<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 14a-11(c) or Rule 14a-12
Badger Meter
- --------------------------------------------------------------------------------
(Name of Registrant an Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 LOGO]
BADGER METER, INC.
4545 WEST BROWN DEER ROAD
MILWAUKEE, WISCONSIN 53223
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1999
The Annual Meeting of the Shareholders of Badger Meter, Inc. (the
"Company") will be held at BADGER METER, INC., 4545 West Brown Deer Road,
Milwaukee, Wisconsin, 53223, on Friday, April 23, 1999, at 8:30 a.m. local time,
for the following purposes:
1. To approve a proposal to restate the Company's Restated Articles of
Incorporation;
2. To elect four directors to three-year terms and one director to a
two-year term;
3. To adopt the Badger Meter, Inc. 1999 Stock Option Plan; and
4. 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 26, 1999 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
March 23, 1999
<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 23, 1999, at BADGER METER,
INC., 4545 West Brown Deer Road, Milwaukee, Wisconsin 53223, 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 26, 1999. As of the record date,
the Company had 2,587,164 shares of Common Stock (the "Common Stock") of the
Company outstanding and entitled to one vote per share, and 1,081,846 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
13,405,624 votes, consisting of 2,587,164 votes represented by outstanding
shares of Common Stock and 10,818,460 votes represented by outstanding shares of
Class B Common Stock.
This Proxy Statement is being furnished to shareholders of the Company on
or about March 23, 1999.
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 five 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 four persons named
below to serve as directors for three-year terms and one person for a two-year
term or until their respective successors have been duly appointed, or until
their prior death, resignation or removal.
The Board of Directors consists of eleven members divided into three
classes of four, four and three directors each. One class is elected each year
to serve for a term of three years. Five directors are to be elected at the
Meeting. Four of the Directors being nominated, Messrs. Forbes, James,
Stollenwerk and Wright, Jr., were elected by the shareholders at the last annual
meeting for a one-year term expiring in 1999. Mr. Belan was elected by the Board
of Directors in February 1999 and is being nominated for a two-year term
expiring in 2001.
Listed below are the names of the nominees of the Board of Directors for
the office of director together with certain additional information concerning
each such nominee. The five 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 TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS EXPIRING 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION WITH COMPANY AGE BUSINESS EXPERIENCE DURING LAST FIVE YEARS SINCE
- ------------------------------ --- ------------------------------------------ --------
<S> <C> <C> <C>
JAMES L. FORBES........................ 66 Badger Meter, Inc.: President and Chief 1981
President and Chief Executive Executive Officer.
Officer
CHARLES F. JAMES, JR................... 67 Milwaukee School of Engineering: Vice 1986
President of Academics. Formerly,
University of Wisconsin - Milwaukee: Dean
of the College of Engineering and Applied
Science.
JOHN J. STOLLENWERK.................... 59 Allen-Edmonds Shoe Corporation (a 1996
manufacturer and marketer of shoes): Owner
and President.
JAMES O. WRIGHT, JR.................... 53 The Wright Tax Service: Owner 1978
</TABLE>
NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS
FOR TWO-YEAR TERM EXPIRING 2001 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
ROBERT D. BELAN........................ 59 Badger Meter, Inc.: Executive Vice 1999
Executive Vice President President Formerly, Badger Meter, Inc.:
President-Utility
</TABLE>
Listed below are the names of the directors who are not up for election
this year together with certain additional information on each director.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING 2000 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
JAMES O. WRIGHT........................ 78 Badger Meter, Inc.: Chairman of the 1948
Chairman of the Board Board
ROBERT M. HOFFER....................... 78 WICOR, Inc. (a holding company): Retired 1967
Chairman and Chief Executive Officer.
Wisconsin Gas Company (gas distribution
utility): Retired Chairman and Chief
Executive Officer.
ANDREW J. POLICANO..................... 49 University of Wisconsin: Dean of the 1997
School of Business.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING 2001 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
KENNETH P. MANNING..................... 57 Universal Foods Corporation (an 1996
international marketer of flavors,
colors, bioproducts, yeast & dehydrated
vegetables): Chairman, President and
Chief Executive Officer.
DONALD J. SCHUENKE..................... 70 Northern Telecom Limited (a 1982
telecommunications company): Chairman.
Northwestern Mutual Life Insurance
Company: Retired Chairman and Chief
Executive Officer.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
PAMELA B. STROBEL...................... 46 Commonwealth Edison Co. (an electric utility): 1995
Executive Vice President and General Counsel.
Unicom Corp. (parent company of Commonwealth
Edison Co.): Executive Vice President and General
Counsel. Formerly, Sidley & Austin Law Firm:
Partner
</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 590,814
shares of Class B Common Stock. This stock held in the Badger Meter Voting Trust
represents 5,908,140 votes or approximately 44.1% 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 has additional voting
power over 38,902 shares of Common Stock and 354,880 shares of Class B Common
Stock as a trustee of the Badger Meter Officers' Voting Trust, for total voting
power over 38,902 shares of Common Stock and 945,694 shares of Class B Common
Stock, representing 9,495,842 votes or approximately 71% 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
Corporation, Universal Foods Corporation, Journal Communications, Inc. and
United Wisconsin Services, Inc. Mr. Manning is a director of Universal Foods
Corporation and Firstar Corporation. Mr. Policano is a director of National
Guardian Life Insurance Company. Mr. Schuenke is a director of A. O. Smith
Corporation, Northern Telecom Limited, 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 Corporation 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 during
1998: Audit, Compliance, Employee Benefit Plans, Finance, Management Review and
Technology.
The Audit Committee, which met twice in 1998, consists of Messrs. Hoffer
(Chairman) and Manning 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 Management Review Committee, consisting of Messrs. Schuenke (Chairman),
Hoffer, Policano and Stollenwerk, met in January 1998, May 1998 and January
1999. The Management Review Committee reviews and establishes all forms of
compensation for the officers of the Company and administers the Company's
compensation plans including the various stock option plans. The Committee also
reviews the various management development and succession programs. The
Committee selects nominees for the Company's Board of Directors. The Committee
considers nominees for directors recommended by the shareholders but has no
established procedure which must be followed. The Company's Restated By-Laws
also provide for shareholder nominations of candidates for election as
directors. These provisions require such nominations to be made pursuant to
timely notice (as specified in the Restated By-Laws) in writing to the Secretary
of the Company.
The Compliance Committee, which met once in 1998, consists of Ms. Strobel
(Chairman), and Messrs. James 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 Employee Benefit Plans Committee, which met three times in 1998,
consists of Messrs. Policano. (Chairman), Schuenke, Wright and Wright, Jr. The
Employee Benefit Plans Committee oversees the
3
<PAGE> 6
administration of the Company's pension plans, savings plans, employee savings
and stock ownership plans and other retirement plans.
The Technology Committee, which met once in 1998, consists of Messrs.
Manning (Chairman), James, 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 Finance Committee, which was formed in August 1998 and met once,
consists of Messrs. Stollenwerk (Chairman), Manning and Policano. This committee
will continually review the Company's various financing activities and recommend
changes in the corporate debt structure.
The Board of Directors held five meetings in 1998. All directors attended
at least 75% of the meetings of the Board of Directors and committees on which
they serve.
DIRECTOR COMPENSATION
The president and CEO is an employee of the Company, as is the executive
vice president, and both receive no compensation as a director. All other
directors are compensated as follows: Directors were compensated at a rate of
$1,200 for each Board of Directors meeting attended and were reimbursed for
out-of-pocket travel, lodging and meal expenses. Directors were paid an
additional fee of $750 per month and were compensated at the rate of $750 for
each committee meeting they attended. Directors were compensated an additional
$250 for out-of-town or all-day meetings.
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 $10,000 to
$14,000 per year, depending on date of award.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of March 1, 1999, 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 246,003 shares of Common Stock and 945,694
shares of Class B Common Stock, representing an aggregate of 9,703,373 votes or
approximately 71.7% 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.
4
<PAGE> 7
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
OPTIONS BENEFICIALLY
EXERCISABLE SOLE SHARED OWNED AND
WITHIN BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
- ---- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
JAMES O. WRIGHT
Common Stock(1)..................... 2,500 8,580(4) 21,994(6)(7) 33,074
1.3%
Class B
Common Stock..................... 590,814(5)(6) 590,814
54.6%
JAMES L. FORBES
Common Stock(1)..................... 15,279(3)(4) 38,902(3)(5) 44,291
1.7%
Class B
Common Stock..................... 81,696(3) 945,694(3)(5) 945,694
87.4%
ROBERT M. HOFFER
Common Stock(1)..................... 8,500 2,500 11,000
0.4%
CHARLES F. JAMES, JR.
