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 Section 240.14a-11(c) or Section
240.14a-12
BANDAG, INCORPORATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
BANDAG, INCORPORATED
Bandag Headquarters
2905 North Highway 61
Muscatine, Iowa 52761-5886
March 29, 1996
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 7, 1996
To The Shareholders:
The Annual Meeting of the Shareholders of Bandag, Incorporated, an
Iowa corporation, will be held at the Holiday Inn, 2915 North Highway 61,
Muscatine, Iowa, on May 7, 1996, commencing at ten o'clock a.m., Central
Daylight Time, for the following purposes:
(1) To elect three directors for terms of three years.
(2) To ratify the selection of Ernst & Young LLP as independent
auditors of the Corporation for the fiscal year ending December
31, 1996.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed March 22, 1996, as the record date
for the determination of shareholders entitled to notice of and to vote at
the meeting.
You are invited to attend the meeting; however, if you do not expect
to attend in person, you are urged to sign, date and return immediately
the enclosed Proxy, which is solicited by the Board of Directors. You may
revoke your Proxy and vote in person should you attend the meeting.
By Order of the Board of Directors
WARREN W. HEIDBREDER, Secretary
BANDAG, INCORPORATED
Bandag Headquarters
2905 North Highway 61
Muscatine, Iowa 52761-5886
March 29, 1996
P R O X Y S T A T E M E N T
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bandag, Incorporated (the
"Corporation") to be voted at the Annual Meeting of the Shareholders of
the Corporation to be held on Tuesday, May 7, 1996, or at any adjournment
thereof, for the purposes set forth in the foregoing Notice of Annual
Meeting. Any shareholder giving a proxy may revoke it at any time prior
to its exercise.
Shareholders of record at the close of business on March 22, 1996,
will be entitled to vote at the meeting or any adjournment thereof. At
the close of business on March 22, 1996, there were 10,125,279 outstanding
$1.00 par value shares of Common Stock and 2,355,152 outstanding $1.00 par
value shares of Class B Common Stock. Each share of Common Stock is
entitled to one vote and each share of Class B Common Stock is entitled to
ten votes at the meeting.
The Corporation's Annual Report for the fiscal year ended December
31, 1995, this Proxy Statement and the enclosed form of proxy are being
mailed to shareholders on or about March 29, 1996.
The following table sets forth information as to the Common, Class A
Common and Class B Common shares of the Corporation beneficially owned by
each director and director-nominee, each of the executive officers named
in the Summary Compensation Table and by all directors and executive
officers as a group as of March 22, 1996:
Percentage
of Aggregate
Voting Power
Percentage of Common
of Outstanding Stock and
Amount Stock of Class B
Directors, Nominees and Beneficially Respective Common
Executive Officers Owned [1] Class [1] Stock**
Lucille A. Carver [2]
Common Stock 2,330,685 23%
Class A Common Stock 3,745,431 32%
Class B Common Stock 1,414,746 60% 49%
Martin G. Carver [3] [4]
Common Stock 133,312 1%
Class A Common Stock 599,155 5%
Class B Common Stock 502,622 21% 15%
Roy J. Carver, Jr. [2]
Common Stock 15,000 *
Class A Common Stock 334,202 3%
Class B Common Stock 400,702 17% 12%
Robert K. Drummond [5]
Common Stock 2,305 *
Class A Common Stock 3,760 *
Class B Common Stock 1,455 * *
James R. Everline
Common Stock 100 *
Class A Common Stock 450 *
Class B Common Stock 350 * *
Edgar D. Jannotta
Common Stock 7,000 *
Class A Common Stock 7,000 *
Class B Common Stock -0- -0- *
Stephen A. Keller
Common Stock 20,000 *
Class A Common Stock 20,000 *
Class B Common Stock -0- -0- *
R. Stephen Newman
Common Stock 2,500 *
Class A Common Stock 2,500 *
Class B Common Stock -0- -0- *
Gary L. Carlson
Common Stock 2,257 *
Class A Common Stock 1,869 *
Class B Common Stock -0- -0- *
Donald F. Chester
Common Stock 3,922 *
Class A Common Stock 3,476 *
Class B Common Stock -0- -0- *
Thomas E. Dvorchak [6]
Common Stock 9,982 *
Class A Common Stock 8,233 * *
Class B Common Stock -0- -0-
Stuart C. Green
Common Stock 1,456 *
Class A Common Stock 645 * *
Class B Common Stock -0- -0-
All Directors, Nominees
and Executive Officers
as a Group (16 Persons)
[7]
Common Stock 2,518,422 25%
Class A Common Stock 4,715,971 40%
Class B Common Stock 2,319,877 98% 76%
* Shares owned constitute less than 1% of shares outstanding and less
than 1% of votes entitled to be cast.
