Document:

FRANKLIN ELECTRIC CO., INC.

               NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN

                               February 11, 2000

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                               TABLE OF CONTENTS
                               -----------------

                                                                  Page
                                                                  ----

SECTION I - INTRODUCTION ....................................      -3-

SECTION II - SHARES SUBJECT TO THE PLAN .....................      -3-

SECTION III - PLAN PARTICIPANTS .............................      -3-

SECTION IV - DEFERRAL ELECTIONS..............................      -3-

SECTION V - PARTICIPANT ACCOUNTS.............................      -4-

SECTION VI - DISTRIBUTION OF ACCOUNTS........................      -5-

SECTION VII - ADMINISTRATION OF THE PLAN.....................      -6-

SECTION VIII - AMENDMENT OR TERMINATION......................      -7-

SECTION IX - GENERAL PROVISIONS..............................      -8-

<PAGE>

                                 FRANKLIN ELECTRIC CO., INC.
                   NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN

                           SECTION I - INTRODUCTION
                           ------------------------

     Franklin Electric Co., Inc., an Indiana corporation (the "Company")
hereby establishes a plan to be known as the Nonemployee Directors' Deferred
Compensation Plan (the "Plan") for members of its Board of Directors (the
"Board"), who are not employees of the Company or an affiliate of the Company
(the "Nonemployee Directors").  The Plan is effective as of February 11, 2000
(the "Effective Date").

                   SECTION II - SHARES SUBJECT TO THE PLAN
                   ---------------------------------------

     (a)   NUMBER OF SHARES.  Subject to adjustment as provided in Section II
(b) herein, the total number of Shares available for issuance under the Plan
shall be twenty-five (25,000) shares of common stock.  Such shares of common
stock may be either authorized but unissued, reacquired or a combination
thereof.

     (b)   ADJUSTMENT IN AVAILABLE SHARES OF COMMON STOCK.  Any increase in
the number of outstanding shares of common stock of the Company occurring
through stock splits or stock dividends after the adoption of the Plan shall
be reflected proportionately in an increase in the aggregate number of shares
of common stock then available for issuance under the Plan.  Any fractional
shares of common stock resulting from such adjustments shall be eliminated.
If changes in capitalization other than those considered above shall occur,
the Board shall make such adjustment in the number and class of shares of
common stock which may thereafter be issued, as the Board in its discretion
may consider appropriate, and all such adjustments shall be conclusive upon
all persons.

                        SECTION III - PLAN PARTICIPANTS
                        -------------------------------

     Each Nonemployee Director shall become a Participant under the Plan by
filing the written Election Form described in Section IV below with the Plan
Administrator appointed by the Personnel and Compensation Committee of the
Board (the "Committee") with respect to the Retainers payable to each
Participant for his or her services as a member of the Board.

                       SECTION IV - DEFERRAL ELECTIONS
                       -------------------------------

     (a)   Each Participant shall make the following election with respect to
his or her Retainer:

           (i)   The Participant may elect to defer receipt of his or her
     entire Retainer until the date on which his or her service on the Board

<PAGE>

     terminates for any reason, and have the cash value of such Retainer
     credited to the Stock Unit Account established for him or her under the
     Plan and converted to Stock Units, pursuant to the provisions of
     paragraph (a) of Section V below; or

           (ii)  If an election is not made pursuant to clause (i) above, a
     Participant shall receive, at the Participant's option, cash equal to the
     Retainer, or a distribution of a number of shares of common stock of the
     Company.  ("Common Stock") equal to the cash value of his or her Retainer
     divided by the Fair Market Value (as defined in paragraph (b) of
     Section IX) of a share of Common Stock on the date on which such Retainer
     is payable.  Such stock distribution shall be evidenced by a certificate
     representing the applicable number of shares of Common Stock, registered
     in the name of the Participant, and distributed to the Participant as
     soon as practicable after the date on which such Retainer is payable.

     (b)   Each election with respect to a Retainer for a calendar year shall
be set forth on an Election Form provided by the Plan Administrator.  Such
Election Form shall be in writing and shall specify the elections described
above with respect to Retainers.