Common Stock(1)..................... 8,500 1,500 600 10,600
0.4%
KENNETH P. MANNING
Common Stock(1)..................... 7,700 2,507 10,207
0.4%
ANDREW J. POLICANO
Common Stock(1)..................... 9,000 1,000 10,000
0.4%
DONALD J. SCHUENKE
Common Stock(1)..................... 8,500 4,500 13,000
0.5%
JOHN J. STOLLENWERK
Common Stock(1)..................... 8,500 4,422 2,383 15,305
0.6%
PAMELA B. STROBEL
Common Stock(1)..................... 8,500 3,400 11,900
0.4%
JAMES O. WRIGHT, JR.
Common Stock(1)..................... 8,500 2,250 10,750
0.4%
Class B
Common Stock..................... 5,400(5) 590,814(5)(6) 590,814
54.6%
ROBERT D. BELAN
Common Stock(1)..................... 15,400 4,978(3)(4) 20,378
0.8%
Class B
Common Stock..................... 21,236(3) 21,236
2.0%
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
NUMBER OF SHARES
OPTIONS BENEFICIALLY
EXERCISABLE SOLE SHARED OWNED AND
WITHIN BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
- ---- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
RONALD H. DIX
Common Stock(1)..................... 7,400 14,359(3)(4) 38,902(3) 59,577
2.4%
Class B
Common Stock..................... 24,696(3) 354,880(3) 354,880
32.8%
RICHARD A. MEEUSEN
Common Stock(1)..................... 10,000 1,191(3)(4) 38,902(3) 49,141
1.9%
Class B
Common Stock..................... 11,304(3) 354,880(3) 354,880
32.8%
WILLIAM H. VANDER HEYDEN
Common Stock(1)..................... 5,400 5,635(3)(4) 400 11,636
0.5%
Class B
Common Stock..................... 51,124(3) 51,124
4.7%
All Directors and Officers as a
Group (16 persons, including
those named above)
Common Stock(1).................. 126,200 76,833(3)(4) 61,496(3)(5) 246,033
(6)(7) 9.6%
Class B
Common Stock..................... 205,676(3)(5) 945,694(3)(5) 945,694
(6) 84.41%
WILLIAM H. ALVERSON
780 N. Water Street
Milwaukee, WI 53202
Class B
Common Stock..................... 86,368(5)(6) 86,368
8.0%
WILLIAM C. WRIGHT
11740 N. Port Washington Road
Mequon, WI 53092
Common Stock........................ 750 750
.02%
Class B
Common Stock..................... 86,368(5)(6) 86,368
8.0%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA
90401
Common Stock(1)(8).................. 166,400 166,400
6.5%
Class B
Common Stock(8).................. 58,000 58,000
5.4%
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER OF SHARES
OPTIONS BENEFICIALLY
EXERCISABLE SOLE SHARED OWNED AND
WITHIN BENEFICIAL BENEFICIAL PERCENT OF CLASS
NAME 60 DAYS OWNERSHIP(2) OWNERSHIP(2) OUTSTANDING
- ---- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Heartland Advisors, Inc.
790 N. Milwaukee Street
Milwaukee, WI 53202
Common Stock(1)(9).................. 156,900 372,600 372,600
14.5%
M&I Trust Company
1000 N. Water St
Milwaukee, WI 53202
Common Stock(1)..................... 2,800 465,425 468,225
18.3%
Class B
Common Stock..................... 6,000(6) 332,272(5)(6) 338,272
(10) 31.3%
</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 26, 1999 (2,587,164), 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
Ronald H. Dix, James L. Forbes and Richard A. Meeusen are trustees,
effective March 1, 1999, holds 38,902 shares of Common Stock and 354,880
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 $2,000,000 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' 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. Dix, Forbes and Meeusen 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 1,084 shares of
Common Stock and 24,696 shares of Class B Common Stock. Mr. Forbes has sole
investment power over 9,890 shares
7
<PAGE> 10
of Common Stock and 81,696 shares of Class B Common Stock. Mr. Meeusen has
sole investment power over 952 shares of Common Stock and 11,304 shares of
Class B Common Stock. Messrs. Belan and Vander Heyden have sole investment
power (but no voting power) over 3,618 and 1,442 shares of Common Stock and
21,236 and 51,124 shares of Class B Common Stock, respectively.
(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, 1,080 shares; James L. Forbes, 5,389 shares; Robert D. Belan, 1,360
shares; Ronald H. Dix, 2,775 shares; Richard A. Meeusen, 239 shares;
William H. Vander Heyden, 4,194 shares; and all officers as a group
(including Messrs. Wright and Forbes) 15,878 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 590,814 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) 86,368 of
the shares of Class B Common Stock reported as beneficially owned by Mr.
William C. Wright (which includes the 86,368 shares reported as
beneficially owned by William H. Alverson); (b) 349,510 shares of Class B
Common Stock of the shares reported as beneficially owned by James O.
Wright; (c) 214,960 of the shares of Class B Common Stock reported as
beneficially owned by James O. Wright, Jr.; and (d) 266,550 shares of Class
B Common Stock reported as beneficially owned by M&I Trust Company. Mr.
James O. Wright, Jr. has sole investment power over 5,400 shares of Class B
Common Stock held in the Voting Trust.
(6) 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: James O.
Wright, Jr., 214,960 shares of Class B Common Stock; William H. Alverson,
86,368 shares of Class B Common Stock; James O. Wright, 349,510 shares of
Class B Common Stock and 19,994 shares of Common Stock; William C. Wright,
86,368 shares of Class B Common Stock; and M&I Trust Company, 266,550
shares of Class B Common Stock and 25,994 shares of Common Stock. All of
the Class B Common Stock shares are held in the Voting Trust (see note 5
above).
(7) Includes 2,000 shares of Common Stock over which Mr. Wright has shared
investment power and no voting power.
(8) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios").
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over the securities of the
Issuer described in this schedule that are owned by the Portfolios. All
securities reported in this schedule are owned by the Portfolios, and
Dimensional disclaims beneficial ownership of such securities.
(9) 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.
(10) The number of shares shown includes shares held in one or more employee
benefit plans, where the Marshall & Ilsley Trust Company, as custodian, may
be viewed as having voting or dispositive authority in certain situations
pursuant to Department of Labor regulations or interpretations or federal
case law. Marshall & Ilsley Trust Company disclaims beneficial ownership of
the shares.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by 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
1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- ----------------------------
EARNINGS UNDER
OTHER ANNUAL LONG-TERM SECURITIES ALL OTHER
FISCAL COMPENSATION INCENTIVE PLAN UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) ($)(3) OPTIONS (#) ($)(2)
- --------------------------- ------ ---------- --------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Forbes............. 1998 374,810 185,000 0 39,853 0 2,500
President and Chief 1997 349,387 172,500 0 38,759 8,680 2,375
Executive Officer 1996 330,356 163,000 0 33,747 8,680 2,250
William H. Vander Heyden.... 1998 224,151 30,900 0 24,090 0 2,500
President-Industrial 1997 219,099 0 0 24,090 5,768 2,375
1996 212,235 59,996 29,558(1) 24,090 5,768 2,250
Robert D. Belan............. 1998 218,014 90,000 0 20,348 5,500 2,500
Executive 1997 196,002 75,800 0 20,348 4,872 2,375
Vice President 1996 181,574 70,680 0 20,348 4,872 2,250
Ronald H. Dix............... 1998 161,162 55,300 0 15,437 0 2,500
Vice President 1997 153,064 52,500 0 15,437 3,696 2,375
Admin. & Human Resources 1996 143,235 45,850 0 15,437 3,696 2,250
Richard A. Meeusen.......... 1998 158,016 54,250 0 15,904 0 2,500
Vice President-Finance, 1997 150,126 50,900 0 15,904 3,808 2,375
Treasurer and Chief 1996 138,913 44,030 0 15,904 13,808 2,040
Financial Officer
</TABLE>
- ---------------
(1) In 1996, Mr. Vander Heyden was reimbursed for a portion of his estimated
additional income taxes as the result of the expiration of restrictions on
stock granted to him in 1986 pursuant to the Company's Restricted Stock Plan
approved by the shareholders in 1984.
