<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BADGER METER, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[BADGER METER, INC. LOGO]
BADGER METER, INC.
4545 WEST BROWN DEER ROAD
MILWAUKEE, WISCONSIN 53223
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 1997
The Annual Meeting of the Shareholders of Badger Meter, Inc. (the
"Company") will be held at THE MILWAUKEE CLUB, 706 North Jefferson Street,
Milwaukee, Wisconsin, 53202, on Friday, April 25, 1997, at 8:30 a.m. local time,
for the following purposes:
1. To elect ten directors to serve for the ensuing year;
2. To adopt the Badger Meter, Inc. 1997 Stock Option Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Holders of record of Common Stock and Class B Common Stock of the Company
at the close of business on February 28, 1997 will be entitled to notice of and
to vote at the meeting and any adjournments or postponements thereof. Holders of
Common Stock will be entitled to one vote per share so held. Holders of Class B
Common Stock will be entitled to ten votes per share so held.
Please vote the enclosed proxy form, sign and return it in the envelope
provided. You retain the right to revoke the proxy at any time before it is
actually voted.
By Order of the Board of Directors
Deirdre C. Elliott, Secretary
April 1, 1997
<PAGE> 3
BADGER METER, INC.
4545 WEST BROWN DEER ROAD
MILWAUKEE, WISCONSIN 53223
PROXY STATEMENT
To the Shareholders of
BADGER METER, INC.
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Badger Meter, Inc. (the "Company") to be
used at the Annual Meeting of Shareholders of the Company (the "Meeting"), which
will be held at 8:30 a.m. local time, Friday, April 25, 1997, at THE MILWAUKEE
CLUB, 706 North Jefferson Street, Milwaukee, Wisconsin 53202, and at any
adjournments or postponements thereof.
Shareholders who execute proxies retain the right to revoke them at any
time prior to the voting thereof by giving notice to the Company in writing or
in open meeting. Unless so revoked, the shares represented by such proxies will
be voted at the Meeting and any adjournments or postponements thereof.
The record date for shareholders entitled to notice of and to vote at the
Meeting is the close of business on February 28, 1997. As of the record date,
the Company had 1,213,904 shares of Common Stock (the "Common Stock") of the
Company outstanding and entitled to one vote per share, and 562,785 shares of
Class B Common Stock (the "Class B Common Stock") of the Company outstanding and
entitled to ten votes per share. As of the record date, the total number of
votes represented by shares of Common Stock and Class B Common Stock was
6,841,754 votes, consisting of 1,213,904 votes represented by outstanding shares
of Common Stock and 5,627,850 votes represented by outstanding shares of Class B
Common Stock. These shares do not reflect the 2-for-1 stock split payable April
18, 1997 to shareholders of record on March 27, 1997.
This Proxy Statement is being furnished to shareholders of the Company on
or about April 1, 1997.
NOMINATION AND ELECTION OF DIRECTORS
At the Meeting, holders of Common Stock and Class B Common Stock, voting as
a single class, shall be entitled to elect ten directors. Directors will be
elected by a plurality of votes cast at the Meeting (assuming a quorum is
present). Consequently, any shares not voted at the Meeting, whether due to
abstentions, broker nonvotes or otherwise, will have no impact on the election
of directors.
Proxies received representing one vote per share of Common Stock or
representing ten votes per share of Class B Common Stock will, unless otherwise
directed, be voted in favor of the election of each of the ten persons named
below to serve as directors until the next Annual Meeting of Shareholders or
until their respective successors have been duly appointed, or until their prior
death, resignation or removal.
Listed below are the names of the nominees of the Board of Directors for
the office of director for the ensuing year, together with certain additional
information concerning each such nominee. The ten nominees are presently
directors of the Company. If any of the nominees should be unable or unwilling
to serve, the proxies, pursuant to the authority granted to them by the Board of
Directors, shall have discretionary authority to select and vote for substitute
nominees. The Board of Directors has no reason to believe that any of the
nominees will be unable or unwilling to serve.
1
<PAGE> 4
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
NAME AND POSITION DIRECTOR
WITH COMPANY AGE BUSINESS EXPERIENCE DURING LAST FIVE YEARS SINCE
----------------- --- ------------------------------------------ --------
<S> <C> <C> <C>
James L. Forbes........................ 64 Badger Meter, Inc.: President and Chief 1981
President and Chief Executive Officer Executive Officer.
Robert M. Hoffer....................... 76 WICOR, Inc. (a holding company): Retired 1967
Chairman and Chief Executive Officer.
Wisconsin Gas Company (gas distribution
utility): Retired Chairman and Chief
Executive Officer.
Charles F. James, Jr................... 65 Milwaukee School of Engineering: Vice 1986
President of Academics. Formerly, University
of Wisconsin -- Milwaukee: Dean of the
College of Engineering and Applied Science.
Kenneth P. Manning..................... 55 Universal Foods Corporation (an international 1996
manufacturer and marketer of food
ingredients): President and Chief Executive
Officer. Formerly, President.
Andrew J. Policano..................... 47 University of Wisconsin: Dean of the School 1997
of Business.
Donald J. Schuenke..................... 68 Northern Telecom Limited (a 1982
telecommunications company): Chairman.
Northwestern Mutual Life Insurance Company:
Retired Chairman and Chief Executive Officer.
John J. Stollenwerk.................... 57 Allen-Edmonds Shoe Corporation (a 1996
manufacturer and marketer of shoes): Owner
and President.
Pamela B. Strobel...................... 44 Commonwealth Edison Co. (an electric 1995
utility): Vice President and General Counsel.
Formerly, Sidley & Austin Law Firm: Partner
James O. Wright........................ 76 Badger Meter, Inc.: Chairman of the Board. 1948
Chairman of the Board
James O. Wright, Jr.................... 51 The Wright Tax Service: Owner. 1978
</TABLE>
Messrs. James O. Wright, James L. Forbes and James O. Wright, Jr. may be
deemed to "control" the Company because of their voting power over 336,329
shares of Class B Common Stock and 13,828 shares of Common Stock. This stock
held in the Badger Meter Voting Trust represents 3,377,118 votes or
approximately 49.4% of the votes represented by outstanding shares of Common
Stock and Class B Common Stock. (See "Stock Ownership of Management and
Others.") James L. Forbes and James O. Wright each have additional voting power
over 16,698 shares of Common Stock and 154,656 shares of Class B Common Stock as
trustees of the Badger Meter Officers' Voting Trust, for total voting power over
30,526 shares of Common Stock and 490,985 shares of Class B Common Stock,
representing 4,940,376 votes or approximately 72.2% of the votes represented by
outstanding shares of Common Stock and Class B Common Stock.
Mr. James O. Wright, Jr. is the son of James O. Wright, Chairman of the
Company.
Certain directors of the Company also serve as directors of other
companies, some of which are publicly held. Mr. Forbes is a director of Firstar
Trust Company, Firstar Corporation, Universal Foods Corporation, Journal
Communications, Inc. and United Wisconsin Services, Inc. Mr. Manning is a
director of Universal Foods Corporation and Firstar Trust Company. Mr. Policano
is a director of National Guardian Life Insurance Company. Mr. Schuenke is a
director of A. O. Smith Corporation, Northern Telecom Limited,
2
<PAGE> 5
Federal Home Loan Mortgage Corporation and Allen-Edmonds Shoe Corporation. Mr.
Stollenwerk is a director of Allen-Edmonds Shoe Corporation, Northwestern Mutual
Life Insurance Company, Firstar Bank Milwaukee, N.A., and Koss Corporation. Mr.
James O. Wright is a director of Marshall & Ilsley Corporation.
COMMITTEES, MEETINGS AND ATTENDANCE
The Board of Directors of the Company had six standing committees at
various times during 1996: Audit, Compensation, Compliance, Nominating, Employee
Benefit Plans and Technology. As of November, 1996, the Compensation Committee
and the Nominating Committee were merged into one committee, the Management
Review Committee, which consists of Messrs. Schuenke (Chairman), Hoffer and
Stollenwerk, all non-employee directors.
The Audit Committee, which met twice in 1996, consists of Messrs. Hoffer
(Chairman) and Schuenke and Ms. Strobel. The Audit Committee recommends to the
Board of Directors independent auditors for selection by the Company, discusses
with the independent auditors and internal auditors the scope and results of
audits, and approves and reviews any non-audit services performed by the
Company's independent auditing firm.
The Compensation Committee, which met in January, 1996 for determination of
base compensations for the year 1996, and in January, 1997, as the Management
Review Committee, to determine bonuses for 1996, base compensation for 1997 and
grants of stock options, consists of Messrs. Schuenke (Chairman), Hoffer and
Stollenwerk. The Management Review Committee reviews and establishes all forms
of compensation for the officers of the Company, and administers the Company's
benefit plans including the Restricted Stock Plan, the 1989 Stock Option Plan,
the 1993 Stock Option Plan and the 1995 Stock Option Plan.