     (c)   An Election Form effective for a calendar year shall be delivered
to the Plan Administrator prior to the first day of such calendar year.  An
Election Form shall remain in effect for subsequent calendar years until a
written notice to revise the Election Form is delivered to the Plan
Administrator on or before the first day of the calendar year in which the
revision is to become effective.  Except as provided in paragraph (d) below,
an initial Election Form or a revised Election Form shall only apply to a
Retainer otherwise payable to a Participant after the end of the calendar year
in which such initial or revised Election Form is delivered to the Plan
Administrator.  Any Election Form delivered by a Participant shall be
irrevocable with respect to any Retainer covered by the elections set forth
therein.  If an Election Form is not in effect for a Nonemployee Director for
a calendar year, he or she shall be deemed to have elected the cash
distribution option specified in clause (ii) of paragraph (a) of this Section
for such calendar year.

     (d)   Notwithstanding the preceding provisions of this Section:

           (i)   An election by a Participant with respect to a Retainer
     payable on or after April 1, 2000  may be made pursuant to an Election
     Form delivered to the Plan Administrator prior to March 31, 2000; and

           (ii)  An election made by a Participant in the calendar year in
     which he or she first becomes eligible to participate in the Plan may be
     made pursuant to an Election Form delivered to the Plan Administrator
     within thirty (30) days after the date on which he or she initially
     becomes eligible to participate, and such Election Form shall be
     effective with respect to Retainers earned from and after the date such
     Election Form is delivered to the Plan Administrator.

                       SECTION V - PARTICIPANT ACCOUNTS
                       --------------------------------

     (a)   (i)   A Retainer of a Participant deferred pursuant to clause (i)
     of paragraph (a) of Section IV shall be credited as a dollar amount to
     the Participant's Stock Unit Account as of the date on which payment of
<PAGE>

     such Retainer otherwise would have been paid, and shall be converted as
     of such date into Stock Units equivalent to Common Stock.  Such
     conversion shall be determined by dividing the dollar balance of the
     payment of such Retainer by the Fair Market Value of a share of Common
     Stock on such payment date.  The number of Stock Units for full shares of
     Common Stock so determined shall be credited to the Participant's Stock
     Unit Account and the aggregate value thereof shall be charged to the cash
     balance of his or her Stock Unit Account. Any cash balance remaining in
     the Participant's Stock Unit Account after such conversion, together with
     other subsequent credits of deferred Retainers thereto and credits
     thereto pursuant to clause (ii) next below, shall be converted into Stock
     Units on the next conversion date.

           (ii)  Additional credits shall be made to a Participant's Stock
     Unit Account in dollar amounts equal to the cash dividends (or the fair
     market value of dividends paid in property other than Common Stock) that
     the Participant would have received had he or she been the owner on each
     record date of a number of shares of Common Stock equal to the number of
     Stock Units in his or her Stock Unit Account on such date.  In the case
     of a dividend in Common Stock or a Common Stock split, additional credits
     will be made to a Participant's Stock Unit Account of a number of Stock
     Units equal to the number of full shares of Common Stock that the
     Participant would have received had he or she been the owner on each
     record date of a number of shares of Common Stock equal to the number of
     Stock Units in his or her Stock Unit Account on such date.  Any cash
     dividends (or dividends paid in property other than Common Stock) shall
     be converted into Stock Units at the next conversion date as set forth in
     clause (i) of this paragraph.

     (b)   Each Stock Unit Account shall be maintained on the books of the
Company until full payment of the balance thereof has been made to the
applicable Participant (or the beneficiaries of a deceased Participant).  No
funds shall be set aside or earmarked for any Stock Unit Account, which shall
be purely a bookkeeping device.

                    SECTION VI - DISTRIBUTION OF ACCOUNTS
                    -------------------------------------

     (a)   The entire balance of a Participant's Stock Unit Account shall be
paid to him or her (or to his or her beneficiaries in the event of his or her
death) in a single lump sum as of the January 31 next following the date the
Participant's service on the Board terminates for any reason.