(2) Company contribution to Badger Meter, Inc. Employee Savings and Stock
Ownership Plan (ESSOP).
(3) 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 $39,853, $24,090,
$20,348, $15,437 and $15,904 for Messrs. Forbes, Vander Heyden, Belan, Dix
and Meeusen, respectively. One more annual payment may be made under the
LTIP for the years 1999 or 2000.
Certain benefits (including social club dues, automobile and legal and
accounting services) were provided through the Company to the executive officers
named in the table above. In 1998, the aggregate amount of such benefits for
each of the executive officers named in the table did not exceed 10% of such
officer's cash compensation.
9
<PAGE> 12
OPTION GRANTS IN 1998
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1998 to the individuals named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO CURRENT
UNDERLYING EMPLOYEES EXERCISE PRESENT
OPTIONS IN OR BASE VALUE AT
TYPE OF GRANTED FISCAL PRICE EXPIRATION DATE
NAME OPTION (#)(1) YEAR ($/SH) DATE OF GRANT ($)
- ---- -------- ---------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Belan....................... Non-Qual 5,500 16.9% $35.56 5/15/08 $70,895
</TABLE>
- ---------------
(1) The above options are non-qualified stock options for purposes of the
Internal Revenue Code of 1986, as amended. The option base price is the fair
market value of the stock at the time of the grant. Options become
exercisable five years after date of grant. Termination of employment for
any reason other than death, disability or retirement will result in the
cancellation of the unexercisable options. The option term is ten years. The
current present value at date of grant was computed under the Black-Scholes
option pricing model using the following assumptions: risk-free interest
rate of 5.7%; dividend yield of 1%; expected market price volatility factor
of 34%; and a weighted average expected life of seven years.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the exercise
in 1998 of options to purchase Common Stock by the five individuals named in the
Summary Compensation Table and the unexercised options to purchase Common Stock
held by such individuals at December 31, 1998.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED OPTIONS AT FY-END (#) FY-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James L. Forbes................ 3,720 $ 86,268 3,255/9,765 $ 75,679/$139,151
William H. Vander Heyden....... 1,442 $ 32,355 7,563/6,489 $ 196,427/$92,468
Robert D. Belan................ 1,218 $ 27,329 17,227/10,981 $ 442,103/$78,448
Ronald H. Dix.................. 7,542 $167,745 8,786/4,158 $ 217,275/$59,252
Richard A. Meeusen............. 952 $ 21,361 8,928/6,784 $ 207,576/$119,172
</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.
10
<PAGE> 13
Mr. Meeusen is eligible for benefits under the cash balance plan but is not
eligible for benefits under the prior plan's final average pay formula. The
estimated total annual benefit payable to Mr. Meeusen under the cash balance
plan at age 65 is $74,405. This projected benefit was determined assuming no
future increases in pay and interest credited annually to the cash balance
account at a rate of 7%.
The remaining executive officers, because of their ages, are expected to
obtain retirement benefits according to the prior plan's final average pay
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 1998, 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.
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 1998, based on the
benefit formula described below.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000................ $20,632 $ 30,948 $ 41,265 $ 51,581 $ 61,897 $ 61,897
175,000................ $24,382 $ 36,573 $ 48,765 $ 60,956 $ 73,147 $ 73,147
200,000................ $28,132 $ 42,198 $ 56,265 $ 70,331 $ 84,397 $ 84,397
250,000................ $35,632 $ 53,448 $ 71,265 $ 89,081 $106,897 $106,897
300,000................ $43,132 $ 64,698 $ 86,265 $107,831 $129,397 $129,397
350,000................ $50,632 $ 75,948 $101,265 $126,581 $151,897 $151,897
400,000................ $58,132 $ 87,198 $116,265 $145,331 $174,397 $174,397
450,000................ $65,632 $ 98,448 $131,265 $164,081 $196,897 $196,897
500,000................ $73,132 $109,698 $146,265 $182,831 $219,397 $219,397
550,000................ $80,632 $120,948 $161,265 $201,581 $241,897 $241,897
600,000................ $88,132 $132,198 $176,265 $220,331 $264,397 $264,397
</TABLE>
Compensation covered by the Defined Benefit 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 (19), Mr.
Vander Heyden (36), Mr. Belan (14) and Mr. Dix (17). The current remuneration
for these individuals for purposes of the Pension Plan is set forth in the
Summary Compensation Table.
11
<PAGE> 14
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 $74,000, $44,000, and $31,600, 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 1998, Mr. Wright received $105,000 from
this plan. In February of 1998, the company entered into an unfunded
supplemental retirement agreement with Mr. Wright, which provides for payments
of $140,000 per year commencing in March of 2000 for life. 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 14 years of
credited service under the Pension Plan consists of five years under the non-
qualified supplemental retirement plan and nine 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
The Company's executive compensation program is administered by the
Management Review Committee of the Board of Directors. The Committee is composed
of four non-employee directors. Following the Committee's review and approval,
all matters related to their activities are reported to the full Board of
Directors for approval.
The charter of the Management Review Committee 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;
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 can successfully perform management duties;
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 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,
including incentive 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 paid to the non-executive chairman of 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 should attract and retain
qualified executive officers, motivate and reward performance;
12
<PAGE> 15
2. Achievement of annual incentive compensation levels requires
attainment of performance goals as approved by the Management Review
Committee;
3. Long-term incentive programs must focus on the enhancement of
shareholder value through the use of stock options and long-term cash
incentives; and
4. The Committee uses 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
product lines, 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. Membership in the
performance peer group set forth on page 15 is limited to publicly-held
companies. The compensation survey incorporates 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
consistently used by the Management Review Committee for the past nine years.
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 a product
line or a combination of product lines, 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.
Base salary increases approved for 1999 by the Management Review Committee
ranged from 5.1 to 15.6 percent, with the President/Chief Executive Officer
being granted an 8.1 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 two
factors to the short-term incentive plan, financial and objective. The financial
factor, generally 25-40 percent of the base salary, is based on the attainment
of a certain operating earnings threshold established for either the Company
overall or the particular operating unit, approved at the beginning of each year
by the Management Review Committee, and return on assets employed. The second
factor, generally 10 percent of the base salary, is a set of objectives for each
officer, determined in advance and agreed to by the
13
<PAGE> 16
Management Review Committee. These objectives are non-financial and include such
things as personnel development, product development, systems enhancements and
compliance programs. Under the terms of the short-term incentive plan, bonuses
cannot be paid on the objective factor unless the minimum goal, for the overall
corporation or for one of the product lines, based on operating earnings, is
met. For 1998, the bonuses for the executive officers range from a low of 10
percent to a high of 50.0 percent. The President/Chief Executive Officer
received a bonus of $185,000.
In determining the individual short-term incentive awards, the financial
factor was based on earnings before taxes for some of the corporate officers and
operating earnings of selected product lines for those officers who have
responsibility for these product lines.
For 1998, the short-term incentive plan had the same payout percentages,
but the targets were operating earnings before taxes and return on assets
employed for various corporate officers and operating earnings and return on
assets employed for selected product lines for those officers who have
responsibility for managing these product lines. In all cases, greater weight is
assigned to the financial factor and less weight to the objective factor. The
return on assets employed will be a maximum 5 percent of salary potential for
the plan participants.
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"), the 1995 Stock Option Plan (the
"1995 Plan") and the 1997 Stock Option Plan (the "1997 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 which was amended in January 1997, whereby members of the
management group could earn bonuses based upon increases in earnings per share
over the prior year. A cash bonus is payable annually for four or five years, if
the annual increase in earnings per share meet 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.
At the January 26, 1999 Management Review Committee meeting, no stock
options were granted.
Section 162(m) Limitations. It is anticipated all 1999 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
Andrew J. Policano
John J. Stollenwerk
MANAGEMENT REVIEW COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Review Committee currently consists of Messrs. Schuenke,
Hoffer, Policano 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, 1994 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, 1994. 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
CHART
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Badger Meter...................... 100.00 128.72 147.50 219.69 473.77 421.42
Peer Group........................ 100.00 122.44 164.25 218.78 235.43 191.41
Broad Market...................... 100.00 88.33 113.86 120.15 144.57 142.61
</TABLE>
* Peer Group consists of Axcess, Inc., Badger Meter, Inc., Bio/Rad Labs, Candela
Laser Corp., CEM Corp., Frequency Electronics, Innovex, Inc., K-Tron
International, Inc., Keithly Instruments, Inc., Medar, Inc., Moore Products
Company, Newport Corp., Research Frontiers, Inc. and TSI, Inc. Lasertechnics,
Inc. has been omitted from this year's Peer Group because it is no longer a
publicly-traded company. Axcess, Inc. was added in 1998.