** Shares of Class A Common Stock are non-voting.
[1] Beneficial owners exercise both sole voting and sole investment power
unless otherwise stated. The Class B Common Stock is convertible on a
share-for-share basis into Common Stock at the option of the
shareholder. As a result, pursuant to Rule 13d-3(d)(1) of the
Securities Exchange Act of 1934, a shareholder is deemed to have
beneficial ownership of the shares of Common Stock which such
shareholder may acquire upon conversion of the Class B Common Stock.
In order to avoid overstatement, the amount of Common Stock
beneficially owned does not take into account such shares of Common
Stock which may be acquired upon conversion (an amount which is equal
to the number of shares of Class B Common Stock held by a
shareholder). The percentage of outstanding Common Stock is based on
the total number of shares of Common Stock outstanding as of March
22, 1996 (10,125,279 shares), and does not take into account shares
of Common Stock which may be issued upon conversion of the Class B
Common Stock.
[2] Indicates one of seven trustees of the Roy J. Carver Charitable Trust
which owns 15,000 shares of Common Stock, 15,000 shares of Class A
Common Stock and no shares of Class B Common Stock.
[3] Mr. Carver disclaims beneficial ownership of 19,195 shares of Common
Stock, 5,300 shares of Class A Common Stock and 525 shares of Class B
Common Stock held by members of his family.
[4] Includes 100,000 shares of Common Stock and 100,000 shares of Class A
Common Stock which Mr. Carver has the right to acquire upon exercise
of stock options within 60 days after March 22, 1996.
[5] Mr. Drummond disclaims beneficial ownership of 130 shares of Common
Stock, 260 shares of Class A Common Stock and 130 shares of Class B
Common Stock held by members of his family.
[6] Mr. Dvorchak disclaims beneficial ownership of 5,000 shares of Class
A Common Stock held by a member of his family.
[7] In determining the aggregate beneficial ownership of Common Stock,
Class A Common Stock and Class B Common Stock for all directors and
officers as a group, shares which are beneficially owned by more than
one officer or director have been counted only once to avoid
overstatement.
---------------------------------
Principal Shareholders. The following tables provide information
concerning persons known by the Corporation to beneficially own at least
five percent of any class of the Corporation's voting securities as of
March 22, 1996:
COMMON SHARES AND CLASS B COMMON SHARES HELD BY OFFICERS AND DIRECTORS
Percentage
Percentage of Aggregate
of Voting Power
Outstanding of Common
Amount Stock of Stock and
Beneficially Respective Class B
Name and Address Owned [2] Class [2] Common Stock
Lucille A. Carver [1] [2]
c/o Bandag, Incorporated
2905 North Highway 61
Muscatine, Iowa 52761-5886
Common Stock 2,330,685 23%
Class B Common Stock 1,414,746 60% 49%
Martin G. Carver [2]
c/o Bandag, Incorporated
2905 North Highway 61
Muscatine, Iowa 52761-5886
Common Stock 133,312 1%
Class B Common Stock 502,622 21% 15%
Roy J. Carver, Jr. [1][2]
c/o Bandag, Incorporated
2905 North Highway 61
Muscatine, Iowa 52761-5886
Common Stock 15,000 *
Class B Common Stock 400,702 17% 12%
*Shares owned constitute less than 1% of shares outstanding and less than
1% of votes entitled to be cast.
__________________________
[1] Indicates one of seven trustees who exercises shared voting and
investment power over 15,000 shares of Common Stock in the Roy J.
Carver Charitable Trust.
[2] Beneficial owners exercise both sole voting and sole investment power
unless otherwise stated. The Class B Common Stock is convertible on
a share-for-share basis into Common Stock at the option of the
shareholder. As a result, pursuant to Rule 13d-3(d)(1) of the
Securities Exchange Act of 1934, a shareholder is deemed to have
beneficial ownership of the shares of Common Stock which such
shareholder may acquire upon conversion of the Class B Common Stock.
In order to avoid overstatement, the amount of Common Stock
beneficially owned does not take into account such shares of Common
Stock which may be acquired upon conversion (an amount which is equal
to the number of shares of Class B Common Stock held by a
shareholder). The percentage of outstanding Common Stock is based on
the total number of shares of Common Stock outstanding as of March
22, 1996 (10,125,279 shares), and does not take into account shares
of Common Stock which may be issued upon conversion of the Class B
Common Stock.
Proposal No. 1-ELECTION OF DIRECTORS
The Articles of Incorporation require election of directors to
staggered terms of three years, providing that three of the directors are
elected each year. Three nominees this year are to be elected for three-
year terms.