     (b)   The balance of a Participant's Stock Unit Account shall be
distributed in shares of Common Stock or in cash as designated by the
Participant (or his or her beneficiaries in the event of his or her death) by
written notice delivered to the Plan Administrator prior to the applicable
January 31 distribution date.  If a timely designation is not received by the
Plan Administrator, distribution shall be made in cash or in Common Stock as
the Company shall decide.  In the event of a distribution in Common Stock, a
certificate representing a number of shares of Common Stock equal to the
number of Stock Units in the Participant's Stock Unit Account, registered in
the name of the Participant (or his or her beneficiaries), and any remaining
cash in the Stock Unit Account, shall be distributed to the Participant  (or
his or her beneficiaries).  In the event of a cash distribution, the
Participant (or his or her beneficiaries) shall receive an amount in cash
equal to the aggregate of (i) the number of  Stock Units in the Stock Unit
<PAGE>

Account multiplied by the Fair Market Value of a share of Common Stock on the
applicable January 31, and (ii) any remaining cash in the Stock Unit Account.

     (c)   If a Participant's service on the Board shall terminate by reason
of his or her death, or if he shall die after becoming entitled to
distribution hereunder, but prior to receipt of his or her entire
distribution, all cash or Common Stock then distributable hereunder with
respect to him or her shall be distributed to such beneficiary or
beneficiaries as such Participant shall have designated by an instrument in
writing last filed with the Committee prior to his or her death, or in the
absence of such designation or of any living beneficiary, to his or her
spouse, or if not then living, to his or her then living descendants, per
stirpes, or if none is then living, to the personal representative of his or
her estate, in the same manner as would have been distributed to the
Participant had he or she continued to live.

     (d)   In the written discretion of the Plan Administrator, and at the
written request of a Participant, up to 100% of the balance in his or her
Stock Unit Account, determined as of the last day of the calendar month prior
to the date of distribution, may be distributed to a Participant in a lump sum
in the case of an Unforeseeable Emergency, subject to the limitations set
forth below.  For purposes of this paragraph an Unforeseeable Emergency is a
severe financial hardship of the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as
defined in Section 152(a) of the Internal Revenue Code of 1986, as amended) of
the Participant, loss of the Participant's property due to casualty or other
similar, extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.  The circumstances that will
constitute an Unforeseeable Emergency will depend upon the facts of each case,
as determined by the Plan Administrator in its discretion, but in any case
payment may not be made to the extent that such hardship is or may be
relieved:

           (i)   Through reimbursement or compensation by insurance or
     otherwise;

           (ii)  By liquidation of the Participant's assets to the extent the
     liquidation of such assets would not itself cause severe
     financial hardship; or

           (iii) By cessation of deferrals under the Plan.

Withdrawal of amounts because of an Unforeseeable Emergency shall be permitted
only to the extent reasonably needed to satisfy the Unforeseeable Emergency.

                   SECTION VII - ADMINISTRATION OF THE PLAN
                   ----------------------------------------

     (a)   The Employee Benefits Committee of the Company, consisting of one
or more employees of the Company, shall act as the Plan Administrator.  The
Plan Administrator shall be responsible for the general operation and
administration of the Plan, and shall have such powers as are necessary to
discharge its duties under the Plan, including, without limitation, the
following:

           (i)   To construe and interpret the Plan, to decide all questions
     of eligibility, to determine the amount, manner and  time of payment of
<PAGE>

     any benefits hereunder, to prescribe rules and procedures to be followed
     by Participants and their beneficiaries under the Plan, and to otherwise
     carry out the purposes of the Plan; and

           (ii)  To appoint or employ individuals to assist in the
     administration of the Plan and any other agents deemed advisable.
     The decisions of the Plan Administrator shall be binding and conclusive
     upon all Participants, beneficiaries and other persons.

     (b)   Any Participant claiming a benefit, requesting an interpretation or
ruling, or requesting information, under the Plan, shall present the request
in writing to the Plan Administrator, which shall respond in writing as soon
as practicable.  If the claim or request is denied, the written notice of
denial shall state the following:

          (i)   The reasons for denial, with specific reference to the Plan
     provisions upon which the denial is based;

          (ii)  A description of any additional material or information
     required and an explanation of why it is necessary; and

          (iii) An explanation of the Plan's review procedure.