PROPOSAL TO RESTATE THE
RESTATED ARTICLES OF INCORPORATION
GENERAL
Article Third of the Company's Restated Articles of Incorporation (the
"Restated Articles") currently authorizes the Company to issue 40,000,000 shares
of capital stock, 20,000,000 of which may be issued as Common Stock, and
20,000,000 of which may be issued as Class B Common Stock. As of February 26,
1999, 2,587,164 shares of Common Stock were issued and outstanding and 1,081,846
shares of Class B Common Stock were issued and outstanding. The Board of
Directors of the Company has proposed to amend and
15
<PAGE> 18
restate the Restated Articles to (i) provide that all outstanding shares of
Class B Common Stock will automatically be converted into shares of Common Stock
on a share-for-share basis upon the closing of a public offering of Common Stock
with gross proceeds to the Company of not less than $20 million (a "Qualified
Public Offering"); (ii) provide that Section 180.1150 of the Wisconsin Business
Corporation Law ("WBCL") will become applicable to the Company upon the closing
of a Qualified Public Offering; and (iii) eliminate certain provisions of the
Restated Articles relating to the initial issuance of the Class B Common Stock
in 1986 that are no longer relevant (the "Proposal"). A copy of the Restated
Articles, marked to show the changes that the Proposal would effect if approved
by the Company's shareholders, is attached as Exhibit A to this Proxy Statement.
The Board of Directors believes that the Proposal is in the best interests
of the Company and its shareholders and, as provided by the Wisconsin Business
Corporation Law, has directed that the Proposal be submitted to a vote of the
shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE PROPOSAL.
BACKGROUND AND PURPOSE
Under the current two class common stock structure set forth in the
Restated Articles, holders of Class B Common Stock have ten votes per share in
contrast to the one vote per share available to holders of Common Stock. In
exchange for lesser voting rights, the holder of each share of Common Stock is
entitled to receive 110% of the amount of any cash dividend payable with respect
to each share of Class B Common Stock.
The existing two class common stock structure has allowed Company
management to focus on the Company's business free from hostile takeover
attempts or comparable outside distractions. A shareholder who held $1,000 in
shares of Common Stock on December 31, 1986 would have had $6,486 in market
value of Common Stock (or Class B Common Stock) as of March 1, 1999. With cash
dividends included, this increase in the market value of Common Stock has
resulted in an annual compounded return of approximately 15.5%.
The Company has determined that it may need more flexibility in its capital
structure in the future. The Company's plan for growth may require at some point
that the Company secure additional equity capital, which may be best raised
through a subsequent public offering. The Company, after discussions with its
investment bankers, believes that such a subsequent public offering may be
difficult, if not impossible, to accomplish if the two class common stock
structure is then in effect.
Accordingly, the two class common stock structure that has served the
Company so well since its adoption in 1986 may need to be dismantled to achieve
more important corporate objectives. The Company has not fixed a plan or
timetable for such a subsequent public offering but believes that now is an
appropriate time to amend the Restated Articles to provide for the automatic
conversion of shares of Class B Common Stock into shares of Common Stock upon
the closing of a Qualified Public Offering. In the view of the Board of
Directors, upon the closing of a Qualified Public Offering, the two class common
stock structure will no longer be as beneficial to the Company and its
shareholders, and at such time it will be in the best long-term interests of the
Company's shareholders to have a single class of common stock.
Section 180.1150 of the WBCL provides that the voting power of shares of a
public Wisconsin corporation held by persons in excess of 20% of the voting
power in the election of directors is limited to 10% of the full voting power of
those shares. This statute may have the effect of significantly diluting the
voting power of a hostile bidder who acquires shares in the Company and may
discourage hostile attempts to acquire the Company. So long as the Company has a
two class common stock structure, the Board of Directors believes that it is
inappropriate for such statute to apply to the Company and the Restated Articles
have historically reflected this belief by providing that such statute does not
apply to the Company. However, in the view of the Board of Directors, upon the
dismantling of the two class common stock structure upon the closing of a
Qualified Public Offering, it will be in the best long-term interests of the
Company's shareholders to have the protection of Section 180.1150 of the WBCL.
16
<PAGE> 19
EFFECTS OF PROPOSAL
In summary terms, adoption of the Proposal will have the following effects:
- Until the closing of a Qualified Public Offering, shares of Common Stock
and Class B Common Stock will continue to have the same relative rights
and preferences as they currently have under the Restated Articles.
- Until the closing of a Qualified Public Offering, Section 180.1150 of
the WBCL will be inapplicable to the Company.
- Upon the closing of a Qualified Public Offering, each outstanding share
of Class B Common Stock will automatically be converted into a single
share of Common Stock.
- Upon and after the closing of a Qualified Public Offering, Section
180.1150 of the WBCL will be applicable to the Company.
- After the closing of a Qualified Public Offering, the Company will only
have a single class of common stock outstanding, the Common Stock.
This summary is qualified by the full text of the changes to the Restated
Articles under the Proposal, which is set forth on Exhibit A hereto and is
herein incorporated by reference.
Under current Federal income tax law:
- A holder of Class B Common Stock will not recognize any gain or loss for
Federal income tax purposes upon the exchange of shares of Class B
Common Stock for shares of Common Stock;
- The tax basis of the Common Stock received in the exchange will be the
same as the tax basis of the Class B Common Stock surrendered; and
- The holding period of the Common Stock received in the exchange will
include the holding period of the Class B Common Stock surrendered,
provided that the shares of Class B Common Stock were held as a capital
asset by the holder at the time of exchange.
Holders of Class B Common Stock are urged to consult their own tax advisers
as to the specific tax consequences to them of any such exchange.
VOTE REQUIRED
For the proposal to be adopted, the following votes must be obtained: (i)
the affirmative vote of a majority of the votes entitled to be cast at the
Meeting by the holders of Common Stock, voting separately as a class; (ii) the
affirmative vote of a majority of the votes entitled to be cast at the Meeting
by the holders of Class B Common Stock, voting separately as a class; and (iii)
the affirmative vote of a majority of the votes entitled to be cast at the
Meeting by the holders of Common Stock and Class B Common Stock voting together
as a single class. As of the record date for the Meeting, James O. Wright, James
L. Forbes and James O. Wright, Jr. beneficially own 590,814 shares of Class B
Common Stock, representing approximately 55% of the voting power of the
outstanding shares of Class B Common Stock, and collectively representing
approximately 44.1% of the combined voting power of the outstanding shares of
Common Stock and Class B Common Stock. James L. Forbes beneficially owns another
354,880 shares of Class B Common Stock and 38,902 shares of Common Stock, along
with Ronald H. Dix and Richard A. Meeusen, for a total of 9,495,842 votes or 71%
of the total votes. Since it is expected that such individuals will vote in
favor of the Proposal, sufficient votes for an affirmative vote of the majority
of the Class B Common Stock, voting separately as a class, and the Common Stock
and the Class B Common Stock, voting together as a single class, are assured.
However, there is no assurance that an affirmative vote of a majority of the
votes entitled to be cast by the Common Stock, voting separately as a class,
will be obtained at the Meeting for the Proposal.
The votes represented by proxies received will be voted FOR approval of the
Proposal, unless a vote against such approval or to abstain from voting is
specifically indicated on the proxy. Any shares not voted at
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the Meeting, whether due to broker non-votes, abstentions or otherwise, will be
treated as votes against the Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE PROPOSAL.
PROPOSED BADGER METER, INC. 1999 STOCK OPTION PLAN
GENERAL
The Board of Directors of the Company has adopted the Badger Meter, Inc.
1999 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 B 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. Upon their election to the Board,
non-employee directors receive a grant of 6,000 options, and another grant up to
2,500 options with the exact amount fixed by the number of options remaining
unexercised under the Long-Term Incentive Plan. 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, 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
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<PAGE> 21
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 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 1998, 32,600 options were granted to directors,
named executive officers or key employees under the Badger Meter, Inc. 1997
Stock Option Plan.
On February 26, 1999, the closing price per share of the Common Stock on
the American Stock Exchange was $32.00.