Proxies will be voted for the election of each of the nominees listed
below, unless the shareholder giving the proxy votes against, or abstains
from voting for, any nominee. If, as a result of unforeseen
circumstances, any such nominee shall be unable to serve as director,
proxies will be voted for the election of such person or persons as the
Board may select. Information about the nominees is set forth below:
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
LUCILLE A. CARVER,, age 78, has for more than five years served as
Treasurer of the Corporation. She is a member of the Contributions
Committee and the Nominating Committee. Mrs. Carver has been a Director
since 1957.
MARTIN G. CARVER, age 47, was elected Chairman of the Board effective
June 23, 1981, Chief Executive Officer effective May 18, 1982, and
President effective May 25, 1983. Mr. Carver was also Vice Chairman of
the Board from January 5, 1981 to June 23, 1981. He is a member of the
Executive Committee, Management Continuity and Compensation Committee,
Nominating Committee and the Strategic Planning Committee. Mr. Carver has
been a Director since 1978.
EDGAR D. JANNOTTA, age 64. On January 2, 1996, William Blair &
Company converted from a partnership to a limited liability company, at
which time Mr. Jannotta became Senior Principal of William Blair &
Company, L.L.C. Mr. Jannotta became Senior Partner of William Blair &
Company on January 1, 1995, after having served as Managing Partner for
more than five years. He holds directorships in AAR Corp., Aon
Corporation; Commonwealth Edison Company, Molex Incorporated, Oil-Dri
Corporation of America and Safety-Kleen Corp. William Blair & Company,
L.L.C. provided investment banking services to the Corporation in 1995 and
the Corporation anticipates that services may be provided to the
Corporation in the current fiscal year. He is a member of the Audit
Committee, Management Continuity and Compensation Committee, Nominating
Committee and the Stock Option Committee. Mr. Jannotta has been a
Director since 1973.
DIRECTORS CONTINUING IN OFFICE
STEPHEN A. KELLER, age 78, retired. He was President of Kodicor,
Inc., a manufacturer of tanks, pottery and plumbing products, with
headquarters in Minneapolis, Minnesota, until his retirement in January
1978. Mr. Keller was Chairman of the Board of Directors of J-TEC
Associates, Inc. until his retirement on December 31, 1984. Mr. Keller is
a member of the Audit Committee, Management Continuity and Compensation
Committee, Stock Option Committee and the Strategic Planning Committee.
Mr. Keller was a Director during the period 1966 to 1973 and has been a
Director since 1978. His term expires in 1997.
R. STEPHEN NEWMAN, age 52, since August 1990 has been President of
Bacon's Information, Inc., a media information services company. Bacon's
Information, Inc. is a subsidiary of K-III, Inc., a communications
corporation. From 1982 to 1990, he was President of MGI Corporation, a
computer services company. Mr. Newman is a member of the Audit Committee,
Management Continuity and Compensation Committee, Strategic Planning
Committee and the Stock Option Committee. Mr. Newman has been a Director
since 1983 and his term expires in 1997.
ROY J. CARVER, JR., age 52, is Chairman of the Board of Directors of
Carver Pump Company, Muscatine, Iowa. During 1988, Mr. Carver acquired a
chain of hardware stores and is President of the Muscatine, Iowa based
company, Carver Hardware. Mr. Carver is President of Carver Aero, Inc.,
which operates fixed base operations at airports in Muscatine, Iowa;
Davenport, Iowa and Clinton, Iowa; President of Carver Hotel Enterprises,
Inc., a Muscatine, Iowa based hotel and restaurant operation; and
President of Harrington Signal, Inc., an electronic signal panel
manufacturing company located in Moline, Illinois. Mr. Carver holds
directorships in Catalyst, Inc., Iowa First Bancshares Corp. and Met-Coil
Systems Corporation. He is a member of the Contributions Committee,
Management Continuity and Compensation Committee, Nominating Committee,
Stock Option Committee and the Strategic Planning Committee. Mr. Carver
has been a Director since 1982 and his term expires in 1998.
ROBERT K. DRUMMOND, age 57, has been for more than five years a
partner in the Milwaukee law firm of Foley & Lardner. In 1995, the
Corporation paid fees for legal services to Foley & Lardner, and the
Corporation anticipates that similar services may be provided by Foley &
Lardner in the current fiscal year. Mr. Drummond's fees as a Director are
paid to Foley & Lardner, which credits the sums to the Corporation's legal
services account. Mr. Drummond is a member of the Management Continuity
and Compensation Committee, Stock Option Committee and Strategic Planning
Committee. Mr. Drummond has been a Director since 1982 and his term
expires in 1998.