The initial notice of denial shall normally be given within ninety (90) days
after receipt of the claim.  If special circumstances require an extension of
time, the claimant shall be so notified and the time limit shall be one
hundred eighty (180) days.  Any person whose claim or request is denied, or
who has not received a response within thirty (30) days, may request review by
notice in writing to the Plan Administrator.  The original decision shall be
reviewed by the Plan Administrator, which may, but shall not be required to,
grant the claimant a hearing.  On review, whether or not there is a hearing,
the claimant may have representation, examine pertinent documents and submit
issues and comments in writing.  The decision on review shall ordinarily be
made within sixty (60) days.  If an extension of time is required for a
hearing or other special circumstances, the claimant shall be so notified and
the time limit shall be extended to one hundred twenty (120) days.  The
decision on review shall be in writing and shall state the reasons and the
relevant Plan provisions.  All decisions on review shall be final and bind all
parties concerned.

                    SECTION VIII - AMENDMENT OR TERMINATION
                    ---------------------------------------

     (a)   The Company intends the Plan to be  permanent but reserves the
right to amend or terminate the Plan when, in the sole opinion of the Company,
such amendment or termination is advisable.  Any such amendment or termination
shall be made pursuant to a resolution of the Board without further action on
the part of the Company's shareholders to the extent permitted by law,
regulation or stock exchange requirements, and shall be effective as of the
date of such resolution or such later date as the resolution may expressly
state.

     (b)   No amendment or termination of the Plan shall (i) directly or
indirectly deprive any current or former Participant or his or her
beneficiaries of all or any portion of his or her Stock Unit Account as
determined as of the effective date of such amendment or termination, or (ii)
directly or indirectly reduce the balance of any Account held hereunder as of
<PAGE>

the effective date of such amendment or termination.  Upon termination of the
Plan, distribution of balances in all Accounts shall be made to Participants
or their beneficiaries in the manner and at the time described in Section VI
as if each Participant's service on the Board had then terminated.  No
additional deferred Retainers shall be credited to the Stock Unit Accounts of
Participants after termination of the Plan, but the Company shall continue to
credit earnings, gains and losses to Stock Unit Accounts pursuant to Section
VI until the balances of such Stock Unit Accounts have been fully distributed
to Participants or their beneficiaries.

     (c)   No such amendment, modification or termination of the Plan may
occur without the approval of the stockholders of the Company, if stockholder
approval for such amendment, modification or termination is required by the
federal securities laws, any national securities exchange or system on which
the Shares are then listed or reported, or a regulatory body having
jurisdiction with respect thereto.

                        SECTION IX - GENERAL PROVISIONS
                        -------------------------------

     (a)   The Plan at all times shall be entirely unfunded and no provision
shall at any time be made with respect to segregating any assets of the
Company for payment of any benefits hereunder.  The right of a Participant or
his or her beneficiary to receive a benefit hereunder shall be an unsecured
claim against the general assets of the Company, and neither the Participant
nor a beneficiary shall have any rights in or against any specific assets of
the Company.  All amounts credited to Stock Unit Accounts shall constitute
general assets of the Company.

     (b)   For all purposes of the Plan, the Fair Market Value of a share of
Common Stock as of a given date shall be the closing sale price of a share of
common stock on the principal securities exchange on which the shares of
common stock are publicly traded, or if there is no such sale on the relevant
date, then on the last previous day on which a sale was reported.

     (c)   Shares of Common Stock distributed under the Plan may be treasury
shares of the Company or shares purchased by the Company in the open market.
The Company shall reserve such number of shares of Common Stock as may be
issuable under the Plan.

     (d)   Nothing contained in the Plan shall constitute a guaranty by the
Company, the Committee, the Plan Administrator, or any other person or entity,
that the assets of the Company will be sufficient to pay any benefit
hereunder.  No Participant or beneficiary shall have any right to receive a
distribution under the Plan except in accordance with the terms of the Plan.

     (e)   Establishment of the Plan shall not be construed to give any
Participant the right to be retained as a member of the Board.

     (f)   No interest of any person or entity in, or right to receive a
distribution under, the Plan, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind; nor may such interest or right to receive a
distribution be taken, either voluntarily or involuntarily, for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
<PAGE>

     (g)   The Plan shall be construed and administered under the laws of the
State of Indiana, except to the extent preempted by federal law.

     (h)   If any person entitled to a payment under the Plan is deemed by the
Company to be incapable of personally receiving and giving a valid receipt for
such payment, then, unless and until claim therefor shall have been made by a
duly appointed guardian or other legal representative of such person, the
Company may provide for such payment or any part thereof to be made to any
other person or institution that is contributing toward or providing for the
care and maintenance of such person.  Any such payment shall be a payment for
the account of such person and a complete discharge of any liability of the
Company, the Committee, the Plan Administrator and the Plan therefor.