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
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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 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 1998, the maximum indebtedness under this short-term
line of credit was $1,590,000. At February 26, 1999, $450,000 was the total
indebtedness to Firstar Bank Milwaukee, N.A. Mr. Forbes, Mr. Manning and Mr.
Stollenwerk are directors of Firstar Corporation (the parent corporation 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 $25,000,000 with the M&I
Marshall & Ilsley Bank, a subsidiary of Marshall & Ilsley Corporation. During
1998, the maximum indebtedness under this short-term line of credit was
$13,720,000. At February 26, 1999, $10,807,000 was the total indebtedness to the
M&I Marshall & Ilsley Bank. 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
1998, the Company purchased $12,700,000 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 8.0% 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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INDEPENDENT AUDITORS
Ernst & Young LLP, the Company's independent auditors for many years, has
been selected to audit the Company and its subsidiaries for 1999.
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, 1998, all reports required by Section
16(a) to be filed by the Company's insiders were filed on a timely basis.
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, 1998. 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
2000 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended ("Rule 14a-8"), must forward the proposal to
the Company by November 23, 1999. In addition, a shareholder who otherwise
intends to present business at the 2000 Annual Meeting (including nominating
persons for election as directors) must comply with the requirements set forth
in the Company's Restated By-Laws. Among other things, to bring business before
an annual meeting, a shareholder must give written notice thereof, complying
with the Restated By-Laws, to the Secretary of the Company not less than 60 days
and not more than 90 days prior to the second Saturday in the month of April
(subject to certain exceptions if the annual meeting is advanced or delayed a
certain number of days). Accordingly, if the Company does not receive notice of
a shareholder proposal submitted otherwise than pursuant to Rule 14a-8 prior to
February 8, 2000, then the notice will be considered untimely and the Company
will not be required to present such proposal at the 2000 Annual Meeting. If the
Board of Directors chooses to present such proposal at the 2000 Annual Meeting,
then the persons named in proxies solicited by the Board of Directors for the
2000 Annual Meeting may exercise discretionary voting power with respect to such
proposal.
Deirdre C. Elliott
Secretary
March 22, 1999
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EDGAR only: Additions are in all capital letters;
deletions are in brackets. EXHIBIT A
RESTATED
ARTICLES OF INCORPORATION
OF
BADGER METER, INC.
The following Restated Articles of Incorporation duly adopted pursuant to
the authority and provisions of Chapter 180 of the Wisconsin Statutes supersede
and take the place of the existing articles of incorporation and amendments
thereto:
ARTICLE FIRST
The name of this [corporation] CORPORATION is "BADGER METER, INC."
ARTICLE SECOND
The Corporation may engage in any lawful activity within the purposes for
which corporations may be organized under the Wisconsin Business Corporation
Law.
ARTICLE THIRD
UNTIL SUCH TIME AS NO SHARES OF CLASS B COMMON STOCK ARE ISSUED AND
OUTSTANDING, SECTIONS (B1) THROUGH (B8) OF THIS ARTICLE THIRD SHALL GOVERN AND
BE APPLICABLE. FROM AND AFTER SUCH TIME AS NO SHARES OF CLASS B COMMON STOCK ARE
ISSUED AND OUTSTANDING, SECTIONS (A1) THROUGH (A4) OF THIS ARTICLE THIRD SHALL
GOVERN AND BE APPLICABLE.
AT SUCH TIME AS SECTIONS (B1) THROUGH (B8) OF THIS ARTICLE THIRD SHALL NO
LONGER GOVERN AND APPLY, THE APPROPRIATE OFFICERS OF THE CORPORATION SHALL
PROMPTLY (I) CAUSE TO BE PREPARED AND DULY FILED WITH THE WISCONSIN DEPARTMENT
OF FINANCIAL INSTITUTIONS SUCH DOCUMENTS AS ARE NECESSARY TO RESTATE THESE
RESTATED ARTICLES OF INCORPORATION TO ELIMINATE SECTIONS (B1) THROUGH (B8) OF
THIS ARTICLE THIRD AND ANY OTHER WORDS, SENTENCES, CLAUSES OR PARAGRAPHS
CONTAINED IN THESE RESTATED ARTICLES OF INCORPORATION PROVIDING FOR OR RELATING
TO CLASS B COMMON STOCK AND/OR THE CONVERSION OF SHARES OF CLASS B COMMON STOCK
INTO SHARES OF COMMON STOCK AND (II) CAUSE TO BE PREPARED AND SENT TO REGISTERED
HOLDERS OF COMMON STOCK A NOTICE, WHICH MAY BE INCLUDED IN ANOTHER COMMUNICATION
TO SHAREHOLDERS GENERALLY, TO THE EFFECT THAT SUCH ACTION HAS BEEN TAKEN.
(A1) STOCK.
(A) THE TOTAL NUMBER OF SHARES OF ALL CLASSES OF CAPITAL STOCK WHICH
THE CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS FORTY (40) MILLION SHARES,
CONSISTING OF A SINGLE CLASS DESIGNATED "COMMON STOCK" HAVING A PAR VALUE
OF ONE DOLLAR ($1.00) PER SHARE.
(B) ANY AND ALL SUCH SHARES OF COMMON STOCK MAY BE ISSUED FOR SUCH
CONSIDERATION, NOT LESS THAN THE PAR VALUE THEREOF, AS SHALL BE FIXED FROM
TIME TO TIME BY THE BOARD OF DIRECTORS. ANY AND ALL SUCH SHARES SO ISSUED,
THE FULL CONSIDERATION FOR WHICH HAS BEEN PAID OR DELIVERED, SHALL BE
DEEMED FULLY PAID STOCK AND SHALL NOT BE LIABLE TO ANY FURTHER CALL OR
ASSESSMENT THEREON, AND THE HOLDERS OF SUCH SHARES SHALL NOT BE LIABLE FOR
ANY FURTHER PAYMENTS EXCEPT AS OTHERWISE PROVIDED BY APPLICABLE WISCONSIN
LAW.
(A2) VOTING RIGHTS AND POWERS.
WITH RESPECT TO ALL MATTERS UPON WHICH SHAREHOLDERS ARE ENTITLED TO VOTE OR
TO WHICH SHAREHOLDERS ARE ENTITLED TO GIVE CONSENT, EVERY HOLDER OF ANY
OUTSTANDING SHARES OF COMMON STOCK SHALL BE ENTITLED TO CAST THEREON ONE (1)
VOTE IN PERSON OR BY PROXY FOR EACH SHARE OF COMMON STOCK STANDING IN HIS NAME
ON THE STOCK TRANSFER RECORDS OF THE CORPORATION.
(A3) DIVIDENDS AND DISTRIBUTIONS.
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THE HOLDERS OF COMMON STOCK SHALL BE ENTITLED TO RECEIVE DIVIDENDS WHEN AND
IF DECLARED BY THE BOARD OF DIRECTORS OUT OF ANY FUNDS LEGALLY AVAILABLE FOR THE
PAYMENT OF SUCH DIVIDENDS.
(A4) NO PREEMPTIVE RIGHTS.
NO HOLDER OF SHARES OF STOCK OR OTHER SECURITIES OF THE CORPORATION SHALL
BE ENTITLED AS A MATTER OF RIGHT TO SUBSCRIBE FOR, PURCHASE OR RECEIVE ANY PART
OF ANY ISSUE OF STOCK OF THE CORPORATION OF ANY CLASS EITHER AT PRESENT
AUTHORIZED OR OF ANY FUTURE INCREASE OR CREATION, INCLUDING WITHOUT LIMITATION,
ANY SECURITIES CONVERTIBLE INTO STOCK OF ANY CLASS, EXCEPT AS THE CORPORATION IN
THE DISCRETION OF THE BOARD OF DIRECTORS MAY ELECT OR CONTRACT TO EXTEND SUCH
RIGHT.
(B1) STOCK.
(A) The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is forty (40) million shares,
consisting of twenty (20) million shares of a class designated "Common
Stock" having a par value of one dollar ($1.00) per share, and twenty (20)
million shares of a class designated "Class B Common Stock" of a par value
of ten cents ($.10) per share. [All issued shares of Common Stock,
including shares held in the treasury of the Corporation, shall continue to
be designated Common Stock.]
