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 ? 240.14a-11(c) or ? 240.14a-12
BADGER METER, INC.
------------------
(Name of Registrant as Specified in its Charter)
-----------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] 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:
[BADGER METER LOGO]
BADGER METER, INC.
4545 WEST BROWN DEER ROAD
MILWAUKEE, WISCONSIN 53223
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 2005
The Annual Meeting of the Shareholders of Badger Meter, Inc. (the
"Company") will be held at BADGER METER, INC., 4545 W. Brown Deer Road,
Milwaukee, Wisconsin 53223, on Friday, April 29, 2005, at 8:30 a.m. local time,
for the following purposes:
1. To elect three directors to three-year terms;
2. To consider approval of the Badger Meter, Inc. 2005 Restricted
Stock Plan;
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Holders of record of Common Stock of the Company at the close of business
on February 28, 2005, will be entitled to notice of and to vote at the meeting
and any adjournments or postponements thereof. Shareholders will be entitled to
one vote per share.
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
Ronald H. Dix, Secretary
March 17, 2005
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 29, 2005, at BADGER METER,
INC., 4545 W. 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 or by submitting a duly executed proxy bearing a later date.
Unless so revoked, the shares represented by such proxies will be voted at the
Meeting and any adjournments or postponements thereof.
The record date for shareholders entitled to notice of and to vote at the
Meeting is the close of business on February 28, 2005. As of the record date,
the Company had 6,745,441 shares of Common Stock (the "Common Stock")
outstanding and entitled to one vote per share.
This Proxy Statement is being furnished to shareholders of the Company
beginning on or about March 18, 2005.
NOMINATION AND ELECTION OF DIRECTORS
At the Meeting, holders of Common Stock shall be entitled to elect three
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 will,
unless otherwise directed, be voted in favor of the election of each of the
three persons named below to serve as directors for three years, or until their
respective successors have been duly appointed, or until their death,
resignation or removal. If your shares are held in "street name" by your broker,
your broker may vote your shares in his or her discretion on the election of
directors if you do not furnish instructions.
After the Meeting, the Board of Directors will consist of eight members
divided into three classes, with one class elected each year to serve for a term
of three years. One current director, James L. Forbes, will not be renominated
as he has reached the Company's mandatory retirement age for directors.
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. Two of the 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.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS EXPIRING AT THE 2008 ANNUAL MEETING
BUSINESS EXPERIENCE DURING DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- --- ---------------------------------- --------
Ronald H. Dix............................. 60 Badger Meter, Inc.: Senior Vice --
President -- Administration and
Secretary. Formerly, Senior Vice
President -- Administration/Human
Resources and Secretary. Vice
President -- Administration/ Human
Resources.
Thomas J. Fischer......................... 57 Fischer Financial Consulting LLC 2003
(an accounting and financial
consulting firm): President.
Formerly, Arthur Andersen
LLP -- Milwaukee Office: Retired
Managing Partner.
Richard A. Meeusen........................ 50 Badger Meter, Inc.: Chairman, 2001
President and Chief Executive
Officer. Formerly, Badger Meter,
Inc.: President and Chief
Executive Officer; President;
Executive Vice President --
Administration; and Vice
President -- Finance, CFO and
Treasurer.
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 AT THE 2007 ANNUAL MEETING
BUSINESS EXPERIENCE DURING DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- --- -------------------------------------- --------
Kenneth P. Manning.................... 63 Sensient Technologies Corporation (an 1996
international supplier of flavors,
colors and inks): Chairman, President
and Chief Executive Officer.
John J. Stollenwerk................... 65 Allen-Edmonds Shoe Corporation (a 1996
manufacturer and marketer of shoes):
Owner and President.
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MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT THE 2006 ANNUAL MEETING
BUSINESS EXPERIENCE DURING DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- --- -------------------------------------- --------
Ulice Payne, Jr. ..................... 49 Addison-Clifton LLC (an export 2000
consulting firm): President. Former
President and Chief Executive Officer
of the Milwaukee Brewers Baseball
Club. Formerly, Foley & Lardner LLP (a
law firm): Managing Partner, Milwaukee
Office.
Andrew J. Policano.................... 55 University of California -- Irvine: 1997
Dean, Graduate School of Management.
Formerly, University of Wisconsin:
Professor and Dean of the School of
Business.
Steven J. Smith....................... 55 Journal Communications, Inc. (a 2000
diversified media and communications
company): Chairman and Chief Executive
Officer. Formerly, Journal
Communications, Inc.: President.