     (i)   The Plan shall be continued, following a transfer or sale of assets
of the Company, or following the merger or consolidation of the Company into
or with any other corporation or entity, by the transferee, purchaser or
successor entity, unless the Plan has been terminated by the Company pursuant
to the provisions of Section VIII prior to the effective date of such
transaction.

     (j)   Each Participant or beneficiary shall keep the Plan Administrator
informed of his or her current address.  The Plan Administrator shall not be
obligated to search for the whereabouts of any person.  If the location of a
Participant is not made known to the Plan Administrator within three (3) years
after the date on which payment of the Participant's benefits under the Plan
may first be made, payment may be made as though the Participant had died at
the end of the three-year period.  If, within one (1) additional year after
such three-year period has elapsed, or, within three (3) years after the
actual death of a Participant, the Plan Administrator is unable to locate any
beneficiary of the Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such Participant, or beneficiary or
any other person and such benefit shall be forfeited.  If such Participant, or
his or her beneficiary or any other person, subsequently makes a valid claim
for distribution of the amount forfeited, such amount, without gains or
earnings thereon, shall be distributed to such Participant or his or her
beneficiary or such other person pursuant to Section VI.

     (k)   Notwithstanding any of the preceding provisions of the Plan, none
of the Company, any member of the Committee, any Plan Administrator or any
individual acting as an employee or agent of the Company, the Committee or the
Plan Administrator, shall be liable to any Participant, former Participant, or
any beneficiary or other person for any claim, loss, liability or expense
incurred by such Participant, or beneficiary or other person in connection
with the Plan.

     (l)   Notwithstanding anything to the contrary contained in the Plan, if
(a) the Internal Revenue Service prevails in a claim by it that amounts
credited to a Participant's Account, and/or earnings thereon, constitute
taxable income to the Participant or his or her beneficiary for any taxable
year of his, prior to the taxable year in which such credits and/or earnings
are distributed to him or (b) legal counsel satisfactory to the Company, and
the applicable Participant or his or her beneficiary, renders an opinion that
the Internal Revenue Service would likely prevail in such a claim, the balance
of such Participant's Account shall be immediately distributed to the
Participant or his or her beneficiary.  For purposes of this paragraph, the
Internal Revenue Service shall be deemed to have prevailed in a claim if such
claim is upheld by a court of final jurisdiction, or if the Company, or a
Participant or beneficiary, based upon an opinion of legal counsel
<PAGE>

satisfactory to the Company and the Participant or his or her beneficiary,
fails to appeal a decision of the Internal Revenue Service, or a court of
applicable jurisdiction, with respect to such claim, to an appropriate
Internal Revenue Service appeals authority or to a court of higher
jurisdiction, within the appropriate time period.

     (m)   Any notice under the Plan shall be in writing, or by electronic
means, and shall be received when actually delivered, or mailed postage paid
as first class U.S. Mail.  Notices shall be directed to the Company at its
principal business office at 400 East Spring Street, Bluffton, Indiana  46714,
to a Participant at the address stated in his or her Election Form, and to a
beneficiary entitled to benefits at the address stated in the Participant's
beneficiary designation, or to such other addresses any party may specify by
notice to the other parties.EMPLOYMENT AGREEMENT
                           --------------------

     THIS EMPLOYMENT AGREEMENT is entered into this 7th day of December, 2000
between FRANKLIN ELECTRIC CO., INC., ("Franklin") an Indiana corporation, and
Gregg C. Sengstack (the "Executive").

     WHEREAS, Executive is employed as Vice President and Chief Financial
Officer of Franklin; Franklin desires to assure the benefit of Executive's
future services; and Executive is willing to commit to render such services,
upon the terms and conditions set forth below;

     NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:

     1.   EMPLOYMENT. Franklin agrees to employ Executive in an executive
capacity, and Executive agrees to serve Franklin in such capacity, upon the
terms and conditions hereinafter set forth until his employment is terminated
in accordance with Paragraph 2 hereof.

     2.   TERMINATION. Either Executive or Franklin may terminate Executive's
employment with Franklin at any time upon at least 90-days' advance written
notice, except that a termination for Good Cause may become effective
immediately upon notice.