The Compliance Committee, which met twice in 1996, consists of Ms. Strobel
(Chairman), and Messrs. Hoffer, James, Wright and Wright, Jr. The Compliance
Committee monitors the Company's compliance with the Company's policies
governing activities which include but are not limited to business ethics,
environment, safety, diversity and quality processes.
The Nominating Committee, which met twice in 1996, consisted of Messrs.
Forbes (Chairman), Schuenke, Wright and Wright, Jr. The Nominating Committee,
which merged into the Management Review Committee in November 1996, selected
nominees for the Company's Board of Directors and reviewed the succession of
management. This committee considered nominees for director recommended by the
shareholders but has no established procedures which must be followed. These
functions are now performed by the Management Review Committee.
The Employee Benefit Plans Committee, which met three times in 1996,
consists of Messrs. Wright, Jr. (Chairman), Hoffer, Schuenke and Wright. The
Employee Benefit Plans Committee oversees the administration of the Company's
pension plans, savings plans, employee stock ownership plans and other
retirement plans.
The Technology Committee, which met twice in 1996, consists of Messrs.
James (Chairman), Stollenwerk and Wright. This committee assesses the
development and maintenance of the technologies used by the Company in all
aspects of the Company's operations.
The Board of Directors held five meetings in 1996. All directors attended
at least 75% of the meetings of the Board of Directors and committees on which
they serve.
DIRECTOR COMPENSATION
All directors who are not employees of the Company were compensated at the
rate of $1,200 for each Board of Directors meeting that they attended and were
reimbursed for out-of-pocket travel, lodging and meal expenses. Directors who
are not employees of the Company were paid additional fees of $750 per month and
were compensated at the rate of $750 for each committee meeting they attended.
Non-employee members of the committees are compensated an additional $250 for
out-of-town or all-day meetings.
3
<PAGE> 6
Effective January 1, 1996, the non-employee directors of the Company
participate in the same long-term incentive plan as certain members of the
management group. Under the terms of the plan, the directors earn cash bonuses
based on the same earnings growth objectives as other participants. The maximum
amount that a director can earn under the long-term incentive plan is less than
$10,000 per year.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of February 28, 1997, the number of
shares of the Company's Common Stock and Class B Common Stock beneficially owned
by (i) each director of the Company, (ii) each of the executive officers named
in the Summary Compensation Table set forth below, (iii) all directors and
officers of the Company as a group, and (iv) each person known to the Company to
be the beneficial owner of more than 5% of the Company's Common Stock and/or
Class B Common Stock (as reported to the Securities and Exchange Commission).
Beneficial ownership of shares is reported in the following table and footnotes
in accordance with the beneficial ownership rules promulgated by the Securities
and Exchange Commission. Such rules define "beneficial owner" of a security to
include any person who has or shares voting power or investment power with
respect to such security.
Compliance with these rules results in overlapping beneficial ownership of
shares. Therefore, certain shares set forth in the table below are reported as
being beneficially owned by more than one person. Although the beneficial owners
of shares of Class B Common Stock are deemed to beneficially own an equal number
of shares of Common Stock, due to the convertibility of Class B Common Stock
into Common Stock, no "double counting" with respect to the two classes of
Common Stock is reported.
In the aggregate, approximately 117,448 shares of Common Stock and 490,985
shares of Class B Common Stock, representing an aggregate of 5,027,298 votes or
approximately 73.4% of the votes represented by the aggregate outstanding shares
of Common Stock and Class B Common Stock, are beneficially held by directors and
officers of the Company as a group.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF BADGER METER, INC.
COMMON STOCK(1) (UNLESS DESIGNATED AS CLASS B COMMON STOCK)
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OPTIONS SOLE SHARED OWNED AND
EXERCISABLE BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME WITHIN 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
---- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
James O. Wright
Common Stock(1).......... 3,750 790(4) 31,526(3)(5) 36,066
(7)(8) 3.0%
Class B Common Stock..... 490,985(3)(5) 490,985
(7) 87.2%
James L. Forbes
Common Stock(1).......... 2,775 2,827(3)(4) 30,526(3)(5)(6) 35,928
3.0%
Class B Common Stock..... 42,738(3) 490,985(3)(5) 490,985
87.2%
Robert M. Hoffer
Common Stock(1).......... 3,750 750 4,500
0.3%
Charles F. James, Jr.
Common Stock(1).......... 3,750 250 300 4,300
0.3%
Kenneth P. Manning
Common Stock(1).......... 100 100
Andrew J. Policano
Common Stock(1).......... 0
Donald J. Schuenke
Common Stock(1).......... 3,750 1,750 5,500
0.4%
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OPTIONS SOLE SHARED OWNED AND
EXERCISABLE BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME WITHIN 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
---- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
John J. Stollenwerk
Common Stock(1).......... 3,750 1,250 5,000
0.4%
Pamela B. Strobel
Common Stock(1).......... 3,750 1,200 4,950
0.4%
James O. Wright, Jr.
Common Stock(1).......... 3,750 875 13,828(5) 18,453
1.5%
Class B Common Stock..... 2,000(5) 336,329(5)(7) 336,329
59.8%
Robert D. Belan
Common Stock(1).......... 6,866 613(4) 7,479
0.6%
Class B Common Stock..... 8,759(3) 8,759
1.6%
Ronald H. Dix
Common Stock(1).......... 6,466 4,000(4) 28,398(3)(6) 38,864
3.2%
Class B Common Stock..... 11,108(3) 154,656(3) 154,656
27.5%
William H. Vander Heyden
Common Stock(1).......... 2,700 2,619(3)(4) 200 5,519
0.5%
Class B Common Stock..... 24,252(3) 24,252
4.3%
Richard A. Meeusen
Common Stock(1).......... 1,666 53(4) 1,719
0.1%
Class B Common Stock..... 5,176(3) 5,176
0.9%
All Directors and Officers
as a Group (17 persons,
including those named
above)
Common Stock(1).......... 55,914 19,386(3)(4) 43,726(3)(5)(6) 117,448
(7)(8) 9.2%
Class B Common Stock..... 105,351(3)(5) 490,985(3)(5)(7) 490,985
87.2%
William H. Alverson
780 N. Water Street
Milwaukee, WI 53202
Class B Common Stock..... 45,434(5)(7) 45,434
8.1%
Edwin P. Wiley
777 East Wisconsin Avenue
Milwaukee, WI 53202
Common Stock(1).......... 3,000 100 14,028(5)(7) 17,128
1.4%
Class B Common Stock..... 100 249,372(5)(7) 249,472
44.3%
William C. Wright
11740 N. Port
Washington Road
Mequon, WI 53092
Class B Common Stock..... 45,434(5)(7) 45,434
8.1%
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OPTIONS SOLE SHARED OWNED AND
EXERCISABLE BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME WITHIN 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
---- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
John F. Callan
777 East Wisconsin Avenue
Milwaukee, WI 53202
Class B Common Stock..... 175,000(5)(7) 175,000
31.1%
Dimensional Fund Advisors
Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Common Stock(1).......... 40,200(9) 63,300 63,300
5.3%
Class B Common Stock..... 49,600(9) 49,600
8.8%
Heartland Advisors, Inc.
790 N. Milwaukee Street
Milwaukee, WI 53202
Common Stock(1)(10)...... 189,750 208,250 208,250
17.2%
T. Rowe Price Associates,
Inc. 100 E. Pratt Street
Baltimore, MD 21202
Common Stock(1).......... 61,000(11) 61,000
5.0%
</TABLE>
- -------------------------
(1) Class B Common Stock is convertible on a share-for-share basis into Common
Stock at any time at the discretion of the holder thereof. As a result, a
holder of Class B Common Stock is deemed to beneficially own an equal
number of shares of Common Stock which such shareholder acquires upon the
conversion of Class B Common Stock. However, in order to avoid
overstatement of the aggregate beneficial ownership of Common Stock and
Class B Common Stock, the Common Stock reported as beneficially owned does
not include Common Stock which may be acquired upon the conversion of Class
B Common Stock. Similarly, the percentage of outstanding Common Stock
beneficially owned is determined with respect to the total number of shares
of Common Stock outstanding as of February 28, 1997 (1,213,904 shares),
which does not include shares of Common Stock which may be issued upon
conversion of Class B Common Stock.
(2) Unless otherwise indicated, the beneficial owner has sole investment and
voting power or shared voting and investment power over the reported
shares.
(3) The Badger Meter Officers' Voting Trust ("Officers' Trust"), of which James
O. Wright, Ronald H. Dix and James L. Forbes are trustees, holds 16,698
shares of Common Stock and 154,656 shares of Class B Common Stock. The
address of the trustees is 4545 West Brown Deer Road, Milwaukee, WI 53223.
The trustees of the Officers' Trust have the right to vote all shares of
Company stock held therein. Whenever beneficiaries of the Officers' Trust
possessing trust interests representing in the aggregate at least 75% of
all the votes represented in the Officers' Trust direct the sale or other
disposition of shares and dissolution of the trust, the trustees must make
the sale or other disposition. When all of the trustees agree and
beneficiaries possessing trust interests representing in the aggregate a
majority of all of the votes represented in the Officers' Trust give their
written approval of the sale or other disposition of shares, the trustees
may make the sale or other disposition. The Officers' Trust will exist for
30 years from December 18, 1992 to December 18, 2022 and thereafter for
additional 30-year renewal periods unless earlier terminated by a vote of
beneficiaries holding 75% or more of the votes in the Officers' Trust or by
applicable law.