Certain directors of the Company also serve as directors of the following
companies, some of which are publicly held. Mr. Dix is a director of Physicians
Insurance Corporation of Wisconsin, Inc. Mr. Fischer is a director of Actuant
Corporation and Regal-Beloit Corporation. Mr. Manning is a director of Sensient
Technologies Corporation and Sealed Air Corporation. Mr. Meeusen is a director
of State Financial Services Corporation. Mr. Payne is a director of The
Northwestern Mutual Life Insurance Company, Wisconsin Energy Corporation,
Midwest Air Group, Inc. and State Financial Services Corporation. Mr. Policano
is a director of National Guardian Life Insurance Company and Physicians
Insurance Corporation of Wisconsin, Inc. Mr. Smith is a director of Journal
Communications, Inc. Mr. Stollenwerk is a director of Allen-Edmonds Shoe
Corporation, The Northwestern Mutual Life Insurance Company, U.S. Bancorp, Koss
Corporation and Wire Maid, Inc.
DIRECTOR COMPENSATION
Richard A. Meeusen and Ronald H. Dix are employees of the Company and
therefore Mr. Meeusen receives, and if elected Mr. Dix will receive, no
compensation for their service as directors. All other directors are not
employees of the Company and are compensated as follows: Directors are
compensated at a rate of $1,500 for each Board of Directors meeting attended and
are reimbursed for out-of-pocket travel, lodging and meal expenses. Directors
are compensated at the rate of $1,000 for each committee meeting they attend. In
addition, directors are paid a retainer of $750 per month and committee chairmen
receive an annual fee of $2,000. Directors may elect to defer their
compensation, in whole or in part, in a stock or cash subaccount of the Badger
Meter Deferred Compensation Plan for Directors. If a director elects to defer
compensation in a stock subaccount, his subaccount is credited with a number of
units equivalent to the dollar amount of such fees on the date they would
otherwise be payable. Amounts credited to the stock subaccount are credited with
dividends by multiplying the number of units in the participant's stock
subaccount on each dividend record date, by the amount of each dividend, to
determine the dividend amount. The dividend amount is then divided by the
closing stock price on the last day of the previous quarter to determine the
number of stock units to be added to the stock subaccount. Upon distribution of
any portion or all of a participant's stock subaccount, the value of the account
will be computed by multiplying the number of units in the account on the date
of distribution by the closing price of the Common Stock on the last day of the
month prior to the distribution.
The non-employee directors of the Company participate in the same long-term
incentive plan ("LTIP") as certain members of the Company's management group.
The LTIP provides annual cash bonuses to the directors with respect to a
four-year performance period beginning in 2002. The awards are based upon annual
attainment of earnings objectives for each year. Effective January 1, 2002, the
maximum amount that a
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director can earn under the long-term incentive plan is $15,188 to $22,022 per
year, depending on date of award. In addition, non-employee directors receive a
one-time grant of options to purchase up to 16,000 shares of Common Stock and an
annual award of 600 shares of Common Stock under the shareholder-approved 2002
Director Stock Grant Plan.
COMMITTEES, MEETINGS AND ATTENDANCE
The Board of Directors of the Company has four standing committees: Audit
and Compliance Committee, Corporate Governance Committee, Employee Benefit Plans
Committee and Finance Committee. The Board of Directors has adopted written
charters for each committee, which are available on the Company's website at
www.badgermeter.com under the selection "Company" -- "Corporate Governance" --
"Committees of the Board." The Board of Directors has affirmatively determined
that all of the Company's directors (other than Mr. Meeusen, Mr. Forbes and Mr.
Dix, if elected) are "independent" as defined in the listing standards of the
American Stock Exchange.
The Audit and Compliance Committee, which met five times in 2004, consists
of Messrs. Fischer (Chairman), Manning and Payne. The Audit and Compliance
Committee oversees the Company's financial reporting process on behalf of the
Board of Directors and reports the results of their activities to the Board. The
activities of the Audit and Compliance Committee include employing an
independent registered public accounting firm for the Company, discussing with
the independent registered public accounting firm and internal auditors the
scope and results of audits, monitoring the Company's internal controls and pre-
approving and reviewing audit fees and other services performed by the Company's
independent registered public accounting firm. The Committee also monitors the
Company's compliance with the Company's policies governing activities which
include but are not limited to the Company's code of conduct and its
environmental, safety, diversity, product regulation and quality processes. The
Board of Directors has determined that each member of the Committee qualifies as
an "Audit Committee financial expert" as defined by Securities and Exchange
Commission rules.