     3.   COMPENSATION. Franklin shall pay or provide Executive with the
following, and Executive shall accept the same, as compensation for the
performance of his undertakings and the services to be rendered by him under
this Agreement:

          (a)   A fixed salary of $175,000 per annum, or such higher amount
     as the Board of Directors of Franklin may from time to time authorize
     (which amount shall not be reduced without Executive's written consent),
     payable in equal monthly installments;

          (b)   Such bonus as may be allocated to Executive by the
     Compensation Committee of Franklin's Board of Directors pursuant to the
     Franklin Executive Officer Bonus Plan.

          (c)   Participation in Franklin's Stock Option Plans, as long as
     such plans remain in effect, and in any future compensation plans
     covering executives of comparable rank.

          (d)   Participation in Franklin's employee benefit plans, policies,
     practices and arrangements in which Executive is presently eligible to
     participate as long as such plans, policies, practices and arrangements
     remain in effect, and in any future employee benefit plans and
     arrangements covering executives of comparable rank, including without
     limitation any defined benefit retirement plan, excess plan, profit
     sharing plan, health or dental plan, disability plan, survivor income
<PAGE>

     plan, or life insurance plan (collectively, the "Benefit Plans").

          (e)   Paid vacations and sick leave in accordance with Franklin's
     policies respecting same as in effect from time to time.

          (f)   All fringe benefits and perquisites offered by Franklin from
     time to time to executives of comparable rank.

     4.   EXPENSES. Franklin shall promptly pay or reimburse Executive for
all reasonable expenses incurred by Executive in the performance of duties
hereunder.

     5.   CONDITIONS OF EMPLOYMENT. During the term of this agreement,
Franklin will continue to employ Executive, and Executive will continue to
serve Franklin, as its Vice President and Chief Financial Officer, with
duties and responsibilities substantially equivalent to those in effect.
Executive shall be furnished office space, assistance and accommodations
suitable to the character of his position with Franklin and adequate for
performance of his duties. Executive's services shall be performed at
Franklin's principal executive office in Bluffton, Indiana, except when the
nature of Executive's duties hereunder require reasonable domestic and
foreign travel from time to time.

     6.   TERMINATION OF EMPLOYMENT. In the event Executive's employment with
Franklin is terminated pursuant to Paragraph 2, he shall be entitled to
receive compensation for the year of termination and for subsequent periods,
if any, as hereinafter set forth:

          (a)   If Executive's employment is terminated by Executive without
     Good Reason or by Franklin With Good Cause (i) the effective date of the
     termination shall be the date specified in the notice referred to in
     Paragraph 2, or such earlier date after the date of such notice as
     Franklin may elect, or, if applicable, the date of the Executive's
     death, (ii) Executive's compensation under (a) and (b) of Paragraph 3
     shall be limited to a pro-rata portion of his basic compensation for the
     year of termination, and (iii) Executive shall continue to be provided
     with the benefits under (c), (d), (e) and (f) of Paragraph 3 until the
     effective date of the termination;

          (b)   If Franklin shall terminate Executive's employment with
     Franklin without Good Cause, or Executive shall voluntarily terminate
     such employment during the Employment Period with Good Reason, (i) the
     effective date of termination shall be the date specified in Paragraph 2
     or such earlier date after the date of such notice as Executive may
     elect, (ii) Executive's compensation under (a) and (b) of Paragraph 3
     for the portion of the year of termination prior to the effective date
     of termination shall be a pro- rata portion of his basic compensation
     for such year, together with a bonus equal to not less than a pro-rata
     portion of his bonus paid or payable for the year prior to the year of
     termination, (iii) Executive shall receive as compensation for the
     severance period described below an additional amount computed by
     annualizing the compensation which he is to receive pursuant to clause
     (ii) above, which shall be payable in the same manner as if his
     employment had not terminated except that any bonus payable in the year
     following the year of termination for a portion of the prior year shall
<PAGE>

     be paid not later than 30 days after the end of the year to which the
     bonus relates, (iv) Executive shall continue to be provided with the
     benefits under (c), (d), (e) and (f) of Paragraph 3 for the severance
     period described below, and (v) any stock options granted to Executive
     by Franklin shall be accelerated and become immediately exercisable in
     full on the effective date of termination, subject to any limitations on
     the order of exercise which are specifically applicable, and shall,
     subject to Subsection (c) hereof, remain exercisable for such period
     after the effective date of termination as is provided under the terms
     of the options and the plans pursuant to which they were issued. The
     severance period shall be the period beginning on the date of
     termination and ending on the earlier of (A) the date which is twelve
     months after the date of termination, or (B) the date on which Executive
     would attain his normal retirement age (as defined in the Franklin
     Electric Co., Inc. Basic Retirement Plan).