The Officers' Trust has a $1,500,000 bank credit line used to assist
officers in financing the purchase of Company stock. Loans to the Officers'
Trust are guaranteed by the Company and the stock purchased by the officers
using this credit facility is pledged to the Company to secure the loans.
The Officers'
6
<PAGE> 9
Trust holds shares with a value more than sufficient to cover the credit
line. All officers, including the named executive officers, have purchased
Company stock using this credit facility.
Messrs. Wright, Dix and Forbes all share voting power in all of the shares
deposited in the Officers' Trust. Beneficiaries of the Officers' Trust have
sole investment power over only those shares individually deposited in the
Officers' Trust. Mr. Dix has sole investment power over 11,108 shares of
Class B Common Stock. Mr. Forbes has sole investment power over 200 shares
of Common Stock and 42,738 shares of Class B Common Stock. Messrs. Belan,
Meeusen and Vander Heyden have sole investment power (but no voting power)
over 8,759, 5,176 and 24,252 shares of Class B Common Stock, respectively.
Mr. Vander Heyden also has sole investment power over 589 shares of Common
Stock.
(4) In conjunction with the Badger Meter, Inc. Employee Savings and Stock
Ownership Plan, Common Stock included in the preceding table has been
allocated to the following directors and/or officers as follows: James O.
Wright, 540 shares; James L. Forbes, 2,627 shares; Robert D. Belan, 613
shares; Ronald H. Dix, 1,320 shares; William H. Vander Heyden, 2,030
shares; Richard A. Meeusen, 53 shares; and all officers as a group
(including Messrs. Wright and Forbes) 8,358 shares. A person who has been
allocated shares pursuant to this plan has sole voting power but no
investment power with respect to these shares.
(5) The Badger Meter Voting Trust ("Voting Trust"), of which James O. Wright,
James L. Forbes and James O. Wright, Jr. are trustees, holds 13,828 shares
of Common Stock and 336,329 shares of Class B Common Stock. The address of
the trustees is 4545 West Brown Deer Road, Milwaukee, WI 53223. The
trustees of the Voting Trust have the right to vote all shares of Company
stock held therein. The Voting Trust will exist for 30 years beyond the
lives of certain members of the Wright family, unless earlier terminated by
a vote of holders of Voting Trust certificates representing 75% of the
stock then held therein or by applicable law. Shares held in the Voting
Trust include shares reported above as beneficially owned by other named
persons, each of whom may have shared investment power over the shares
listed, as follows: (a) 45,434 of the shares of Class B Common Stock
reported as beneficially owned by Mr. William C. Wright (which includes the
45,434 shares reported as beneficially owned by William H. Alverson); (b)
13,828 shares of Common Stock and 249,372 shares of Class B Common Stock of
the shares reported as beneficially owned by Edwin P. Wiley; (c) 13,828
shares of Common Stock and 205,352 shares of Class B Common Stock of the
shares reported as beneficially owned by James O. Wright; (d) 106,680 of
the shares of Class B Common Stock reported as beneficially owned by James
O. Wright, Jr. and (e) 175,000 of the shares of Class B Common Stock
reported as beneficially owned by John F. Callan. Mr. James O. Wright, Jr.
has sole investment power over 2,000 shares of Class B Common Stock held in
the Voting Trust.
(6) Shares have been awarded pursuant to the Company's Restricted Stock Plan,
which provides that a person who has been awarded restricted shares has no
investment power or voting power in the shares but is entitled to receive
the dividends until the expiration of the restricted period. All of the
officers who held restricted shares deposited their stock in the Badger
Meter Officers' Voting Trust on March 10, 1992 (see note 3 above). These
shares are therefore reflected in the preceding table only for Messrs.
Forbes, Wright and Dix solely as trustees of the Officers' Voting Trust.
Restricted shares were also awarded to employees who are not Company
officers. These shares are held by the BMI EBPA Company, which has sole
voting power over those shares. Mr. Dix is a general partner of the BMI
EBPA Company, and his shared voting power in these shares is therefore
reflected in the preceding table.
(7) The number of shares shown includes shares which are reported as
beneficially owned solely because such persons are co-trustees of trusts
for the benefit of various Wright family members, as follows: Edwin P.
Wiley, 13,828 shares of Common Stock and 249,372 shares of Class B Common
Stock; James O. Wright, Jr., 106,680 shares of Class B Common Stock;
William H. Alverson, 45,434 shares of Class B Common Stock; James O.
Wright, 13,828 shares of Common Stock and 205,352 shares of Class B Common
Stock; William C. Wright, 45,434 shares of Class B Common Stock; and John
F. Callan, 175,000 shares of Class B Common Stock. All of these shares are
held in the Voting Trust (see note 5 above).
7
<PAGE> 10
(8) Includes 1,000 shares of Common Stock over which Mr. Wright has shared
investment power and no voting power.
(9) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 63,300 shares of Badger
Meter, Inc. stock as of December 31, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(10) These securities are held in investment advisory accounts of Heartland
Advisors, Inc. As a result, various persons have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, the securities. The interests of one such account, Heartland Value
Fund, a series of Heartland Group, Inc., a registered investment company,
relates to more than 5% of the class.
(11) These securities are owned by various individual and institutional
investors including T. Rowe Price Small Cap Value Fund, Inc. for which T.
Rowe Price Associates, Inc. serves as investment adviser with power to
direct investments and/or sole power to vote the securities. For purposes
of the reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers, based on salary and bonus earned during fiscal 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION PAYMENTS UNDER
-------------------------------------- LONG-TERM SECURITIES ALL OTHER
NAME AND FISCAL OTHER ANNUAL INCENTIVE PLAN UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) ($)(4) OPTIONS(#) ($)(2)
------------------ ------ --------- -------- --------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Forbes.......... 1996 330,356 163,000 0 33,747 4,340 2,250
President and Chief 1995 306,647 107,105 0 0 0 2,260
Executive Officer 1994 291,891 90,000 52,000(1) 0 0 2,002
William H. Vander Heyden... 1996 212,235 59,996 29,558(1) 24,090 2,884 2,250
President -- Industrial 1995 203,480 0 0 0 0 2,260
1994 198,784 48,824 0 0 0 2,002
Robert D. Belan.......... 1996 181,574 70,680 0 20,348 2,436 2,250
President -- Utility 1995 169,033 57,172 0 0 2,500 2,260
1994 159,119 40,380 0 0 0 2,000
Ronald H. Dix............ 1996 143,235 45,850 0 15,437 1,848 2,250
Vice President 1995 132,980 30,017 0 0 2,500 2,260
Admin. & Human 1994 124,925 28,154 28,814(1) 0 0 1,674
Resources
Richard A. Meeusen....... 1996 138,913 44,030 0 15,904 6,904 2,040
Vice President -- 1995 18,569 0 0 0 0 0
Finance, Treasurer and 1994 -- -- -- -- -- --
Chief Financial
Officer(3)
</TABLE>
- -------------------------
(1) Mr. Vander Heyden in 1996 and Messrs. Forbes and Dix in 1994 were reimbursed
for a portion of their estimated additional income taxes as the result of
the expiration of restrictions on stock granted to them in 1988 for Mr.
Vander Heyden and in 1986 for Messrs. Forbes and Dix pursuant to the
Company's Restricted Stock Plan approved by the shareholders in 1984.
8
<PAGE> 11
(2) Company contribution to Badger Meter, Inc. Employee Savings and Stock
Ownership Plan (ESSOP).
(3) Mr. Meeusen's employment with the Company began in November 1995.
(4) During 1996, each of the executive officers named in the table was
designated as a participant under the Company's Long-Term Incentive Plan
("LTIP"). The LTIP provides annual cash bonuses to the named officers and
other members of the management group with respect to a four or five year
performance period. The awards are based upon annual attainment of earnings
objectives for the period 1996 to 2000, as established by the Board of
Directors. Maximum annual payments under this plan are $33,747, $24,090,
$20,348, $15,437 and $15,904 for Messrs. Forbes, Vander Heyden, Belan, Dix
and Meeusen, respectively. The maximum annual payment to each participant
under the LTIP will be approximately 11.81% of his December 31, 1995 base
salary. A maximum of three more annual payments may be made under the LTIP
for the years 1997 to 2000.
Certain benefits (including social club dues, automobile and legal and
accounting services) were provided through the Company to the executive officers
named in the table above. In 1996, the aggregate amount of such benefits for
each of the executive officers named in the table did not exceed 10% of such
officer's cash compensation.