The Corporate Governance Committee consisting of Messrs. Policano
(Chairman), Payne, Smith and Stollenwerk, met three times in 2004 and in January
2005. The Corporate Governance Committee reviews and establishes all forms of
compensation for the officers and directors 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 and adopts and maintains the Principles of Corporate Governance. In
addition, the Committee selects nominees for the Company's Board of Directors.
The Employee Benefit Plans Committee, which met three times in 2004,
consisted of Messrs. Smith (Chairman), Forbes and Policano. The Employee Benefit
Plans Committee oversees the administration of the Company's pension plan,
employee savings and stock ownership plan, health plans and other benefit plans.
The Finance Committee, which met twice in 2004, consisted of Messrs.
Manning (Chairman), Fischer, Forbes and Stollenwerk. This Committee reviews the
Company's various financing activities and insurance coverage and recommends
changes in the corporate capitalization structure.
The Board of Directors held five meetings in 2004. Mr. Policano currently
serves as lead outside director of the Board. During 2004, all directors
attended at least 75% of the meetings of the Board of Directors and committees
on which they served during the period that they served. All members of the
Board of Directors attended the 2004 Annual Meeting of Shareholders. It is the
Board's policy that all directors attend the Annual Meeting of Shareholders,
unless unusual circumstances prevent such attendance.
NOMINATION OF DIRECTORS
The Corporate Governance Committee (the "Committee") has responsibility for
selecting nominees for the Company's Board of Directors. All members of the
Committee meet the definition of independence set
4
forth by the American Stock Exchange. The Board of Directors has adopted a
policy by which the Committee will consider nominees for Board positions, as
follows:
- The Committee will review potential new candidates for Board positions.
- The Committee will review each candidate's qualifications in light of the
needs of the Board and the Company, considering the current mix of
director attributes and other pertinent factors.
- The minimum qualifications required of any candidate include the highest
ethical standards and integrity, and sufficient experience and knowledge
commensurate with the Company's needs.
- The specific qualities and skills required of any candidate will vary
depending on the Company's specific needs at any point in time.
- No candidate, including current directors, may stand for reelection after
reaching the age of 70.
- There are no differences in the manner in which the Committee evaluates
candidates recommended by shareholders and candidates identified from
other sources.
- To recommend a candidate, shareholders should write to the Board of
Directors, Badger Meter, Inc., P.O. Box 245036, Milwaukee, WI 53224-9536,
via certified mail. Such recommendation should include the candidate's
name and address, a brief biographical description and statement of
qualifications of the candidate and the candidate's signed consent to be
named in the proxy statement and to serve as a director if elected.
- To be considered by the Committee for nomination and inclusion in the
Company's proxy statement, the Board must receive shareholder
recommendations for director no later than October 15 of the year prior
to the relevant Annual Meeting of Shareholders.
During 2004, and as of the date of this proxy statement, the Committee did
not pay any fees to third parties to assist in identifying or evaluating
potential candidates. Also, the Committee has not received any shareholder
nominees for consideration at the 2005 Annual Meeting of Shareholders.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors has established a process for shareholders to
communicate with members of the Board. To contact the Board, shareholders should
write to the Board of Directors, c/o Secretary, Badger Meter, Inc., P.O. Box
245036, Milwaukee, WI 53224-9536, via certified mail. The Company's process for
determining how and which communications will be relayed to the Board has been
approved by all of the independent directors of the Company.
PRINCIPLES OF CORPORATE GOVERNANCE
The Board of Directors of Badger Meter, Inc. has adopted the following
principles of corporate governance:
- A majority of the board members are independent directors.
- All directors are selected on the basis of their ability to contribute to
positive corporate governance through their values, knowledge and skills.
- The Board of Directors has established a committee of independent
directors who are responsible for nominating directors and assuring
compliance with these corporate governance principles (the Corporate
Governance Committee).
- The Board of Directors has established the Audit and Compliance
Committee, which is composed entirely of independent directors who are
responsible for overseeing the audit functions and financial reporting
compliance of the Company. Members of the Audit and Compliance Committee
have the skills, experience and financial expertise to fulfill this
function.
5
- The Board of Directors and committees have authority to directly hire
outside consultants as needed to properly fulfill their responsibilities.
- The independent members of the Board of Directors hold regular "executive
sessions" without the presence of management or non-independent
directors.
- The Board of Directors has designated an independent director as the
"lead outside director" to chair executive sessions and, when necessary,
represent the independent directors.