JAMES R. EVERLINE, age 54, is President of Everline & Co., a mergers
and acquisitions/management consulting company. Previously, Mr. Everline
was President, Investment Banking Division of Henry & Company (1990-
December 1991). Henry & Company is engaged in the venture capital and
investment banking business. Prior to Mr. Everline's employment by Henry
& Company, he was a Partner of Founders Court Investors Inc. (1988-1989)
and served as Vice President, Capital Markets Group, Bank of America
(1981-1988). He is a member of the Audit Committee, Executive Committee,
Management Continuity and Compensation Committee, Nominating Committee,
Stock Option Committee and the Strategic Planning Committee. Mr. Everline
has been a Director since 1982 and his term expires in 1998.
Directors are elected by a majority of the votes cast (assuming a
quorum is present). Consequently, any shares not voted at the Annual
Meeting, whether due to abstentions, broker non-votes or otherwise, will
have no impact on the election of directors.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times in 1995.
The Audit Committee met three times in 1995; its functions are to
review major accounting decisions with management and the independent
auditors, to confer with such auditors with respect to the scope and
results of the annual audit, to review the annual audit and evaluate the
auditors' performance, to recommend to the Board of Directors annually the
selection of outside auditors for the ensuing year, to recommend the scope
and format of financial information to be submitted to the Board of
Directors, to review the scope of financial information included in the
Annual Report to Shareholders, to review the program of the internal audit
department for the year, to review the financial data included in all
required governmental reports, and to review the audits of all pension,
profit sharing and other trust funds held for the benefit of employees of
the Corporation. The Committee also reviews various insurance coverages of
the Corporation and the Corporation's compliance with the Foreign Corrupt
Practices Act.
The Management Continuity and Compensation Committee met four times
in 1995; its functions are to review, evaluate and determine executive
level compensation and to recommend to the Board of Directors the election
of corporate officers.
The Nominating Committee met four times in 1995; its duties relate to
the evaluation and recommendation to the Board of Directors of prospective
candidates for election as directors of the Corporation. The Nominating
Committee will consider recommended nominations for the position of
director which are submitted in writing by the shareholders and addressed
to the Committee in care of the Corporation at Muscatine, Iowa.
The Stock Option Committee met twice in 1995; its function is to
select key executives and to award options and restricted stock grants to
those key executives whose judgment, initiative and efforts contribute
materially to the successful performance of the Corporation.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Information
The following table sets forth certain information concerning compensation
paid for the last three fiscal years to the Corporation's Chief Executive
Officer and each of its four other most highly compensated executive
officers whose total cash compensation exceeded $100,000 in fiscal 1995.
The persons named in the table are sometimes referred to herein as the
"named executive officers."
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Other Annual Restricted All Other
Name and Principal Compensation Stock Compensation
Position Year Salary Bonus [1] Award(s)[2] [3]
<S> <C> <C> <C> <C> <C> <C>
Martin G. Carver 1995 $321,340 $0 $91,264 $111,417 $20,255
Chairman of the Board, 1994 311,740 0 91,127 111,250 20,060
Chief Executive Officer 1993 299,036 0 82,770 107,115 19,318
and President
Gary L. Carlson 1995 $281,941 $0 $161,206 $23,087 $220,009
Senior V.P. and General 1994 273,808 0 28,224 23,363 170,778
Manager of Eastern 1993 183,867 0 7,598 10,545 15,207
Hemisphere Retreading
Division
Donald F. Chester 1995 $251,372 $0 $11,874 $14,053 $20,255
Senior V.P., 1994 233,517 0 12,161 14,463 19,359
International 1993 244,140 0 9,931 12,210 18,382
Thomas E. Dvorchak 1995 $309,127 $0 $24,813 $27,102 $26,203
Senior V.P. and Chief 1994 304,913 0 25,391 27,813 20,060
Financial Officer 1993 292,942 0 19,706 22,200 19,318
Stuart C. Green 1995 $304,720 $0 $22,357 $26,098 $20,255
Senior V.P., 1994 295,268 0 21,942 25,587 20,832
Manufacturing 1993 283,690 0 18,120 22,200 21,101
<FN>
[1] Amounts shown represent the tax reimbursement or "gross up" with
respect to restricted stock awards and certain other fringe benefits
and, in Mr. Carlson's case, includes tax "gross up" in connection
with foreign service assignment.