OPTION GRANTS IN 1996
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1996 to the individuals named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL CURRENT
UNDERLYING OPTIONS PRESENT
OPTIONS GRANTED TO EXERCISE OR VALUE AT
TYPE GRANTED EMPLOYEES IN BASE PRICE EXPIRATION DATE OF
NAME OF OPTION (#)(1) FISCAL YEAR ($/SH) DATE GRANT($)
---- --------- ---------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
James L. Forbes................ Non-Qual 300 0.5% $24.75 1/16/06 $ 1,266
James L. Forbes................ ISO 4,040 7.3% $24.75 1/16/06 $17,049
William H. Vander Heyden....... ISO 2,884 5.2% $24.75 1/16/06 $12,170
Robert D. Belan................ ISO 2,436 4.4% $24.75 1/16/06 $10,280
Ronald H. Dix.................. ISO 1,848 3.3% $24.75 1/16/06 $ 7,799
Richard A. Meeusen............. Non-Qual 5,000 9.0% $24.75 1/16/06 $21,100
Richard A. Meeusen............. ISO 1,904 3.4% $24.75 1/16/06 $ 8,035
</TABLE>
- -------------------------
(1) Options identified as "non-qual" are non-qualified stock options for
purposes of the Internal Revenue Code of 1986, as amended. "ISO" options are
incentive stock options and are qualified options for purposes of the
Internal Revenue Code of 1986, as amended. The option base price is the fair
market value of the stock at the time of the grant. For non-qualified
options, up to one-third of the options may be exercised one year after date
of grant, up to two-thirds of the options granted may be exercised two years
after date of grant and all of the options may be exercised three years
after date of grant. The incentive stock options are exercisable one-quarter
per year for four years. Termination of employment for any reason other than
death, disability or retirement will result in the cancellation of the
unexercisable options. The term of the options is ten years. The current
present value at date of grant was computed under the Black-Scholes option
pricing model using the following assumptions: risk-free interest rate of
5.5%; dividend yield of 3%; expected market price volatility factor of .168;
and a weighted average expected life of five years.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the exercise
in 1996 of options to purchase Common Stock by the five individuals named in the
Summary Compensation Table and the unexercised options to purchase Common Stock
held by such individuals at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FY-END(#) AT FY-END($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James L. Forbes................ None N/A 3,710/3,330 $71,136/$45,371
William H. Vander Heyden....... None N/A 3,421/2,163 $67,199/$29,471
Robert D. Belan................ None N/A 6,643/3,494 $127,909/$51,769
Ronald H. Dix.................. 400 $8,300 6,096/3,053 $116,731/$45,761
Richard A. Meeusen............. None N/A 476/6,428 $6,486/$87,582
</TABLE>
PENSION PLAN TABLE
The Company maintained a defined benefit pension plan (the "Pension Plan")
covering all domestic salaried employees including the above-named executive
officers. Effective January 1, 1997, the Pension Plan was modified to become a
"cash balance" plan. Under this approach, a participant has an account balance
which is credited each year with dollar amounts equal to 5% of compensation,
plus 2% of compensation in excess of the Social Security wage base. Interest is
credited to the account balance each year at a rate of interest based upon
30-year U.S. Treasury securities. A starting balance was established for each
participant based upon December 31, 1996 accrued benefits under the prior
Pension Plan formula.
Additional annual dollar amounts are credited to the accounts of
participants with Pension Plan participation prior to January 1, 1997. These
additional annual credits are 3% for those with less than 11 years; 4% for those
with 11 to 20 years; and 5% for those with over 20 years. The additional credits
will apply for years after 1996 for each year of continued employment but
limited to the lesser of 15 years or the number of the participant's years of
credited service as of December 31, 1996.
At retirement, a participant may elect a cash payment of the account
balance or a life annuity of equivalent value.
Mr. Meeusen currently has no vested interest under the Plan, and is
expected to receive retirement benefits determined in accordance with the new
modified approach, which will generally result in the accumulation of 5% of his
compensation each year, plus interest on the account balance.
The remaining executive officers, because of their ages, are expected to
obtain retirement benefits according to the prior pension plan formula, which
has been retained under the modified Pension Plan as a minimum benefit for
employees who had attained age 50 and completed 10 or more years of service as
of December 31, 1996.
Under the prior formula, the monthly pension at normal retirement (age 65)
for all executive officers is equal to the sum of nine-tenths percent (0.9%) of
the participant's average monthly compensation (based on the highest 60 months
of the last 120 months compensation) multiplied by the participant's years of
service, not to exceed 30; and six-tenths percent (0.6%) of the participant's
average monthly compensation in excess of the taxable Social Security monthly
wage base, multiplied by the participant's years of service, not to exceed 30.
IRS regulations limit the amount of compensation to be considered in benefit
calculations to $160,000 in 1997, and varying amounts for prior years.
Participants whose compensation is in excess of the IRS limits also participate
in a non-qualified unfunded supplemental retirement plan. Benefits are
calculated to provide the participant the same pension benefits as if there was
no compensation limit.
10
<PAGE> 13
Based on the assumption that retirement occurs at age 65, the following
table shows the approximate annual retirement benefit payable from either the
funded or unfunded plan to salaried employees retiring in 1996, based on the
benefit formula described below.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL --------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
$150,000 $20,845 $ 31,268 $ 41,691 $ 52,114 $ 62,536 $ 62,536
175,000 24,595 36,893 49,191 61,489 73,786 73,786
200,000 28,345 42,518 56,691 70,864 85,036 85,036
250,000 35,845 53,768 71,691 89,614 107,536 107,536
300,000 43,345 65,018 86,691 108,364 130,036 130,036
350,000 50,845 76,268 101,691 127,114 152,536 152,536
400,000 58,345 87,518 116,691 145,864 175,036 175,036
450,000 65,845 98,768 131,691 164,614 197,536 197,536
500,000 73,345 110,018 146,691 183,364 220,036 220,036
550,000 80,845 121,268 161,691 202,114 242,536 242,536
</TABLE>
Compensation covered by the Pension Plan is a participant's salary and
bonus, as shown in the Summary Compensation Table, whether or not such
compensation has been deferred at the participant's election.
The above table does not reflect limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), on pensions paid under federal
income tax qualified plans. However, an executive officer covered by the
Company's unfunded program will receive the full pension to which he would be
entitled in the absence of such limitations.
The years of credited service under the Pension Plan for each individual
named in the Summary Compensation Table are as follows: Mr. Forbes (17), Mr.
Vander Heyden (34), Mr. Belan (12) and Mr. Dix (15). The current remuneration
for these individuals for purposes of the Pension Plan is set forth in the
Summary Compensation Table.
In 1990, Messrs. Forbes, Vander Heyden and Dix agreed to the cancellation
of substantially all of their post-retirement group term life insurance in
exchange for an unfunded supplemental retirement plan. This plan provides for
the payment of 20% of the participant's final monthly salary for 120 months
after retirement. Assuming no increase in salary before retirement, they would
be paid additional annual pensions of $66,000, $42,400, and $28,000,
respectively. In 1995, Mr. James O. Wright, Chairman of the Board, and Chief
Executive Officer from 1952-1986, was granted a supplemental retirement pension
funded in part by existing life insurance policies. In 1996, Mr. Wright received
$105,000 from this plan. Mr. Wright's payment is reviewed annually by the
Management Review Committee. Mr. Belan is entitled to benefits under a non-
qualified supplemental retirement plan for five years of service which he was
granted at the time of his employment. The 12 years of credited service under
the Pension Plan consists of five years under the non-qualified supplemental
retirement plan and seven years under the qualified plan. Benefits are
calculated to provide Mr. Belan with the same pension benefits as if all of his
credited service was under the qualified plan.
BOARD MANAGEMENT REVIEW COMMITTEE REPORT ON EXECUTIVE COMPENSATION
At the November 15, 1996 meeting, the Board of Directors combined the
responsibilities of the former Compensation Committee and former Nominating
Committee into a new Management Review Committee. This new Committee has three
independent, non-employee directors. Following the Committee's review and
approval, all matters related to executive compensation are reported to the full
Board of Directors.
The charter of the Management Review Committee, as set forth in its bylaws,
includes the following powers and duties:
1. To recommend candidates to be nominated by the Board of Directors
for election as directors of the Company at the next succeeding Annual
Meeting of Shareholders;
11
<PAGE> 14
2. To recommend candidates to fill any unexpired term of the Board
which may occur, and to consider nominees recommended by shareholders;
3. To evaluate director performance;
4. To review and consider management's program for the development
and succession of management, including identifying and developing those
individuals who have the character, intelligence, motivation, education,
stamina, and personality to be top caliber executives;
5. To recommend candidates to be nominated by the Board of Directors
for election as Corporate officers and to make recommendations to the Board
of Directors on the ratification of the divisional officers;
6. To evaluate the performance of the Corporate officers;
7. To review and approve all forms of compensation and fringe
benefits for all Corporate officers, except assistant officers;
8. To review recommendations and to grant shares of Restricted Stock,
Stock Appreciation Rights, and Stock Options in accordance with their
respective plans;
9. To review and approve annually the Corporate Incentive Plans and
incentives to be paid;
10. To review and recommend to the Board fees and compensation of
non-employee directors for service on the Board or its committees or to the
Company in any capacity;
11. To review and recommend to the Board all forms of compensation and
fringe benefits to be provided to consultants to the Company; and
12. To submit to the Corporate Secretary minutes of each meeting held
by the Committee.