- The Board of Directors has reviewed and approved the Company's Code of
Business Conduct.
- The Board of Directors has created an environment to promote effective
corporate governance and to represent the interests of the shareholders
in all matters.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of February 28, 2005 (unless otherwise
specified), the number of shares of Common Stock beneficially owned and the
number of exercisable options outstanding 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 executive 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 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.
6
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
BADGER METER, INC. COMMON STOCK
AGGREGATE
NUMBER OF SHARES
AND PERCENT OF
COMMON STOCK
SOLE BENEFICIAL SHARED BENEFICIAL BENEFICIALLY
NAME OWNERSHIP(1) OWNERSHIP(1) OWNED(4)
---- --------------- ----------------- ----------------
James L. Forbes....................... 142,054(3) 219,614
3.2%
Thomas J. Fischer..................... 3,200 3,000 22,400
*
Kenneth P. Manning.................... 21,800 26,000
*
Richard A. Meeusen.................... 54,052(2)(3) 160,390(2) 211,034
3.1%
Ulice Payne, Jr. ..................... 4,800 22,000
*
Andrew J. Policano.................... 5,900 17,100
*
Steven J. Smith....................... 6,200 23,400
*
John J. Stollenwerk................... 15,632 5,082 36,914(5)
*
Ronald H. Dix......................... 37,091(2)(3) 204,242(2) 245,381
3.6%
Horst E. Gras......................... 16,510(2)(3) 28,260
*
Richard E. Johnson.................... 30,632(2)(3) 170,786(2) 200,518
3.0%
Kenneth E. Smith...................... 16,190(2)(3) 37,590
*
All Directors and Executive Officers
as a Group (16 persons, including
those named above).................. 506,731(2)(3) 222,720(2) 933,591(5)
13.2%
Heartland Advisors, Inc............... 581,800(6) 581,800
789 N. Water St. 8.6%
Milwaukee, WI 53202
JOW Corp.............................. 400,000(7) 400,000
4545 W. Brown Deer Rd. 5.9%
Milwaukee, WI 53223
Marshall & Ilsley Corp. .............. 629,620(3) 118,778 747,598(8)
1000 N. Water St. 11.1%
Milwaukee, WI 53202
T. Rowe Price Associates, Inc. ....... 392,400(9) 392,400
100 E. Pratt St. 5.8%
Baltimore, MD 21203
---------------
* Less than one percent.
(1) Unless otherwise indicated, the beneficial owner has sole investment and
voting power or shared voting and investment power over the reported shares.
7
(2) The Badger Meter Officers' Voting Trust ("Officers' Trust"), of which Ronald
H. Dix, Richard E. Johnson and Richard A. Meeusen are trustees, holds
160,390 shares of 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 Common Stock held therein. The
Officers' Trust will exist for 30 years from December 18, 1992 to December
18, 2022, and thereafter for additional 30-year renewal periods unless
earlier terminated by a vote of beneficiaries holding 75% or more of the
votes in the Officers' Trust or by applicable law.
The Officers' Trust has a $1.5 million loan balance at February 28, 2005,
that was used to assist executive officers in financing the purchase of
Common Stock prior to July 2002. Loans to the Officers' Trust are guaranteed
by the Company and the stock purchased by the executive officers using this
credit facility is pledged to the Officers' Trust to secure the loans. In
compliance with the Sarbanes-Oxley Act of 2002, no loans have been made to
executive officers since July 2002. Each depositor to the Trust must have
sufficient shares deposited to adequately collateralize the individual
officer's loan balance. The Officers' Trust holds shares with a value more
than sufficient to cover the full credit line. All executive officers,
including the named executive officers, have purchased Common Stock using
this loan program.
Messrs. Dix, Johnson 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 20,400 shares of
Common Stock. Mr. Johnson has sole investment power over 16,000 shares of
Common Stock. Mr. Meeusen has sole investment power over 34,912 shares of
Common Stock. Mr. Gras has sole investment power (but no voting power) over
11,860 shares and Mr. Kenneth Smith has sole investment power (but no voting
power) over 10,000 shares of Common Stock.
(3) 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 executive officers and/or directors as follows:
James L. Forbes, 11,170 shares; Ronald H. Dix, 6,491 shares; Richard E.
Johnson, 632 shares; Richard A. Meeusen, 1,522 shares; Kenneth E. Smith, 790
shares; and all officers and/or directors as a group (including those
named), 37,295 shares. Mr. Gras is not a participant in the Plan.