          (c)   If within one (1) year after a Change in Control (as defined
     below), (i) Franklin shall terminate Executive's employment with
     Franklin without Good Cause (as defined below), or (ii) Executive shall
     voluntarily terminate such employment with Good Reason (as defined
     below), Franklin shall, within 30 days of the termination of Executive's
     employment with Franklin, (A) make a lump sum cash payment to him equal
     to an amount of Executive's Salary as would be payable to Executive for
     the lesser of two years and the period of time from the date of
     termination to the date the Executive attains his normal retirement age
     (as defined in the Franklin Electric Co., Inc. Basic Retirement Plan),
     and (B) in settlement of the options described in Subsection (b), make a
     lump sum cash payment to him equal to the difference between the
     aggregate fair market value of the stock subject to such options as of
     the date of such termination and the aggregate exercise price thereof.
     For purposes of this Section, "Salary" shall mean the greater of (a)
     Executive's salary rate in effect on the date of the Change in Control
     or (b) Executive's salary rate in effect on the date his employment with
     Franklin terminates. Also in such event, Executive shall, following his
     termination of employment, for the period of time used to calculate the
     amount of Salary payable pursuant to clause (A) of this Subsection (c),
     continue to be provided with the benefits under (c), (d), (e) and (f) of
     Paragraph 3. Franklin agrees that (y) Executive shall not be required to
     mitigate his damages by seeking other employment or otherwise, and (z)
     Franklin's obligations hereunder shall not be reduced in any way by
     reason of any compensation received by Executive from sources other than
     Franklin after the termination of Executive's employment with Franklin.

          (d)   In the event that Executive is subject to an excise tax under
     Section 4999 of the Internal Revenue Code of 1986 with respect to any
     cash, benefits or other property received in the event of a Change of
     Control, Franklin shall reimburse Executive for (i) the Federal excise
     taxes imposed under Section 4999, (ii) any interest, penalties and
     additions to Federal income tax which are imposed on Executive with
     respect to any period ending before the date on which Franklin remits to
     Executive or the Internal Revenue Service the amount necessary to
     satisfy Executive's federal tax liability under Section 4999 and which
     are owed by Executive as a result of the imposition of such excise tax,
     and (iii) any Federal income and excise taxes payable by Executive as a
     result of the reimbursement described in (i) and (ii) above.
<PAGE>

          (e)   For purposes of this section 6:

                (1)  "Good Cause" shall mean (A) Executive's death or
          disability, (B) Executive's fraud, (C) Executive's misappropriation
          of, or intentional material damage to, the property or business of
          Franklin, or (D) Executive's commission of a felony.

                (2)  "Good Reason" shall exist if (A) there is a significant
          change in the nature or the scope of Executive's authority, (B)
          there is a reduction in Executive's basic compensation, (C)
          Franklin changes the principal location in which Executive is
          required to perform services, or (D) there is a reasonable
          determination by Executive that, as a result of a change in
          circumstances significantly affecting his position, he is unable to
          exercise the authority, powers, function or duties attached to his
          position.

                (3)  "Change in control" shall be deemed to have taken place
          if (A) a third person, including a "group" as defined in Section
          13(d)(3) of the Securities Exchange Act of 1934, and excluding any
          person who, as of the date of this Agreement, is the beneficial
          owner of shares of Franklin stock representing 20% or more of the
          total number of votes that may be cast for the election of
          Directors, becomes the beneficial owner of shares of Franklin stock
          representing 20% or more of the total number of votes that may be
          cast for the election of Directors, or (B) as the result of, or in
          connection with, any cash tender or exchange offer, merger or other
          business combination, sale of assets or contested election, or any
          combination of the foregoing transactions, the persons who
          immediately prior thereto were directors of Franklin cease to
          constitute a majority of the Board of Directors of Franklin.
          Notwithstanding the foregoing sentence, a Change of Control shall
          not be deemed to occur by virtue of any transaction in which
          Executive is a participant in a group effecting an acquisition of
          Franklin if Executive holds an equity interest in the entity
          acquiring Franklin at the time of such acquisition.