The compensation policies which are used as a general guideline for the
Committee as it carries out its powers and duties are:
1. The design of executive pay programs intended to attract and retain
qualified executive officers, motivate and reward performance;
2. Achievement of annual incentive compensation levels is dependent
upon the attainment of performance goals as approved by the Management
Review Committee;
3. Long-term incentive programs focus on the enhancement of
shareholder value through the use of stock options and long-term cash
incentives; and
4. The Committee will use its judgment to achieve a fair and
competitive compensation structure, utilizing both short-term and long-term
plans, with fixed and variable components.
In making its decisions, the Management Review Committee reviews:
1. Competitive compensation data for organizations of similar size and
similar business activity, considering both base salary and bonus data
separately and on a combined basis;
2. Financial performance for the Company as a whole and various
operating units, relative to prior year, the budget and other meaningful
financial data; and
3. Personal performance, including objectives approved by the
Management Review Committee and on a discretionary basis, where
appropriate.
The compensation program for the executive officers of the Company involves
base salaries, short-term annual cash incentive bonuses and a long-term program
using stock options and cash incentives.
Base Salaries. Salary rate ranges are established for each officer
position. The rate ranges are reviewed annually by the Management Review
Committee, using data supplied by an independent consulting firm, on
organizations of similar size and similar business activity. Similar size for
1996 was deemed as companies with
12
<PAGE> 15
sales between $100 million and $200 million. The companies in the performance
peer group set forth on page 15 are limited to publicly-held companies. The
compensation survey incorporates all companies of similar size, including
privately-held companies, and has a broader definition of similar business
activity, thereby providing the best basis for evaluating compensation relative
to the companies that compete with the Company for executives. The data includes
both salaries and total cash compensation. This process has been used by the
Management Review Committee for the past seven years. Based on a review of the
data, the Management Review Committee approved a 3.5 percent increase in the
rate ranges for 1997. The Management Review Committee approved a 3.5 percent
increase in the rate ranges for 1996 at its January, 1996 meeting. The Company's
policy is to pay executives at market, so the midpoint of the rate range
reflects compensation for similar positions in organizations of similar size and
similar business. Each of the individual officers' compensation falls within the
appropriate rate range.
In establishing the compensation of each officer, including the
President/Chief Executive Officer, the Management Review Committee is given a
five-year history, including base salary, short-term incentive awards, and
long-term compensation programs. The Committee is also furnished with a schedule
showing the Common Stock and Class B Common Stock ownership of each officer,
including options and restricted shares.
The base compensation for each employee is established by first determining
the employee's position within the applicable rate range and then considering
various performance factors. For those employees who are managers of an
operating unit, the financial performance of that particular unit, relative to
the prior year, the budget and the current economic condition of the market
being served are considered. Other non-financial objectives examined include any
change in market share, new product development, customer service and the
quality attainment of various products. Because the philosophy of the Company is
one of long-term goals and objectives, greater weight is given to the long-term
factors and lesser weight to the annual financial performance for base
compensation considerations.
Historically, all annual salary increases were effective on the hiring
anniversary date of the executive officer. The Management Review Committee
requested that the annual review date for executive officer compensation be
changed to February 1 and the compensation increases were adjusted to reflect
the change from anniversary date to February 1, 1997. Base salary increases
approved by the Management Review Committee ranged from 1.26 to 6.2 percent,
with the Chief Executive Officer being granted a 4.55 percent increase, after
evaluation of the factors set forth above relative to each individual's
circumstances and performance.
Short-Term Incentive Plan. Under the short-term incentive plan, the maximum
bonus payable is 50 percent of base salary for the President/Chief Executive
Officer and 35-40 percent for the other officers. There are three factors to the
short-term incentive plan. The financial factor, generally 50 percent of the
overall bonus potential, is based on the attainment of a certain earnings per
share threshold established for either the Company overall or the particular
operating unit, approved at the beginning of each year by the Management Review
Committee. The second factor, generally 25 percent of the incentive bonus
potential, is a set of objectives for each officer, determined in advance and
agreed to by the Management Review Committee. These objectives are non-financial
and include such things as personnel development, product development, systems
enhancements and compliance programs. The third factor, generally 25 percent of
the short-term incentive bonus plan potential, is discretionary, giving the
Management Review Committee the ability to compensate officers for outstanding
individual performance, other than financial and specific items included in
their objectives. Under the terms of the short-term incentive plan, bonuses
cannot be paid on the objective or discretionary factors unless the minimum
goal, for the overall corporation or for one of the operating units, based on
earnings per share, is met. For 1996, the bonuses for the executive officers
range from a low of 28.3 percent to a high of 49.4 percent. The President/Chief
Executive Officer received a bonus of $163,000.
In determining the individual short-term incentive awards, the financial
factor was based on earnings per share of the corporation or the individual unit
and the objective and discretionary factors were based upon the performance of
the individual executive.
For 1997, the short-term incentive plan will still have the same payout
percentages, but the target will be operating earnings for the particular
operating unit, Corporate, Division, strategic business unit or product line,
13
<PAGE> 16
whichever is appropriate, with greater weight being assigned to the financial
factor, less weight to the objective factor and with the discretionary factor
being eliminated.
Long-Term Incentive Plans/Stock Option Plans. A long-term compensation
program, which includes the Company's 1989 Stock Option Plan (the "1989 Plan"),
the 1993 Stock Option Plan (the "1993 Plan") and the 1995 Stock Option Plan (the
"1995 Plan"), presents an opportunity for the officers to gain or increase their
equity interests in the Company. All of the stock options are granted at the
market price on the date of grant.
For the year beginning January 1996, the Company established a long-term
incentive plan whereby members of the management group could earn bonuses based
upon increases in earnings per share over the prior year. A cash bonus would be
payable after four or five years if the annual increase in earnings per share
met the objectives established by the Board of Directors. During the years,
1996-2000, the maximum annual bonus to be paid to a participant would be
approximately 11.81 percent of his December 31, 1995 base salary. The Committee
believes that the long-term incentive plan based on increases in earnings per
share, ties management compensation to the shareholders' interest and is
reasonable compared to other publicly held companies of similar size. The
Management Review Committee amended the plan to permit the cash to be paid out
annually if the maximum annual target was achieved or if the minimum annual
target was achieved within the extension year. As originally designed, once the
target earnings are achieved, the cash earned cannot be forfeited. By making the
payments annually as earned, rather than one payment representing the aggregate
of all of the years' achievements, the executive officers would increase their
shareholdings earlier and would receive dividends annually.
As a result of this amendment to the long-term incentive plan, the
following payments were made: Mr. Forbes, $33,747; Mr. Vander Heyden, $24,090;
Mr. Belan, $20,348; Mr. Meeusen, $15,904; and Mr. Dix, $15,437.
At the January 23, 1997 Management Review Committee meeting, non-qualified
stock options were granted to 13 employees in the amount of 250 shares each. No
stock options were granted to any of the executive officers.
Section 162(m) Limitations. It is anticipated all 1997 compensation to
executives will be fully deductible under Section 162(m) of the Code and
therefore the Management Review Committee determined that a policy with respect
to qualifying compensation paid to certain executive officers for deductibility
is not necessary.
The foregoing report has been approved by all members of the Committee.
The Management Review Committee
Donald J. Schuenke, Chairman
Robert M. Hoffer
John J. Stollenwerk
MANAGEMENT REVIEW COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Review Committee currently consists of Messrs. Schuenke,
Hoffer and Stollenwerk. There are no Compensation Committee interlocks.
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares on a cumulative basis the yearly percentage
change since January 1, 1992 in (a) the total shareholder return on the Common
Stock with (b) the total return on the American Stock Exchange Corporate Index
and (c) the total return of a peer group made up of 14 companies in similar
industries and with similar market capitalization as selected by an independent
consulting firm. The graph assumes $100.00 invested on January 1, 1992. It
further assumes the reinvestment of dividends. The returns of each component
company in the peer group have also been weighted based on such company's
relative market capitalization.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN OF COMPANY,
PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 100.00 100.00 100.00
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1992 118.08 98.15 101.37
1993 133.39 100.64 120.44
1994 171.70 128.36 106.39
1995 196.75 179.89 137.13
1996 293.05 231.86 144.70
</TABLE>
* Peer Group consists of Badger Meter, Inc., Bio/Rad Labs, Candela Laser Corp.,
CEM Corp., Frequency Electronics, Innovex, Inc., K-Tron International, Inc.,
Keithly Instruments, Inc., Lasertechnics, Inc., Medar, Inc., Moore Products
Company, Newport Corp., Research Frontiers, Inc. and TSI, Inc. Cimco, Inc. has
been omitted from this year's Peer Group because it is no longer a
publicly-held company.
15
<PAGE> 18
PROPOSED BADGER METER, INC. 1997 STOCK OPTION PLAN
GENERAL
The Board of Directors of the Company has adopted the Badger Meter, Inc.