(B) Any and all such shares of Common Stock and Class B Common Stock
may be issued for such consideration, not less than the par value thereof,
as shall be fixed from time to time by the Board of Directors. Any and all
such shares so issued, the full consideration for which has been paid or
delivered, shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall
not be liable for any further payments except as otherwise provided by
applicable Wisconsin law. [The powers, preferences, limitations and
relative rights of the Common Stock and the Class B Common Stock shall be
as follows:]
[(1)](B2) VOTING RIGHTS AND POWERS.
[(a)] With respect to all matters upon which shareholders are entitled
to vote or to which shareholders are entitled to give consent, the holders
of the outstanding shares of Common Stock and the holders of the
outstanding shares of Class B Common Stock shall vote together as a single
class, and every holder of any outstanding shares of Common Stock shall be
entitled to cast thereon one (1) vote in person or by proxy for each share
of Common Stock standing in his name on the stock transfer records of the
Corporation, and every holder of any outstanding shares of Class B Common
Stock shall be entitled to cast thereon ten (10) votes in person or by
proxy for each share of Class B Common Stock standing in his name on the
stock transfer records of the Corporation; provided that, with respect to
any proposed amendment to these Restated Articles of Incorporation which
would increase or decrease the number of authorized shares of either the
Common Stock or the Class B Common Stock, increase or decrease the par
value of the shares of the Common Stock or the Class B Common Stock, or
alter or change the powers, preferences, relative voting power or special
rights of the shares of the Common Stock or the Class B Common Stock so as
to affect them adversely, the approval of a majority of the votes entitled
to be cast by the holders of the class affected by the proposed amendment,
voting separately as a class, shall be obtained in addition to the approval
of a majority of the votes entitled to be cast by the holders of the Common
Stock and the Class B Common Stock voting together as a single class as
herein before provided. [(b) Notwithstanding the foregoing, with respect to
the election of directors at the annual meeting of shareholders to be held
in 1987, holders of Common Stock, voting as a separate class shall be
entitled to elect the number of directors which constitutes 25% of the
authorized number of members of the Board of Directors. If such number is
not a whole number, then holders of Common Stock shall be entitled to elect
the number of directors which constitutes the nearest whole number greater
than 25% of such membership. Holders of Common Stock and Class B Common
Stock, voting as a single class, shall be entitled to elect the remaining
directors. After the 1987 annual meeting of shareholders, all directors]
ALL DIRECTORS shall be elected by holders of Common Stock and Class B
Common Stock voting as a single class.
[(2)](B3) Dividends and Distributions.
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<PAGE> 26
(a) Cash Dividends. As and when cash dividends may be declared from
time to time by the Board of Directors, the cash dividend payable with
respect to each share of the Common Stock shall in all cases be in an
amount equal to one hundred ten percent (110%) of the amount of the cash
dividend payable with respect to each share of the Class B Common Stock.
Cash dividends may be declared and payable with respect to the Common Stock
without a concurrent cash dividend declared and payable with respect to the
Class B Common Stock. Distributions declared by the Board of Directors to
be in connection with the partial or complete liquidation of the
Corporation or any of its subsidiaries shall not be considered to be cash
dividends for the purposes of this [Paragraph(2)] SECTION (B3).
(b) Other Dividends and Distributions. Each share of Common Stock and
Class B Common Stock shall be equal in respect of rights to dividends
(other than those payable in cash) and distributions (including
distributions declared by the Board of Directors to be in connection with
the partial or complete liquidation of the Corporation or any of its
subsidiaries) when and as declared, in the form of stock or other property
of the Corporation, except that in the case of dividends or other
distributions payable in stock of the Corporation, including distributions
pursuant to stock split-ups or divisions, [which occur after the expiration
of the period during which shares of the Class B Common Stock are first
issued by the Corporation,] only shares of Common Stock shall be
distributed with respect to the Common Stock and only shares of Class B
Common Stock shall be distributed with respect to the Class B Common Stock.
[(3)](B4) Restrictions on Transfer of the Class B Common Stock.
(a) No beneficial owner (as hereinafter defined) of shares of Class B
Common Stock (hereinafter referred to as a "Class B Shareholder") may
transfer, and the Corporation shall not register the transfer of, shares of
Class B Common Stock, whether by sale, assignment, gift, bequest,
appointment or otherwise, except to a Permitted Transferee of such Class B
Shareholder. A "Permitted Transferee" shall be defined as (i) the Class B
Shareholder and any other Class B Shareholder; (ii) the spouse of the Class
B Shareholder; (iii) any parent and any lineal descendant (including any
adopted child) of any parent of the Class B Shareholder or of the Class B
Shareholder's spouse; (iv) any trustee, guardian or custodian for, or any
executor, administrator or other legal representative of the estate of, any
of the foregoing Permitted Transferees; (v) the trustee of a trust
(including a voting trust) for the benefit of such Class B Shareholder
and/or any of his or her Permitted Transferees; (vi) any corporation,
partnership or other entity if a majority of the beneficial ownership
thereof is held by the Class B Shareholder and/or any of his or her
Permitted Transferees; (vii) any [director] DIRECTOR of the Corporation;
and (viii) any officer of the Corporation elected or appointed by the
Corporation's Board of Directors and (ix) any trustee of a trust created or
organized in the United States and forming part of a stock bonus, pension
or profit sharing plan of the Company for the exclusive benefit of the
employees or their beneficiaries. If a Class B Shareholder and all of his
or her Permitted Transferees cease, for whatever reason, to hold a majority
of the beneficial ownership of any corporation, partnership or other entity
specified in clause (vi) above, then any and all shares of Class B Common
Stock held by such corporation, partnership or other entity will
automatically, without further deed or action, be converted into a like
number of shares of Common Stock. For the purpose of this [Paragraph(3)]
SECTION (B4) the term "beneficial owner(s)" of any shares of Class B Common
Stock shall mean a person or persons who, or entity or entities which, have
or share the power, either singly or jointly, to direct the voting or
disposition of such shares.
(b) For purposes of this [Paragraph(3)] SECTION (B4), a transfer
shall not include (i) a distribution by a corporation to its shareholders
pursuant to a dissolution, liquidation, dividend or similar distribution,
(ii) a distribution to partners of a partnership in proportion to their
partnership interests or (iii) a disposition of a trust to any
beneficiaries of such trust pursuant to the terms of such trust.
(c) Notwithstanding anything to the contrary set forth herein, any
Class B Shareholder may pledge his shares of Class B Common Stock to a
pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares
shall not be transferred to or registered in the name of the pledgee and
shall remain subject to the provisions of this
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<PAGE> 27
[Paragraph(3)] SECTION (B4). In the event of foreclosure or other similar
action by the pledgee, such pledged shares of Class B Common Stock may only
be transferred to a Permitted Transferee of the pledgor or converted into
shares of Common Stock, as the pledgee may elect.
(d) Any purported transfer of shares of Class B Common Stock not
permitted hereunder shall be void and of no effect. The purported
transferee shall have no rights as a shareholder of the Corporation and no
other rights against, or with respect to, the Corporation, except the right
to receive shares of Common Stock upon the conversion of his shares of
Class B Common Stock into shares of Common Stock. The Corporation may, as a
condition to the transfer or the registration of a transfer of shares of
Class B Common Stock to a purported Permitted Transferee, require the
furnishing of such affidavits or other proof as it deems necessary to
establish that such transferee is a Permitted Transferee.
(e) The Corporation shall note on the certificates for shares of
Class B Common Stock the restrictions on transfer and registration of
transfer imposed by this [Paragraph(3)] SECTION (B4).
(f) Shares of Class B Common Stock shall be registered in the name(s)
of the beneficial owner(s) thereof and not in "street" or nominee name.
[(4)](B5) Conversion of the Class B Common Stock.
(a) Each share of Class B Common Stock may at any time or from time
to time, at the option of the respective holder thereof, be converted into
one (1) fully paid and nonassessable share of Common Stock. Such conversion
right shall be exercised by the surrender of the certificate representing
such share of Class B Common Stock to be converted to the Corporation at
any time during normal business hours at the principal executive offices of
the Corporation (to the attention of the Secretary of the Corporation), or
if an agent for the registration or transfer of shares of Class B Common
Stock is then duly appointed and acting (said agent being referred to in
this Article Third as the "Transfer Agent") then at the office of the
Transfer Agent, accompanied by a written notice of the election by the
holder thereof to convert and (if so required by the Corporation or the
Transfer Agent) by instruments of transfer, in form satisfactory to the
Corporation and to the Transfer Agent, duly executed by such holder or his
duly authorized attorney, and transfer tax stamps or funds therefor, if
required pursuant to [Paragraph(4)(e), below] PARAGRAPH (E) OF THIS SECTION
(B5).