(4) Includes the following shares subject to stock options which are currently
exercisable or exercisable within 60 days of February 28, 2005: Mr.
Meeusen -- 31,504 shares; Mr. Dix -- 24,448 shares; Mr. Gras -- 11,750
shares; Mr. Johnson -- 15,100 shares; Mr. Kenneth Smith -- 21,400 shares and
all directors and executive officers as a group -- 341,302 shares.
(5) Does not include deferred director fee holdings of 7,590 phantom stock units
held by Mr. Stollenwerk under the Badger Meter Deferred Compensation Plan
for Directors. The value of the phantom stock units is based upon and
fluctuates with the market value of the Common Stock. When a participant
chooses to exit the plan, all compensation accrued is paid out in cash.
(6) These shares may be deemed beneficially owned within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934 by (1) Heartland Advisors, Inc.
by virtue of its investment discretion and voting authority granted by
certain clients, which may be revoked at any time; and (2) William J.
Nasgovitz, as a result of his ownership interest in Heartland Advisors, Inc.
Heartland Advisors, Inc. and Mr. Nasgovitz each specifically disclaim
beneficial ownership of any shares reported on the Schedule 13G filed by
Heartland Advisors, Inc.
(7) James O. Wright, who is a director emeritus and a retired executive officer
of Badger Meter, Inc., is the President of JOW Corp.
(8) Consists of sole voting power over 629,620 shares and sole investment power
over 628,820 shares and shared voting power over 117,978 shares and shared
investment power over 118,778 shares. The number of shares shown includes
shares held in an employee benefit plan, 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 of federal case law. Pursuant to SEC Rule 13d-4,
inclusion of such shares in the Schedule 13G filed by Marshall & Ilsley
Corporation, the parent holding company of Marshall & Ilsley Trust Company
N.A., shall not be construed as an
8
admission that the reporting person or its subsidiaries are, for purposes of
Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, the
beneficial owners of such securities.
(9) Consists of sole voting power over 70,000 shares and sole investment power
over 392,400 shares. These securities are owned by various individual and
institutional investors for which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
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 (defined as base salary plus
imputed interest on loans issued prior to July 2002) and bonus earned during
fiscal 2004.
LONG-TERM COMPENSATION AWARDS
----------------------------------------------------
EARNINGS UNDER SECURITIES ALL OTHER
NAME AND PRINCIPAL LONG-TERM INCENTIVE UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) PLAN ($)(1) OPTIONS (#)(5) ($)(2)(3)
------------------ ---- ---------- --------- -------------------- -------------- ------------
Richard A. Meeusen.... 2004 322,839 200,025 28,917 0 3,250
Chairman, President 2003 306,877 163,895 28,917 23,400 3,000
and CEO 2002 265,457 165,000 28,917 20,000 2,750
Ronald H. Dix......... 2004 214,814 121,275 28,067 0 3,250
Sr. Vice President -- 2003 204,883 99,330 28,067 17,000 3,000
Administration and 2002 193,953 95,000 28,067 12,000 2,750
Secretary
Horst E. Gras(4)...... 2004 250,501 91,213 33,961 0 0
Vice President -- 2003 218,675 80,251 30,139 13,600 0
International
Operations 2002 175,524 72,362 26,620 10,000 0
Richard E. Johnson.... 2004 203,980 115,500 34,628 0 3,250
Sr. Vice President -- 2003 183,633 89,397 34,628 17,000 3,000
Finance, Chief
Financial 2002 158,536 77,500 34,628 12,000 2,691
Officer and Treasurer
Kenneth E. Smith...... 2004 194,782 101,063 38,576 0 3,250
Vice President -- 2003 188,275 83,979 38,576 13,600 3,000
Sales and Marketing 2002 182,221 89,500 38,333 10,000 2,750
---------------
(1) Each of the executive officers named in the table has been designated as a
participant under the Company's Long-Term Incentive Plan ("LTIP"). The LTIP
provides annual cash bonuses to the named executive officers and other
members of the management group with respect to a four-year performance
period that began in 2002. The awards are based upon annual attainment of
earnings objectives for each year, as established by the Board of Directors.
(2) Amounts shown represent the Company contributions to the Badger Meter, Inc.
Employee Savings and Stock Ownership Plan ("ESSOP"), under its 401(k) Plan.
(3) Certain personal 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. The aggregate amount of such benefits for
each of the executive officers named in the table did not exceed 10% of such
executive officer's cash compensation for any of the years shown.