1997 Stock Option Plan (the "Option Plan") to encourage key employees and
directors of the Company and its subsidiaries to become shareholders or to
increase their stock ownership of the Company. The Option Plan will become
effective upon approval by the affirmative vote of the holders of a majority of
the aggregate votes outstanding on Common Stock and Class B Common Stock of the
Company present or represented at the Meeting (assuming a quorum is present or
so represented). It is intended that certain of the options issued under the
Option Plan may constitute incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The remainder
of the options issued under the Option Plan will constitute nonqualified stock
options.
The full text of the Option Plan is set forth as Exhibit A to this Proxy
Statement and this brief description is qualified in its entirety by reference
to the full text of the Option Plan. The Board of Directors of the Company
believes that the Option Plan will promote continuity of management, increased
incentive and personal interest in the welfare of the Company by those who are
primarily responsible for its long-term growth and financial success.
Options may be granted to directors and key employees of the Company and
its present and future subsidiaries. Approximately 250 employees are currently
eligible to participate in the Option Plan.
The Option Plan will be administered by the Management Review Committee of
the Board of Directors (the "Committee") which shall consist of not less than
two directors both of whom at the time they exercise discretion in administering
the Option Plan will not, and for at least one year prior thereto will not have
been, eligible for participation in the Option Plan as employees. The Company's
Board of Directors chooses which directors will serve on the Committee. Subject
to the express provisions of the Option Plan, the Committee has authority to
interpret the Option Plan and make all other determinations necessary or
advisable for the administration of the Option Plan.
The Committee has complete authority, subject to the express provisions of
the Option Plan, to select employees to participate in the Option Plan, and to
determine the number of shares subject to each option, the time at which the
option is to be granted, the type of option, the option period, the option
price, and the manner in which the options become exercisable, and to adopt
other provisions as it deems necessary or desirable.
The Option Plan provides for the grant of options representing up to an
aggregate of 200,000 shares of Common Stock (adjusted to reflect the 2-for-1
stock split payable April 18, 1997), subject to adjustment as discussed below.
If an option granted under the Option Plan expires, is canceled, or terminates
unexercised as to any share of Common Stock subject thereto, or if shares of
Common Stock are used to satisfy the Company's withholding tax obligations, such
shares will again be available for purposes of the Option Plan. Shares which may
be issued under the Option Plan may be authorized but unissued shares, or shares
acquired by the Company and held in its treasury. The aggregate fair market
value of Common Stock with respect to which any incentive stock options are
exercisable for the first time by an optionee during any calendar year under the
Option Plan or any other such plan of the Company shall not exceed $100,000.
Grants of nonqualified stock options are not subject to this limitation. In the
event of any change in the outstanding shares of Common Stock of the Company by
reason of any stock dividend or split, reorganization or recapitalization,
merger, dissolution, combination or exchange of shares or other similar
corporate change, the number of shares of stock subject to the Option Plan and
the aggregate number of shares in outstanding option agreements shall be
equitably adjusted by the Committee.
The option price per share of Common Stock will be fixed by the Committee,
but incentive stock options will not be less than 100% of the fair market value
on the date the option is granted. The Committee will determine the expiration
date of each option, but, in the case of an incentive stock option, such
expiration date will not be later than ten (10) years after the date of grant.
No option shall be assignable or transferable by an
16
<PAGE> 19
optionee except by will or the laws of descent and may be exercised during the
life of the optionee only by the optionee, except that the Committee may
determine the extent and manner in which optionees may designate a beneficiary
to exercise the option after the optionee's death or transfer any option.
An option may be exercised in full or in part by delivery to the Company at
its principal office of a written notice of exercise specifying the number of
shares with respect to which the option is being exercised. A notice of exercise
will be accompanied by full payment of the option price of the shares being
purchased (a) in cash or its equivalent; (b) with the consent of the Committee,
shares of Common Stock of the Company; or (c) with the consent of the Committee,
any combination of (a) and (b).
The Board of Directors may amend, suspend, or terminate the Option Plan at
any time, except that unless approved by the shareholders, no amendment shall
(i) increase the maximum number of shares issuable under the Option Plan, (ii)
materially increase the benefits to employees under the Option Plan, (iii)
change materially the class of persons eligible to participate in the Option
Plan or (iv) change the number, price, expiration date or make any other
material change to the options granted to directors hereunder. Termination of
the Option Plan will not affect the rights of optionees under options previously
granted to them. All unexpired options will continue until, by their own terms
and conditions, they lapse or terminate. No incentive stock options may be
granted after the tenth (10th) anniversary of the effective date of the Option
Plan.
An optionee has no rights as a shareholder with respect to any shares
subject to any option until the date the option has been exercised, the shares
have been fully paid, and a stock certificate has been issued.
No awards have been made to date under the Option Plan. The Company cannot
currently determine the awards that may be granted in the future to key
employees under the Option Plan. Such determinations will be made from time to
time by the Committee. During 1996, 72,084 options were granted to directors,
named executive officers or key employees under the Badger Meter, Inc. 1995
Stock Option Plan or the Badger Meter, Inc. 1989 Stock Option Plan.
On February 28, 1997, the closing price per share of the Common Stock on
the American Stock Exchange was $44.875.
TAX CONSEQUENCES
Certain options granted under the Option Plan are intended to be "incentive
stock options" as defined in Section 422 of the Code ("ISO"). In general, an
optionee will recognize no income or gain as a result of exercise of an ISO
(except that the alternative minimum tax may apply). If an optionee holds the
shares received on exercise of an ISO for at least two years from the date of
grant and one year from the date of exercise, he will recognize no federal
taxable income as a result of exercise and any gain (or loss) realized by the
optionee on the disposition of the stock will be treated as a long-term capital
gain (or loss), and no deduction is allowed to the Company. If the holding
period requirements are not satisfied, the optionee will recognize ordinary
income at the time of disposition equal to the lesser of (i) the gain realized
on the disposition, or (ii) the excess of the fair market value of the shares
acquired on the date of exercise over the exercise price. Any additional gain on
the disposition will be a long-term or short-term capital gain, depending on the
length of time the shares were held. The Company is entitled to a deduction
equal to the amount of ordinary income recognized by the optionee.
Upon exercise of a nonqualified stock option, the excess of the fair market
value of the shares at the time of exercise over the exercise price is generally
taxable to the optionee as ordinary income. The Company is entitled to a tax
deduction in the same amount at the time income is recognized by the optionee. A
subsequent disposition of the shares will give rise to long-term or short-term
capital gain (or loss), depending on the length of time the shares are held, to
the extent the amount realized from the sale differs from the tax basis, i.e.,
the fair market value of the shares on the date of exercise.
TAX WITHHOLDING
Not later than the date as of which an amount first becomes includable in
the gross income of the optionee for federal tax purposes with respect to any
option granted under the Option Plan, the optionee will
17
<PAGE> 20
be required to pay to the Company, or make arrangements satisfactory to the
Company regarding the payment of any federal, state, local or foreign taxes of
any kind required by law to be withheld with respect to such amount.
The Company may deduct and withhold from any cash payable to an optionee
such amounts as may be required for the purpose of satisfying the Company's
obligation to withhold federal, state or local taxes as the result of the
exercise of an option. With the consent of the Committee, an optionee may be
permitted to satisfy the Company's withholding tax requirements by electing to
have the Company withhold shares of Common Stock otherwise issuable to the
optionee, or deliver to the Company shares of Common Stock with a fair market
value equal to the amount required to be withheld. The Company may establish
such procedures as it deems appropriate for the settling of withholding
obligations with shares of Common Stock.
VOTE REQUIRED
A majority of the votes present or represented at the Meeting (assuming a
quorum is present) is required for approval of the Option Plan. The votes
represented by the proxies received will be voted FOR approval of the adoption
of the Option Plan, unless a vote against such approval or to abstain from
voting is specifically indicated on the proxy. Consequently, any shares not
voted at the Meeting, whether due to broker non-votes or otherwise (excluding
abstentions), will have no impact on the outcome of the vote. Shares of Common
Stock and Class B Common Stock as to which holders abstain from voting will be
treated as votes against approval of the Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY SHAREHOLDERS
VOTE FOR THE ADOPTION OF THE PLAN.
CERTAIN TRANSACTIONS
The Company maintains a short-term credit line of $10,000,000 with Firstar
Bank Milwaukee, N.A. During 1996, the maximum indebtedness under this short-term
line of credit was $4,893,000. At February 28, 1997, $4,285,000 was the total
indebtedness to Firstar Bank Milwaukee, N.A. Mr. Forbes is a director of Firstar
Corporation (the parent corporation of Firstar Bank Milwaukee, N.A.). Mr.
Stollenwerk is a director of Firstar Bank Milwaukee, N.A. The terms of the
Company's credit lines with Firstar Bank Milwaukee, N.A. are comparable to those
that would be obtained from an unaffiliated third party.