(b) As promptly as practicable after the surrender for conversion of
a certificate representing shares of Class B Common Stock in the manner
provided in [Paragraph(4)(a), above] PARAGRAPH (A) OF THIS SECTION (B5),
and the payment in cash of any amount required by the provisions of
[Paragraphs(4)(a) and (4)(e)] PARAGRAPHS (A) AND (E) OF THIS SECTION (B5),
the Corporation will deliver or cause to be delivered at the office of the
Transfer Agent to, or upon the written order of, the holder of such
certificate, a certificate or certificates representing the number of full
shares of Common Stock issuable upon such conversion, issued in such name
or names as such holder may direct. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of the
surrender of the certificate representing shares of Class B Common Stock,
and all rights of the holder of such shares as such holder shall cease at
such time and the person or persons in whose name or names the certificate
or certificates representing the shares of Common Stock are to be issued
shall be treated for all purposes as having become the record holder or
holders of such shares of Common stock at such time; provided, however,
that any such surrender and payment on any date when the stock transfer
records of the Corporation shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates representing
shares of Common Stock are to be issued as the record holder or holders
thereof for all purposes immediately prior to the close of business on the
next succeeding day on which such stock transfer records are open.
(c) No adjustments in respect of dividends shall be made upon the
conversion of any share of Class B Common Stock; provided, however, that if
a share [of Class B Common Stock] shall be converted subsequent to the
record date for the payment of a dividend or other distribution on shares
of Class B Common Stock but prior to such payment, the registered holder of
such share at the close of business on such record date shall be entitled
to receive the dividend or other distribution payable [on such share] IN
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THE AMOUNT DECLARED PER SHARE OF CLASS B COMMON STOCK on the date set for
payment of such dividend or other distribution notwithstanding the
conversion thereof or the Corporation's default in payment of the dividend
or distribution due on such date.
(d) The Corporation covenants that it will at all times reserve and
keep available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of Common
Stock as shall be issuable upon the conversion of all such outstanding
shares; provided, that nothing contained herein shall be construed to
preclude the Corporation from satisfying its obligations in respect of the
conversion of the outstanding shares of Class B Common Stock by delivery of
purchased shares of Common Stock which are held in the treasury of the
Corporation. The Corporation covenants that if any shares of Common Stock
required to be reserved for purposes of conversion hereunder, require
registration with or approval of any governmental authority under any
federal or state law before such shares of Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly registered or
approved, as the case may be. The Corporation will endeavor to list the
shares of Common Stock required to be delivered upon conversion prior to
such delivery upon each national securities exchange, if any, upon which
the outstanding Common Stock is listed at the time of such delivery. The
Corporation covenants that all shares of Common Stock which shall be issued
upon conversion of the shares of Class B Common Stock, will, upon issue, be
fully paid and nonassessable and not subject to any preemptive rights.
(e) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class B Common Stock shall be made without charge
for any stamp or other similar tax in respect of such issuance. However, if
any such certificate is to be issued in a name other than that of the
holder of the share or shares of Class B Common Stock converted, the person
or persons requesting the issuance thereof shall pay to the Corporation the
amount of any tax which may be payable in respect of any transfer involved
in such issuance or shall establish to the satisfaction of the Corporation
that such tax has been paid.
(f) [When] UPON THE EARLIER TO OCCUR OF (I) A QUALIFIED PUBLIC
OFFERING (AS DEFINED BELOW) OR (II) THE DATE ON WHICH the number of
outstanding shares of Class B Common Stock falls below two percent (2%) of
the aggregate number of shares of Common Stock and Class B Common Stock
then outstanding, the outstanding shares of Class B Common Stock shall be
deemed without further act on anyone's part to be immediately and
automatically converted into shares of Common Stock, and stock certificates
formerly representing outstanding shares of Class B Common Stock shall
thereupon and thereafter be deemed to represent a like number of shares of
Common Stock. "QUALIFIED PUBLIC OFFERING" SHALL MEAN THE CLOSING OF A FIRM
COMMITMENT UNDERWRITTEN PUBLIC OFFERING OF COMMON STOCK PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT (OTHER THAN A REGISTRATION STATEMENT
RELATING TO AN OFFER AND SALE OF COMMON STOCK TO EMPLOYEES OF, OR OTHER
PERSONS PROVIDING SERVICES TO, THE CORPORATION PURSUANT TO AN EMPLOYEE
BENEFIT PLAN, REGISTERED ON FORM S-8 OR A SUCCESSOR FORM) UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, WITH GROSS PROCEEDS FROM THE SALE OF
SUCH COMMON STOCK BY THE CORPORATION OF NOT LESS THAN $20 MILLION. IF A
SHARE OF CLASS B COMMON STOCK SHALL BE CONVERTED INTO COMMON STOCK PURSUANT
TO THIS PARAGRAPH (F) SUBSEQUENT TO THE RECORD DATE FOR THE DETERMINATION
OF SHAREHOLDERS ENTITLED TO VOTE AT A MEETING OF SHAREHOLDERS OR UPON A
MATTER OTHERWISE PRESENTED FOR A SHAREHOLDER VOTE, BUT PRIOR TO SUCH
MEETING OR VOTE, THEN THE REGISTERED HOLDER OF EACH SHARE OF COMMON STOCK
AND CLASS B COMMON STOCK AT THE CLOSE OF BUSINESS ON SUCH RECORD DATE SHALL
BE ENTITLED TO ONE (1) VOTE FOR EACH SHARE AT SUCH MEETING OR FOR SUCH VOTE
ON EACH MATTER PRESENTED FOR A VOTE BY THE HOLDERS OF COMMON STOCK AND/OR
CLASS B COMMON STOCK.
(B6)[(5)] Issuance of the Class B Common Stock.
[(a) Initial Issuance. On and subject to the terms and conditions of
this Paragraph(5), on or before 5:00 p.m. Milwaukee, Wisconsin time ("close
of business") on December 31, 1986, or such later date and time as the] THE
Board of Directors may, [prior to December 31, 1986, determine, each
outstanding share of Common Stock shall be convertible by the holder
thereof, into one share] ONLY ISSUE SHARES OF THE CLASS B COMMON STOCK IN
THE FORM OF A DISTRIBUTION OR DISTRIBUTIONS PURSUANT TO A STOCK DIVIDEND ON
OR
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<PAGE> 29
SPLIT-UP OF THE SHARES OF THE CLASS B COMMON STOCK AND ONLY TO THE THEN
HOLDERS OF THE OUTSTANDING SHARES OF THE CLASS B COMMON STOCK IN
CONJUNCTION WITH AND IN THE SAME RATIO AS A STOCK DIVIDEND ON OR SPLIT-UP
OF THE SHARES OF THE COMMON STOCK. EXCEPT AS PROVIDED IN THIS SECTION (B6),
THE CORPORATION SHALL NOT ISSUE ADDITIONAL SHARES of Class B Common Stock.
[Any such conversion shall be deemed to be effective as of the date of
receipt by the Corporation or the Transfer Agent of the following
documents: (i) a proper written notice of conversion by the holder of
shares of Common Stock, addressed to the Transfer Agent, designating the
number of shares of Common Stock to be converted into shares of Class B
Common Stock, and (ii) the stock certificate or certificates representing
the number of shares of Common Stock to be so converted into shares of
Class B Common Stock, duly endorsed for transfer or accompanied by
appropriate stock powers, with signatures guaranteed by a national banking
association or a member firm of The New York Stock Exchange, Inc. or the
American Stock Exchange, Inc. Upon the effective date of any such
conversion, all shares of Common Stock so converted shall be deemed to be
issued and held in the treasury of the Corporation. The issuance of a
certificate or certificates for shares of the Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate or certificates is or are to be
issued in a name other than that of the holder of the share or shares of
Common Stock converted, the person or persons requesting the issuance
thereof shall pay to the Transfer Agent or to the Corporation the amount of
any tax which may be payable in respect to any such transfer.