[2] At December 31, 1995 the number of shares held and the aggregate
market value of restricted stock held by the named executive officers
are as follows: Martin G. Carver, 10,670 shares Common Stock, value
$577,514, and 6,810 shares Class A Common Stock, value $360,930; Gary
L. Carlson, 1,320 shares Common Stock, value $71,445, and 940 shares
Class A Common Stock, value $49,820; Donald F. Chester, 1,460 shares
Common Stock, value $79,023, and 1,020 shares Class A Common Stock,
value $54,060; Thomas E. Dvorchak, 2,320 shares Common Stock, value
$125,570, and 1,520 shares Class A Common Stock, value $80,560; and
Stuart C. Green, 1,390 shares Common Stock, value $75,234, and 590
shares Class A Common Stock, value $31,270. Dividends are paid on
the shares of restricted stock prior to vesting.
[3] Of the amounts shown in this column for 1995 for each of the named
executive officers, $19,600 is the Corporation's contribution under
its Salaried Profit Sharing, Retirement and Savings Plan for each of
such individuals (of which, because of limitations under the Internal
Revenue Code of 1986, as amended, $12,000 was paid into such Plan and
the balance to be paid by the Corporation outside such Plan) and $655
is the Corporation's contribution to its Bandag Security Program, a
combination defined benefit and defined contribution plan. The
remainder of the amount shown for Mr. Carlson in 1995 is $199,754
representing allowances for foreign service assignment.
</TABLE>
Stock Options
The following table sets forth information regarding the fiscal year-
end value of unexercised options held by the named executive officers. No
options were granted or exercised in 1995.
Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year- Fiscal Year-
End End[2]
Shares
Acquired Value
Name on Exercise Realized Exercisable Exercisable
Martin G. Carver -0- -0- 200,000[1] $6,775,000
[1] Comprised of 100,000 shares of Common Stock and 100,000 shares of
Class A Common Stock. The options were granted in 1987 at an
exercise price equal to the closing price of the Corporation's Common
Stock on the New York Stock Exchange on the date of grant.
[2] The dollar values are calculated by determining the difference
between the fair market value of the underlying Common Stock and
Class A Common Stock, respectively, at fiscal year-end and the
exercise price of the options.
Pension Plan Benefits. The following table sets forth annual normal
retirement age pension benefits under the Bandag Salaried Pension Plan at
the specified remuneration and years-of-service classifications. The
table assumes retirement in 1996. To the extent benefits are not paid
under the Salaried Pension Plan due to limitations under the Internal
Revenue Code of 1986, as amended, they are paid by the Corporation.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Annual Pension Per Years of Service
Highest 5-Year Average
Annual Compensation 5-Years 10-Years 15-Years 20-Years 25-Years 30-Years 35-Years
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 3,219 $ 6,438 $9,656 $12,300 $14,800 $16,300 $17,550
$100,000 $ 7,281 $14,563 $21,844 $27,300 $32,300 $35,300 $37,800
$200,000 $15,406 $30,813 $46,219 $57,300 $67,300 $73,300 $78,300
$250,000 $18,607 $37,214 $55,822 $69,119 $81,089 $88,270 $94,255
$300,000 $18,607 $37,214 $55,822 $69,119 $81,089 $88,270 $94,255
$350,000 $18,607 $37,214 $55,822 $69,119 $81,089 $88,270 $94,255
$400,000 $18,607 $37,214 $55,822 $69,119 $81,089 $88,270 $94,255
</TABLE>
Pension amounts are based upon an employee's base salary (exclusive
of bonus) and credited years of service. For the individuals named in the
foregoing remuneration table, the base salary and credited service as of
March 22, 1996, were as follows: Martin G. Carver, $321,340 and 17
years; Gary L. Carlson, $281,941 and 22 years; Donald F. Chester,
$251,372 and 12 years; Thomas E. Dvorchak, $309,127 and 25 years; and
Stuart C. Green, $304,720 and 4 years. Benefits shown in the table are
computed as a straight line single life annuity assuming retirement at age
65 and are not subject to offset for Social Security benefits.
The named executive officers also participate in the Bandag Security
Program which is a combined defined benefit and defined contribution plan
(see footnote [3] on page 8). The annual defined benefit payable at age
62 for each of the named executive officers is fixed and is as follows:
Martin G. Carver, $700; Gary L. Carlson, $985, Donald F. Chester, $478;
Thomas E. Dvorchak, $1,124; and Stuart C. Green, $74.
Report of Management Continuity and Compensation Committee on Executive
Compensation
The seven member Management Continuity and Compensation Committee of
the Board of Directors (the "Compensation Committee") makes all decisions
regarding compensation of the Corporation's executive officers, except for
the awarding of stock options and restricted stock, which are made by the
Stock Option Committee. Set forth below is a report submitted by the
Compensation Committee addressing the Corporation's compensation policies
for 1995 applicable to the Corporation's executive officers, including the
executive officers named in the Summary Compensation Table.