The Company maintains a short-term credit line of $15,000,000 with the M&I
Marshall & Ilsley Bank, a subsidiary of Marshall & Ilsley Corporation. During
1996, the maximum indebtedness under this short-term line of credit was
$1,100,000. At February 28, 1997, the Company had no indebtedness to the M&I
Marshall & Ilsley Bank on this credit line. Mr. James O. Wright is a director of
Marshall & Ilsley Corporation. The terms of the Company's credit lines with the
M&I Marshall & Ilsley Bank are comparable to those that would be obtained from
an unaffiliated third party.
Divisions of The Fall River Group supply castings to the Company. During
1996, the Company purchased $10,400,000 of castings from The Fall River Group.
Charles F. Wright, the Chief Executive Officer of The Fall River Group, is a
beneficiary of one of the trusts of which William C. Wright and William H.
Alverson (who each report beneficial ownership of 8.1% of the Company's Class B
Common Stock) are trustees. The amounts paid by the Company for the castings are
at prevailing market rates.
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<PAGE> 21
INDEPENDENT AUDITORS
Ernst & Young LLP, the Company's independent auditors for many years, has
been selected to audit the Company and its subsidiaries for 1997.
Representatives of Ernst & Young LLP will be present at the Annual Meeting to
respond to appropriate questions and to make a statement if they desire to do
so.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors to file reports concerning the ownership of Company
equity securities with the Securities and Exchange Commission and the Company.
Based solely on a review of the copies of such forms furnished to the Company,
or written representations that no Form 5 was required, the Company believes
that, during the year ended December 31, 1996, all reports required by Section
16(a) to be filed by the Company's insiders were filed on a timely basis, except
that the Company inadvertently reported late on behalf of Mr. James O. Wright,
in his status as a trustee, a single voting trust transaction which was exempt
from Section 16(b). The voting trust transaction, however, was reported on a
timely basis by the voting trust.
OTHER MATTERS
THE COMPANY HAS FILED AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1996. THE COMPANY
WILL PROVIDE A COPY OF THIS FORM 10-K REPORT WITHOUT CHARGE TO EACH PERSON WHO
IS A RECORD OR BENEFICIAL HOLDER OF SHARES OF COMMON STOCK OR CLASS B COMMON
STOCK ON THE RECORD DATE FOR THE MEETING AND WHO SUBMITS A WRITTEN REQUEST FOR
IT. REQUESTS FOR COPIES OF THE FORM 10-K SHOULD BE ADDRESSED TO SECRETARY,
BADGER METER, INC., 4545 WEST BROWN DEER ROAD, P.O. BOX 23099, MILWAUKEE,
WISCONSIN 53223.
The cost of solicitation of proxies will be borne by the Company. Brokers,
nominees and custodians who hold stock in their names and who solicit proxies
from the beneficial owners will be reimbursed by the Company for out-of-pocket
and reasonable clerical expenses.
The Board of Directors does not intend to present at the Meeting any
matters other than those set forth herein and does not presently know of any
other matters that may be presented to the Meeting by others. However, if any
other matters should properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy to vote said proxy on any such matters
in accordance with their best judgment.
A shareholder wishing to include a proposal in the proxy statement for the
1998 Annual Meeting of Shareholders must forward the proposal to the Company by
November 28, 1997.
Deirdre C. Elliott
Secretary
April 1, 1997
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<PAGE> 22
EXHIBIT A
BADGER METER, INC.
1997 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Badger Meter, Inc. 1997 Stock Option Plan (the "Plan")
is to promote the best interests of Badger Meter, Inc. (the "Company") and its
shareholders by encouraging directors and key employees of the Company and its
subsidiaries to secure or increase on reasonable terms their stock ownership in
the Company. The Board of Directors of the Company believes the Plan will
promote continuity of management, increased incentive and personal interest in
the welfare of the Company by those who are primarily responsible for shaping
and carrying out the long-range plans of the Company and its subsidiaries and
securing their continued growth and financial success. It is intended that
certain of the options issued under the Plan may constitute incentive stock
options within the meaning of Section 422 of the Internal Revenue Code
("Incentive Stock Options") and the remainder of the options issued under the
Plan will constitute non-qualified stock options ("Non-qualified Stock
Options").
2. EFFECTIVE DATE
The Plan shall become effective on the date of adoption by the Board of
Directors of the Company (the "Board"), subject to the approval and ratification
of the Plan by the shareholders of the Company within twelve (12) months of the
date of adoption by the Board, and all options granted prior to such shareholder
approval shall be subject to such approval.
3. ADMINISTRATION
(a) The Plan shall be administered by the Management Review Committee of
the Board (the "Committee") as such Committee may be constituted from time to
time. The Committee shall consist of not less than two members of the Board
selected by the Board, each of whom shall qualify as a non-employee director
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934
("Exchange Act"), or any successor rule or regulation thereto. A majority of the
members of the Committee shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held.
If at any time the Committee shall not be in existence or not consist of
directors who are qualified as "non-employee directors" as defined above, the
Board shall administer the Plan. To the extent permitted by applicable law, the
Board may, in its discretion, delegate to another committee of the Board or to
one or more senior officers of the Company any or all of the authority and
responsibility of the Committee with respect to options to participants other
than participants who are subject to the provisions of Section 16 of the
Exchange Act. To the extent that the Board has delegated to such other committee
or one or more officers the authority and responsibility of the Committee, all
references to the Committee herein shall include such other committee or one or
more officers.
(b) Subject to the express provisions of the Plan, the Committee shall have
complete authority to select the key employees to whom options shall be granted,
to determine the number of shares subject to each option, the time at which the
option is to be granted, the type of option, the option period, the option price
and the manner in which options become exercisable, and shall establish such
other terms and conditions of the options as the Committee may deem necessary or
desirable. In making such determinations, the Committee may take into account
the nature of the services rendered by the respective employees, their present
and potential contribution to the success of their respective organizations and
such other factors as the Committee in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Committee shall also have
complete authority to interpret the Plan, to prescribe, amend and rescind the
rules and regulations relating to it, to waive any conditions or restriction
with respect to any options, and to make all other
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<PAGE> 23
determinations necessary or advisable for the administration of the Plan. The
determinations of the Committee on the matters referred to in this paragraph 3
shall be conclusive.
4. ELIGIBILITY
Any non-employee director ("Director") or key employee ("Employee") of the
Company or its present and future subsidiaries, as defined in Section 424(f) of
the Internal Revenue Code ("Subsidiaries"), whose judgment, initiative and
efforts contribute materially to the successful performance of the Company or
its Subsidiaries, shall be eligible to receive options under the Plan.
5. SHARES SUBJECT TO THE PLAN
The shares which may be issued pursuant to options under the Plan shall be
shares of the Company's Common Stock, $1.00 par value ("Stock"), and may be
either authorized and unissued or treasury shares. The total number of shares
for which options may be granted and which may be purchased pursuant to options
under the Plan shall not exceed an aggregate of 200,000 shares, (adjusted to
reflect the 2-for-1 stock split payable April 18, 1997), subject to adjustment
as provided in the following sentence and in paragraph 12 hereof. If an option
granted under the Plan expires, is canceled or terminates unexercised as to any
shares of Stock subject thereto, or if shares of Stock are used to satisfy the
Company's withholding tax obligations, such shares shall again be available for
the granting of additional options under the Plan.
6. OPTION PRICE
The option price per share of Stock shall be fixed by the Committee, but
shall be not less than 100% in the case of Incentive Stock Options of the fair
market value of the Stock on the date the option is granted. Unless otherwise
determined by the Committee, the "fair market value" of Stock on the date of
grant shall be the closing price for a share of Stock on such date, or, if such
date is not a trading date, the next preceding trading date as quoted on the
American Stock Exchange Transaction Reporting System.
7. GRANT OF OPTIONS
(a) Subject to the terms and conditions of the Plan, the Committee may,
from time to time, grant to Employees options to purchase such number of shares
of Stock and on such terms and conditions as the Committee may determine. More
than one option may be granted to the same Employee. The day on which the
Committee approves the granting of an option shall be considered as the date on
which such option is granted.
(b) Notwithstanding the foregoing, each Director of the Company who is not
an employee of the Company or any subsidiary or affiliate thereof, and who first
became or becomes a Director after April 24, 1997, shall, upon approval of the
Plan by the shareholders of the Company, or at the time of their first election
to the Board, subject to adjustments as provided in paragraph 12, automatically
receive an option to purchase 6,000 shares of Stock on that date. Any date on
which a Director receives an option shall be referred to as a "Grant Date". Such
options shall be Non-qualified Stock Options with an expiration date ten (10)
years after the Grant Date. The option price per share shall be the closing
price for a share of Stock on the Grant Date, or if such day is not a trading
day, the next preceding trading day as quoted on the American Stock Exchange
Transaction Reporting System.
(c) Notwithstanding the foregoing, each Director or future Director of the
Company who is not an employee of the Company or any subsidiary or affiliate
thereof shall upon approval of the Plan by the shareholders of the Company, or
at the time of their first election to the Board, be entitled to receive an
option to purchase 2,000 shares of Stock on that date in order to increase the
Directors' stake in the future of the Company. Any date on which a Director
receives an option shall be referred to as a Grant Date. Such options shall be
Non-qualified Stock Options with an expiration date ten (10) years after the
Grant Date. The option price per share shall be the closing price for a share of
Stock on the Grant Date, or if such day is not a trading day, the next preceding
trading day as quoted on the American Stock Exchange Transaction Reporting
System.