Notwithstanding the foregoing, any shareholder who holds shares of common
Stock in "street" or nominee name must have such shares re-registered in
such shareholders own name before converting such shares to Class B Common
Stock and such Class B Common Stock certificate or certificates may only be
issued in the name of the registered holder of the converted shares of
Common Stock, or his Permitted Transferee. Subject to the foregoing, as
promptly as practicable after the surrender for conversion of a certificate
or certificates representing shares of the Common Stock and payment of any
tax as herein before provided, the Corporation will deliver or cause to be
delivered at the office of the Transfer Agent to, or upon the written order
of, the holder of such certificate or certificates, a certificate or
certificates representing the number of shares of Class B Common Stock
issuable upon such conversion. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of the
surrender of the certificate or certificates representing shares of the
Common Stock (if on such date the transfer records of the Corporation shall
be closed, then immediately prior to the close of business on the first
date thereafter that said records shall be open), and all rights of such
holder arising from ownership of the shares of Common Stock shall cease at
that time, and the person or persons in whose name or names the certificate
or certificates representing shares of the Class B Common Stock are to be
issued shall be treated for all purposes as having become the record holder
or holders of such shares of Class B Common Stock at such time and shall
have and may exercise all the rights and powers appertaining thereto. No
adjustments in respect of past cash dividends shall be made upon the
conversion of any share of the Common Stock; provided, however, that if any
shares of the Common Stock shall be converted subsequent to the record date
for the payment of a cash or stock dividend or other distribution on shares
of the Common Stock, but prior to such payment, the registered holder of
such shares of Common Stock at the close of business on such record date
shall nonetheless be entitled to receive that cash or stock dividend or
other distribution. The Corporation shall reserve and keep available,
solely for the purpose of issue upon conversion of outstanding shares of
the Common Stock, such number of shares of the Class B Common Stock as may
be issuable upon the conversion of all such outstanding shares of the
Common Stock. All shares of the Class B Common Stock which may be issued
upon conversion of shares of the Common Stock will, upon issuance, be fully
paid and nonassessable.
(b) Subsequent Issuance. Following the expiration of the period for
initial issuance, the Board of Directors may only issue shares of the Class
B Common Stock in the form of a distribution or distributions pursuant to a
stock dividend on or split-up of the shares of the Class B Common Stock and
only to the then holders of the outstanding shares of the Class B Common
Stock in conjunction with and in the same ratio as a stock dividend on or
split-up of the shares of the Common Stock. Except as provided in this
subparagraph(b), the Corporation shall not issue additional shares of Class
B Common Stock after expiration of the period during which shares of Class
B Common Stock are first issued by the]
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<PAGE> 30
[Corporation, and all shares of Class B Common Stock surrendered for
conversion shall be retired,] unless otherwise approved by the affirmative
vote of the holders of a majority of the outstanding shares of the Common
Stock and Class B Common Stock entitled to vote, voting together as a
single class, as provided in [Paragraph(1)] SECTION (B2) of this Article
Third.
(B7) NO PREEMPTIVE RIGHTS.
No holder of shares of any class of stock or any other class of securities
of the Corporation shall be entitled as a matter of right to subscribe for,
purchase or receive any part of any issue of stock of the Corporation of any
class either at present authorized or of any future increase or creation,
including without limitation, any securities convertible into stock of any
class, except as the Corporation in the discretion of the [board] BOARD of
[directors] DIRECTORS may elect or contract to extend such right.
(B8) WISCONSIN CONTROL SHARE STATUTE.
Outstanding shares of any class of capital stock of the Corporation shall
not be subject to the limited voting provisions of Section [180.25(9)(a)]
180.1150 of the Wisconsin [Wisconsin Statutes] BUSINESS CORPORATION LAW. ON AND
AFTER THE DATE OF A QUALIFIED PUBLIC OFFERING (AS DEFINED ABOVE), THIS SECTION
(B8) SHALL BE NULL AND VOID AND WITHOUT LEGAL EFFECT.
ARTICLE [FIFTH] FOURTH
[1(a)](1) NUMBER, CLASSIFICATION AND TENURE OF DIRECTORS.
There shall be a Board of Directors which shall consist of such number of
Directors as shall from time to time be specified in the Bylaws but which shall
not be less than three (3). The [directors] DIRECTORS shall be divided into
three classes, designated Class I, Class II, and Class III, and all classes
shall be as nearly equal in number as possible. The terms of office of the
Directors initially classified shall be as follows: at the 1998 Annual Meeting
of Shareholders, Class I Directors shall be elected for a one-year term expiring
at the next Annual Meeting of Shareholders, Class II Directors shall be elected
for a two-year term expiring at the second succeeding Annual Meeting of
Shareholders, and Class III Directors shall be elected for a three-year term
expiring at the third succeeding Annual Meeting of Shareholders. At each Annual
Meeting of Shareholders after such initial classification, Directors to replace
those whose terms expire at such Annual Meeting shall be elected to hold office
until the third succeeding Annual Meeting. Each Director shall hold office until
the expiration of his term and until his successor is elected and qualified or
until his earlier death, resignation or removal. If the number of Directors is
changed, (a) any newly created directorships or any decrease in directorship
shall be so portioned among the classes as to make all classes as nearly as
equal as possible, and (b) when the number of Directors is increased by the
Board of Directors and any newly created directorships are filled by the Board
of Directors, there shall be no classification of the additional Directors
until, and the terms of the additional Directors shall expire at, the next
Annual Meeting of Shareholders.
(2) REMOVAL OF DIRECTORS.
[1(b). Removal of Directors.] A Director may be removed only for
cause and only by the shareholders by the affirmative votes of a majority
of the votes entitled to be cast upon removing him at a meeting called for
the purpose of removing him, and the meeting notice must state that the
purpose, or one of the purposes, of the meeting is removal of the Director
and must state the reason or reasons why the Director is subject to
removal.
(3) AMENDMENTS.
[1(c). Amendments.] Notwithstanding any other provision of these
Restated Articles of Incorporation, the provisions of this Article [Fifth]
FOURTH shall be amended, altered, changed or repealed only by the
affirmative vote of shareholders holding at least seventy percent (70%) of
the voting power of the then outstanding shares of all classes of capital
stock of the Company, considered for this purpose as a single class.
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<PAGE> 31
ARTICLE [SIXTH] FIFTH
The majority affirmative voting requirements of Section 180.25(2) of the
Wisconsin Statutes are hereby expressly elected and deemed applicable to this
Corporation as if this Corporation had been organized after January 1, 1973.
These [articles] RESTATED ARTICLES OF INCORPORATION may be amended by resolution
setting forth such amendment or amendments adopted at any meeting of the
shareholders of the Corporation by a vote of at least a majority of the votes
represented by shares of all of the Common Stock and Class B Common Stock of the
[corporation] CORPORATION then outstanding, except as set forth herein or as
restricted by the statutes of the State of Wisconsin.
ARTICLE SEVENTH SIXTH
The address of the registered office of the corporation at the time of
adoption of these [amended and restated] RESTATED Articles of Incorporation is
4545 West Brown Deer Road, Brown Deer, Wisconsin (P.O. address: Milwaukee,
Wisconsin 53223); and the name of the registered agent at such address is
Deirdre C. Elliott.
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<PAGE> 32
EXHIBIT B
BADGER METER, INC.
1999 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Badger Meter, Inc. 1999 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> 33
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 shares, 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 23, 1999, 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 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 23, 1999, 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 up to 2,500 shares of
Stock on that date with the amount of options granted fixed by the number of
options remaining unexercised under the Long-term Incentive Plan approved by the
Management Review Committee on January 26, 1999, 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
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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.
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
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<PAGE> 35
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.
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.
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<PAGE> 36
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.
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.
B-5
<PAGE> 37
PROXY
1999 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 23, 1999, at Badger Meter, Inc., 4545 West Brown Deer
Road, 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:
1. To approve a proposal to restate the Restated Articles of
Incorporation;
2. Election of Directors
<TABLE>
<S> <C>
[] FOR all nominees listed below [] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed below
contrary below)
</TABLE>
THREE-YEAR TERM: JAMES L. FORBES, CHARLES F. JAMES, JR., JOHN J. STOLLENWERK AND
JAMES O. WRIGHT, JR. TWO-YEAR TERM: ROBERT D. BELAN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
_______________________________________________________________________________
3. To adopt the Badger Meter, Inc. 1999 Stock Option Plan; and
4. 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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(to be signed on the other side)
<PAGE> 38
(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 PROPOSAL TO RESTATE THE RESTATED ARTICLES OF INCORPORATION, FOR
THE ELECTION OF THE NOMINEES LISTED, AND FOR THE 1999 STOCK OPTION PLAN.
Dated____________________________________,1999
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.