Consistent with the Corporation's commitment to adopt a world-class
approach to improving total quality, in 1992 the Corporation adopted a new
approach to the compensation of executive officers and other salaried
employees. As the Corporation learned more about total quality systems,
their fairness to people and their necessity in achieving a corporation's
long-term objectives, it became apparent that the then existing
compensation system was not designed with these objectives in mind. In
that spirit, a Midpoint Compensation System (the "System") was approved
by the Compensation Committee in 1992.
This System eliminated arbitrary incentives which the Compensation
Committee believes are a major barrier to continuous improvement. As a
result of the adoption of the System, bonuses, country club memberships,
automobile allowances, split dollar life insurance and tax preparation
fees, which were perquisites of top executives and some other managers,
were eliminated. A portion of the dollar value of these perquisites was
rolled into the executives' base salaries. Salary survey information was
used to ensure that the salaries were fair and competitive with those of
other companies similar in size to the Corporation. Under the System,
bonuses and most traditional executive perquisites are no longer paid.
Rather, under the System, an executive officer, including the Chief
Executive Officer, receives an annual salary fixed by the Compensation
Committee, restricted stock awards determined by the Stock Option
Committee, tax "gross up" payments related to such awards and Corporation
contributions to the Corporation's Salaried Profit Sharing, Retirement and
Savings Plan and the Bandag Security Program as determined by the
Compensation Committee.
Under the System, a salary "midpoint" for each executive officer,
including the Chief Executive Officer, is established through the use of
executive compensation salary surveys, financial performance of the
Corporation, national trends in compensation and the Corporation's
competitive need to retain and to recruit the very best and most capable
people. Such salary surveys encompass general manufacturing companies
with revenues from $500 million to $1 billion. In reviewing the
Corporation's financial performance, the Compensation Committee considered
the Corporation's revenues, net income and net income per share in light
of the competitive and economic conditions encountered by the Corporation
during the fiscal year, as well as the effect on the Corporation's
financial performance resulting from the Corporation's investment in
marketing programs, research and development, plant, machinery and
equipment and in personnel and related programs.
The salary "midpoints" represent the salary level in the 75th
percentile of the salary range for each executive officer position, based
on executive compensation salary surveys, as adjusted by the Compensation
Committee based on an evaluation of the importance of the particular
executive position to the Corporation. The salary "midpoints" are
adjusted by the Compensation Committee each year based on a review of the
factors outlined in the immediately preceding paragraph. These salary
"midpoints" are used to calculate the annual increase for each executive
officer, except the Chief Executive Officer, by multiplying the salary
"midpoint" (not the existing annual salary) by a percentage established by
the Compensation Committee. Multiplying the salary "midpoint" for a given
position by the annual percentage determined by the Compensation Committee
increases base salaries which are currently below the salary "midpoint" by
a greater amount than if base salaries were multiplied by the annual
percentage, while base salaries which are currently in excess of the
salary "midpoint" for a given position will receive a smaller increase
than would be the case if the base salaries were multiplied by such
percentage. For 1996, the percentage increase was fixed at 4.0% for all
salaried Corporation employees, including all executive officers, except
the Chief Executive Officer. Such increase in base salary takes effect on
January 1, 1996 and does not affect 1995 compensation. In fixing the
percentage increase for 1996 base salary, the Compensation Committee
considered a variety of factors, including the inflation rate, the
Corporation's financial performance and trends in salaried employee
compensation increases, as disclosed by published salary forecasts.
Mr. Martin G. Carver, Chief Executive Officer, again declined to
receive a salary increase for 1996 based on a percentage of the salary
"midpoint" for his position. Instead, he again requested that his salary
increase for 1996 be increased by a percentage of his 1995 base salary,
which is substantially lower than his salary "midpoint." The salary
increase for Mr. Carver for 1996 was equal to 3.45% of his 1995 base
salary (not his salary "midpoint").
Although the Compensation Committee considers the Corporation's
financial performance in determining the total compensation for executive
officers, including the Chief Executive Officer, there is no specific
formula or target performance against which executive compensation is to
be compared or judged. Rather, the Corporation's performance is part of
the total mix of information which the Compensation Committee considers in
making its decisions on executive compensation.
Bandag, Incorporated Management
Continuity and Compensation Committee
Roy J. Carver, Jr. Edgar D. Jannotta
Martin G. Carver Stephen A. Keller
Robert K. Drummond R. Stephen Newman
James R. Everline
Report of Stock Option Committee on Executive Compensation
The Stock Option Committee of the Board of Directors (the "Stock Option
Committee"), which is composed of six non-employee directors, makes all
decisions regarding the granting of stock options and the grant of
restricted stock awards. No grants of stock options were made in 1995.