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<PAGE> 24
8. OPTION PERIOD
Except as set forth in paragraph 7, the Committee shall determine the
expiration date of each option, but in the case of Incentive Stock Options such
expiration date shall be not later than ten (10) years after the date such
option is granted.
9. MAXIMUM PER PARTICIPANT
The aggregate fair market value (determined at the time the option is
granted pursuant to paragraph 7) of the Stock with respect to which any
Incentive Stock Options are exercisable for the first time by a Director or
Employee during any calendar year under the Plan or any other such plan of the
Company or any Subsidiary shall not exceed $100,000.
10. EXERCISE OF OPTIONS
An option may be exercised, subject to its terms and conditions and the
terms and conditions of the Plan, in full at any time or in part from time to
time by delivery to the Company at its principal office of a written notice of
exercise specifying the number of shares with respect to which the option is
being exercised. Any notice of exercise shall be accompanied by full payment of
the option price of the shares being purchased (a) in cash or its equivalent; or
(b) with the consent of the Committee, by delivering to the Company shares of
Stock (valued at their fair market value as of the date of exercise, as
determined by the Committee consistent with the method of valuation set forth in
paragraphs 6 and 7); (c) with the consent of the Committee, by any combination
of (a) and (b); or (d) by delivering (including by fax) to the Company or its
designated agent an executed irrevocable option exercise form together with
irrevocable instructions to a broker/dealer to sell or margin a sufficient
portion of the shares of Stock and delivering the sale or margin loan proceeds
directly to the Company to pay for the option price.
11. TRANSFERABILITY
No option shall be assignable or transferable by a Director or an Employee
other than by will or the laws of descent and distribution, and may be exercised
during the life of the Director or Employee only by the Director or Employee or
his guardian or legal representative, except that an Employee may, to the extent
allowed by the Committee and in a manner specified by the Committee, (a)
designate in writing a beneficiary to exercise the option after the Employee's
death and (b) transfer any option.
12. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK
In the event of a capital adjustment resulting from a stock dividend, stock
split, reorganization, recapitalization, merger, consolidation, combination or
exchange of shares or the like, the number of shares of Stock subject to the
Plan and the aggregate number and class of shares under option in outstanding
option agreements shall be adjusted in a manner consistent with such capital
adjustment; provided, however, that no such adjustment shall require the Company
to sell any fractional shares. The determination of the Committee as to any
adjustment shall be final. Notwithstanding the foregoing, options subject to
grant or previously granted to Directors under the Plan at the time of any
capital adjustments shall be subject only to such adjustments as shall be
necessary to maintain the relative proportionate interest of each Director and
preserve, without exceeding, the value of such options.
13. CORPORATE MERGERS AND OTHER CONSOLIDATIONS
The Committee may also grant options having terms and provisions which vary
from those specified in the Plan provided that any options granted pursuant to
this paragraph are granted in substitution for, or in connection with the
assumption of, existing options granted by another company and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition or other
reorganization to which the Company is a party.
A-3
<PAGE> 25
14. OPTION AGREEMENTS
All options granted under the Plan shall be evidenced by written agreement
(which need not be identical) in such form as the Committee shall determine.
Each option agreement shall specify whether the option granted thereunder is
intended to constitute an Incentive Stock Option or a Non-qualified Stock
Option.
15. TRANSFER RESTRICTIONS
Shares of Stock purchased under the Plan and held by any person who is an
officer or Director of the Company, or who directly or indirectly controls the
Company, may not be sold or otherwise disposed of except pursuant to an
effective registration statement under the Securities Act of 1933 or except in a
transaction in compliance with Rule 144 under such Act or other transaction
which, in the opinion of counsel for the Company, is exempt from registration
under such Act. The Committee may waive the foregoing restrictions in whole or
in part in any particular case or cases, or may terminate such restrictions,
whenever the Committee determines that such restrictions afford no substantial
benefit to the Company.
16. AMENDMENT OF PLAN
Shareholder approval of any amendment of the Plan shall be obtained if
otherwise required by: (i) the rules and/or regulations promulgated under
Section 16 of the Exchange Act (in order for the Plan to remain qualified under
Rule 16b-3); (ii) the Internal Revenue Code of 1986, as amended, or any rules
promulgated thereunder (in order to allow for Incentive Stock Options to be
granted under the Plan); or (iii) the listing requirements of the American Stock
Exchange or any principal securities exchange or market on which the Stock is
then traded (in order to maintain the quotation or listing of the Stock
thereon). The provisions of paragraphs 7(b) and 7(c) cannot be amended more than
once every six (6) months other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations thereunder.
17. TERMINATION OF PLAN
The Board shall have the right to suspend or terminate the Plan at any
time; provided, however, that no Incentive Stock Options may be granted after
the tenth (10th) anniversary of the effective date of the Plan as described in
paragraph 2 hereof. Termination of the Plan shall not affect the rights of
Employees or Directors under options previously granted to them, and all
unexpired options shall continue in force and operation after termination of the
Plan except as they may lapse or be terminated by their own terms and
conditions.
18. TAX WITHHOLDING
(a) The Company may deduct and withhold from any cash otherwise payable to
an Employee such amount as may be required for the purpose of satisfying the
Company's obligation to withhold federal, state or local taxes as the result of
the exercise of an option. In the event the amount so withheld is insufficient
for such purpose, the Company may require that the Employee pay to the Company
upon its demand or otherwise make arrangements satisfactory to the Company for
payment of such amount as may be requested by the Company in order to satisfy
its obligation to withhold any such taxes.
(b) An Employee may be permitted to satisfy the Company's withholding tax
requirements by electing to have the Company withhold shares of Stock otherwise
issuable to the Employee or to deliver to the Company shares of Stock having a
fair market value on the date income is recognized pursuant to the exercise of
an option equal to the amount required to be withheld. The election shall be
made in writing and shall be made according to such rules and procedures as the
Committee may determine.
19. RIGHTS AS A SHAREHOLDER
A Director or an Employee shall have no rights as a shareholder with
respect to any shares subject to any option until the date the options shall
have been exercised, the shares shall have been fully paid and a stock
certificate shall have been issued.
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<PAGE> 26
20. MISCELLANEOUS
The grant of any option under the Plan may also be subject to other
provisions as the Committee determines appropriate, including, without
limitation, provisions for (a) one or more means to enable Employees to defer
recognition of taxable income relating to options; (b) the purchase of Stock
under options in installments; and (c) compliance with federal or state
securities laws and stock exchange requirements.
A-5
<PAGE> 27
PROXY
1997 ANNUAL MEETING OF SHAREHOLDERS
BADGER METER, INC.
The undersigned does hereby constitute and appoint James O. Wright, James
L. Forbes and Deirdre C. Elliott, or any one or more of them, as proxies for
the undersigned at the Annual Meeting of Shareholders of Badger Meter, Inc. to
be held on FRIDAY, April 25, 1997, at The Milwaukee Club, 706 North Jefferson
Street, Milwaukee, Wisconsin, at 8:30 a.m. local time, and any adjournments or
postponements thereof, to vote thereat the shares of stock held by the
undersigned as fully and with the same effect as the undersigned might or could
do if personally present at said Meeting or any adjournments or postponements
thereof:
<TABLE>
<S> <C> <C>
1. Election of Directors FOR all nominees listed below (except WITHHOLD AUTHORITY
as marked to the contrary below) to vote for all nominees listed below
</TABLE>
JAMES L. FORBES, ROBERT M. HOFFER, CHARLES F. JAMES, JR., KENNETH P. MANNING,
ANDREW POLICANO, DONALD J. SCHUENKE, JOHN J. STOLLENWERK, PAMELA B. STROBEL,
JAMES O. WRIGHT AND JAMES O. WRIGHT, JR.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
________________________________________________________________________________
2. To adopt the Badger Meter, Inc. 1997 Stock Option Plan:
FOR AGAINST ABSTAIN
and
3. To transact such other business as may properly come before the
meeting, or any adjournments or postponements thereof,
hereby revoking any other Proxy heretofore executed by the undersigned for such
Meeting. The undersigned acknowledges receipt of the Notice of Annual Meeting
of Shareholders and the Proxy Statement.
<PAGE> 28
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(to be signed on the other side)
(continued from other side)
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED AND FOR THE ADOPTION OF THE
BADGER METER, INC. 1997 STOCK OPTION PLAN.
Dated ____________________________________________, 1997
Signed ________________________________________________
(Signature of Shareholder)
Signed ________________________________________________
(Signature if Jointly Held)
Please sign exactly as your
name appears on your stock
certificate as shown directly
to the left. Joint owners
should each sign personally.
A corporation should sign in
full corporate name by duly
authorized officers. When
signing as attorney, executor,
administrator, trustee or
guardian, give full title as
such.
PLEASE SIGN AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
REQUIRED.