     7.   DISCLOSURE OF CONFIDENTIAL INFORMATION. Without the consent of
Franklin, Executive shall not at any time divulge, furnish or make accessible
to anyone (other than in the regular course of business of Franklin) any
knowledge or information with respect to confidential or secret processes,
inventions, formulae, machinery, plan, devices or materials of Franklin or
with respect to any confidential or secret engineering development or
research work of Franklin or with respect to any other confidential or secret
aspect of the business of Franklin. Executive recognizes that irreparable
injury will result to Franklin and its business and properties, in the event
of any breach by Executive of any of the provisions of this section. In the
event of any breach of any of the commitments of Executive pursuant to this
section, Franklin shall be entitled, in addition to any other remedies and
damages available, to injunctive relief to restrain the violation of such
commitments by Executive or by any person or persons acting for or with
Executive in any capacity whatsoever.

     8.   LITIGATION EXPENSES. Franklin shall pay to Executive all out-of-
pocket expenses, including attorneys' fees, incurred by Executive in
<PAGE>

connection with any claim or legal action or proceeding involving this
Agreement, whether brought by Executive or by or on behalf of Franklin or by
another party; provided, however, Franklin shall not be obligated to pay to
Executive out-of-pocket expenses, including attorneys' fees, incurred by
Executive in any claim or legal action or proceeding in which Franklin is a
party adverse to Executive if Franklin prevails in such litigation. Franklin
shall pay prejudgment interest on any money judgment obtained by Executive,
calculated at the published prime interest rate charged by Franklin's
principal banking connection, as in effect from time to time, from the date
that payment(s) to him should have been made under this Agreement.

     9.   POST TERMINATION PAYMENT OBLIGATIONS ABSOLUTE. Franklin's
obligation to pay Executive the compensation and to make the other
arrangements provided herein to be paid and made after termination of
Executive's employment with Franklin shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right that Franklin
may have against him or anyone else. All amounts so payable by Franklin shall
be paid without notice or demand. Each and every such payment made by
Franklin shall be final and Franklin will not seek to recover all or any part
of such payment from Executive or from whomsoever may be entitled thereto,
for any reason whatsoever.

     10.  NOTICES. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received and if mailed shall be mailed
by United States registered or certified mail, return receipt requested,
addressee only, postage prepaid. Notice to Franklin shall be addressed to
Franklin Electric Co., Inc. at 400 East Spring Street, Bluffton, Indiana
46714. Notices to Executive shall be addressed to the Executive at his last
permanent address as shown on Franklin's records. Notwithstanding the
foregoing, if either party shall have previously designated a different
address by notice to the other party given in the foregoing manner, then
notices to such party shall be addressed as designated until the designation
is revoked by notice given in such manner.

     11.  ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties with respect to the subject matter hereof and cannot be
amended, modified or supplemented in any respect, except by a subsequent
written agreement entered into by both parties hereto.

     12.  SUCCESSORS. This Agreement may not be assigned by Franklin except
in connection with a merger involving Franklin or a sale of substantially all
of its assets, and the obligations of Franklin provided for in this Agreement
shall be the binding legal obligations of any successor to Franklin by
purchase (if such successor assumes this Agreement), merger, consolidation,
or otherwise. This Agreement may not be assigned by Executive during his
life, and upon his death will be binding upon and inure to the benefit of his
heirs, legatees and the legal representatives of his estate.

     13.  WAIVER, MODIFICATION AND INTERPRETATION. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by Executive and
an appropriate officer of Franklin empowered to sign the same by the Board.
No waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed
<PAGE>

by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Indiana. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

     14.  WITHHOLDING. Franklin may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy
applicable withholding requirements under any federal, state, or local law.

     15.  HEADLINES. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of any
provision of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above,

FRANKLIN ELECTRIC CO., INC.                 EXECUTIVE

/s/ WILLIAM H. LAWSON                       /s/ GREGG C. SENGSTACK
--------------------------                 -------------------------
WILLIAM H. LAWSON                          GREGG C. SENGSTACK
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER

1

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