The purpose of the Corporation's Restricted Stock Grant Plan is to provide
long-term incentive compensation which will attract and retain superior
executive personnel. Under the Plan, the Stock Option Committee awards
stock to key executives each year. The shares are held by a custodian
until seven years have elapsed, when they are then transferred to the
executive. Dividends are paid to the recipient of the restricted stock
while the shares are held by the custodian. If an executive who has not
attained age 60 leaves the Corporation before the end of the seven year
restriction period, the shares are forfeited, except in the case of death
or disability. An executive who has attained age 60 and who leaves the
Corporation prior to the end of the seven-year retention period does not
forfeit the shares.
During 1995 awards of restricted stock were made utilizing the
Corporation's System. Restricted stock awards were granted based on a
percentage of the salary "midpoint" established for each executive
position. The percentages were established taking into consideration
total compensation, as well as each executive's level of responsibility.
The Chief Executive Officer's percentage of "midpoint" is greater than the
other executive officers. In fixing a greater percentage of the Chief
Executive Officer's "midpoint," the Stock Option Committee took into
account that the Chief Executive Officer's base salary is substantially
below the salary "midpoint" for his position and that his increase in base
salary for 1996 is substantially less than he would have received had his
increase been based on his salary "midpoint." The number of restricted
shares granted was computed by multiplying the salary "midpoint" for an
executive officer, including the Chief Executive Officer, by the
percentage fixed by the Stock Option Committee and then dividing such
amount by the per share market value of the Corporation's Common Stock on
the date of grant. In fixing the awards for all executives, including the
Chief Executive Officer, the Stock Option Committee considered the
Corporation's performance in the same manner as the Compensation Committee
did in fixing other components of executive compensation. See "Report of
Management Continuity and Compensation Committee on Executive
Compensation." The total amount of previous awards made to individuals
was not a factor in fixing the 1995 awards.
Bandag, Incorporated
Stock Option Committee
Roy J. Carver, Jr. Edgar D. Jannotta
Robert K. Drummond Stephen A. Keller
James R. Everline R. Stephen Newman
Compensation Committee Interlocks and Insider Participation
The Management Continuity and Compensation Committee (the "Compensation
Committee") consists of Messrs. Roy J. Carver, Jr., Martin G. Carver,
Robert K. Drummond, James R. Everline, Edgar D. Jannotta, Stephen A.
Keller and R. Stephen Newman. The Stock Option Committee consists of
Messrs. Roy J. Carver, Jr., Robert K. Drummond, James R. Everline, Edgar
D. Jannotta, Stephen A. Keller and R. Stephen Newman. Mr. Martin G.
Carver is Chairman of the Board, Chief Executive Officer and President of
the Corporation. Mr. Roy J. Carver owns Carver Aero, Inc., which sold
$131,660.13 of aviation fuel to the Corporation in 1995 (see "Transactions
with Management/Principal Shareholders" herein). Mr. Drummond is a
partner of the law firm of Foley & Lardner, Milwaukee, Wisconsin, which
has served as legal counsel to the Corporation for several years. Mr.
Jannotta is Senior Principal of William Blair & Company, L.L.C., which
provided investment banking services to the Corporation in 1995. Mr.
Keller formerly served as President of the Corporation from April 1966
through June 1973.
Remuneration of Directors. Directors who are also full-time employees
of the Corporation do not receive remuneration for acting as directors.
Non-employee directors are compensated in accordance with the following
schedule:
Annual Fees - Chairman of Committee - $35,500. Other Directors - $33,500.
Board Meeting Attendance - $1,250 per meeting.
Committee Meeting Attendance - Chairman - $1,500 per meeting.
Other Directors - $1,250 per meeting.
Transactions with Management/Principal Shareholders. Roy J. Carver,
Jr., son of Lucille A. Carver and brother of Martin G. Carver, owns 100%
of Carver Aero, Inc., which operates fixed base operations at airports in
Muscatine, Iowa; Davenport, Iowa, and Clinton, Iowa. During 1995, it sold
$131,660.13 of aviation fuel to Bandag, Incorporated at competitive prices
based on volume purchased.
SHAREHOLDER RETURN PERFORMANCE INFORMATION
Set forth below is a line graph comparing the yearly percentage change
during the last five years in the cumulative total shareholder return
(assuming reinvestment of dividends) on the Corporation's Common Stock
with the cumulative total return of the Standard & Poor's 500 Stock
(Index) and the Dow Jones & Co., Inc. Automobile Parts & Equipment-All
(Index). Performance information set forth below for the Corporation's
Common Stock includes the Corporation's Class A Common Stock issued as a
stock dividend on June 10, 1992.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Bandag, Incorporated
Stock Performance Chart
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Bandag, Incorporated, S&P 500 Stock (Index) and
Automobile Parts & Equipment - All (Index)
[PERFORMANCE GRAPH]
December 31
1990 1991 1992 1993 1994 1995
Bandag, Incorporated $100 $144 $139 $132 $142 $135
S&P 500 Stock (Index) $100 $130 $140 $155 $157 $216
Automobile Parts &
Equipment-All (Index) $100 $148 $192 $238 $203 $252
Assume $100 Invested on December 31, 1990 in
Bandag, Incorporated Common Stock, the S&P 500
Stock (Index) and the Automobile Parts &
Equipment-All (Index)
Proposal No. 2-RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, based upon the recommendation of the Audit
Committee, which consists of James R. Everline, Edgar D. Jannotta, Stephen
A. Keller, and R. Stephen Newman, directors of the Corporation, has
appointed Ernst & Young LLP as the Corporation's independent auditors for
the year ending December 31, 1996.
Ernst & Young LLP served as the Corporation's independent auditors for
the year ended December 31, 1995. Representatives of Ernst & Young LLP
will be present at the Annual Meeting and will be available to respond to
any questions raised at the meeting and make any comments they deem
appropriate.
Although this appointment is not required by law to be submitted to a
vote by shareholders, the Board believes it appropriate, as a matter of
policy, to request that the shareholders ratify the appointment of Ernst &
Young LLP as independent auditors for 1996. If the shareholders should not
ratify, the Board will reconsider the appointment.
Proposal No. 3-OTHER MATTERS
The management of the Corporation knows of no matters to be presented
at the meeting other than those set forth in the Notice of Annual Meeting.
However, if any other matters properly come before the meeting, it is
intended that the persons named in the enclosed Proxy will vote on such
matters in accordance with their best judgments.
1997 SHAREHOLDERS' PROPOSALS
The date by which proposals of shareholders intended to be presented at
the 1997 Annual Meeting of the Corporation must be received by the
Corporation for inclusion in its proxy statement and form of proxy
relating to that meeting is November 29, 1996.
MISCELLANEOUS
The expense of preparing, printing and mailing this proxy statement and
the proxies solicited hereby will be borne by the Corporation.
Some of the officers and regular employees of the Corporation may,
without extra remuneration, solicit proxies personally or by telephone,
telex or telefax. The Corporation will request brokerage houses, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial
owners of shares held of record and will reimburse such persons for their
expenses.
By Order of the Board of Directors
WARREN W. HEIDBREDER, Secretary
<PAGE>
BANDAG, INCORPORATED
Muscatine, Iowa
PROXY FOR ANNUAL MEETING - MAY 7, 1996
Lucille A. Carver and Martin G. Carver, or either of them each with
power of substitution, are authorized to vote all shares of Common Stock
(COM) and Class B Common Stock (CLB) which the undersigned is entitled to
vote at the Annual Meeting of Shareholders of Bandag, Incorporated to be
held May 7, 1996 and at any adjournment thereof.
This proxy is solicited on behalf of the Company's Board of Directors.
Every properly signed proxy will be voted as directed. The Board of
Directors recommends a vote FOR the nominees in Item (1) and FOR Item (2).
Unless otherwise directed, proxies will be voted in accordance with the
foregoing sentence and in the discretion of the Board of Directors in
connection with Item (3).
You are encouraged to specify your choices by marking the appropriate
boxes. SEE REVERSE SIDE, but you need not mark any boxes if you wish to
vote in accordance with the Board of Directors' recommendations. The
proxy holders cannot vote your shares unless you sign and return this
card.
SEE REVERSE
CONTINUED, AND TO BE SIGNED ON REVERSE SIDE SIDE
[X] Please mark votes as in this example
The signer hereby revokes all proxies heretofore given by the signer to
vote at said meeting or any adjournment thereof.
FOR AGAINST ABSTAIN
1. Election of Directors
Lucille A. Carver [__] [__] [__]
Martin G. Carver [__] [__] [__]
Edgar D. Jannotta [__] [__] [__]
FOR AGAINST ABSTAIN
2. The selection of Ernst & Young LLP [__] [__] [__]
as independent auditors for the
fiscal year ending December 31, 1996.
3. In their discretion upon such
other matters as may properly
come before the meeting
MARK HERE FOR MARK HERE
COMMENTS/CHANGE IF YOU PLAN
OF ADDRESS AND [__] TO ATTEND [__]
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature ___________________ Date __________
Signature ___________________ Date __________