(4) Mr. Gras, who is based in Germany, is paid primarily in euros. The amounts
shown reflect the U.S. dollar equivalent of that currency as of the dates
paid. Year-to-year comparisons are affected by changes in the exchange rate.
Mr. Gras's base salaries paid in euros were 198,088 for 2004, 190,439 for
2003 and 174,820 for 2002.
(5) Share amounts have been adjusted to reflect a 2-for-1 stock split effective
December 10, 2004.
9
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS (KEESAS)
The Company has entered into Key Executive Employment and Severance
Agreements ("KEESAs") with certain key executive officers, including certain of
the above-named executive officers, whose expertise has been critical to the
Company's success, to remain with the Company in the event of any merger or
transition period. The KEESA agreements provide for payment of severance to
executive officers whose employment is terminated under certain circumstances,
such as other than for cause, death or disability, in anticipation of or
following a change in control or by the officer for good reason following such a
change, within two years of a change in control.
There are two forms of the KEESA. The KEESA for the Chairman, President and
Chief Executive Officer provides for payment of three years of salary and annual
incentive compensation, as well as the actuarial equivalent of the additional
retirement benefits the executive officer would have earned if he had remained
employed for three more years, continued medical, dental, and life insurance
coverage for three years, outplacement services, and financial planning
counseling. The KEESA for the remainder of the named executive officers provides
for payment of two years' salary and annual incentive compensation, along with
two years of the other benefits set forth above.
OPTION GRANTS IN 2004
There were no options granted in 2004 to the individuals named in the
Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN 2004 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the exercise
in 2004 of options to purchase Common Stock by the individuals named in the
Summary Compensation Table and the unexercised options to purchase Common Stock
held by such individuals at December 31, 2004.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FY-END (#) FY-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ ------------------------- -------------------------
Richard A. Meeusen........ 21,904 449,376 29,408/36,800 455,189/616,188
Ronald H. Dix............. 7,448 95,902 27,096/25,800 437,265/428,804
Horst E. Gras............. 3,600 46,594 11,000/17,600 129,810/295,926
Richard E. Johnson........ 1,800 7,245 15,000/27,600 249,474/457,082
Kenneth E. Smith.......... 7,800 80,070 19,400/23,600 304,269/386,936
10
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE
TO BE ISSUED WEIGHTED-AVERAGE ISSUANCE UNDER EQUITY
UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN 1)
------------- -------------------- -------------------- -------------------------------
Equity compensation plans
approved by security holders:
STOCK OPTION PLANS:
1989 Plan...................... 6,600 $ 6.23 0
1993 Plan...................... 7,500 $10.14 0
1995 Plan...................... 88,600 $14.91 6,856
1997 Plan...................... 225,956 $14.35 14,348
1999 Plan...................... 344,840 $13.81 12,760
2003 Plan...................... 135,000 $14.00 265,000
2002 DIRECTOR STOCK GRANT
PLAN:....................... N/A N/A 8,600
Equity compensation plans not
approved by security holders... None N/A N/A
Total............................ 808,496 $14.02 307,564
PENSION PLAN TABLE
The Company maintains a defined benefit pension plan (the "Pension Plan")
covering all domestic salaried employees including the above-named executive
officers except Mr. Gras. 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 based on
their service on 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 21 or more years. The additional credits will apply for years after
1996 for each year of continued employment but limited to the lesser of 15 years
or the number of the participant's years of credited service as of December 31,
1996. At retirement, a participant may elect a cash payment of the account
balance or a life annuity of equivalent value.
Mr. Meeusen, Mr. Smith, and Mr. Johnson are eligible for benefits under the
cash balance plan but are not eligible for benefits under the prior plan's final
average pay formula. The estimated total annual benefits payable to these
executives under the cash balance plan at age 65 are $130,118 for Mr. Meeusen,
$34,901 for Mr. Smith and $55,035 for Mr. Johnson. These projected benefits were
determined assuming no future increases in pay and interest credited to the cash
balance account at a rate of 7%.
Mr. Dix, because of his age and service, is 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
11
of Covered Compensation, 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 $205,000 in 2004, 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
from this plan 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 2004, based on the
benefit formula described above.
YEARS OF SERVICE
AVERAGE ANNUAL ---------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
-------------- -------- -------- -------- -------- -------- --------
$150,000.............. $ 19,723 $ 29,584 $ 39,446 $ 49,307 $ 59,169 $ 59,169
$175,000.............. $ 23,473 $ 35,209 $ 46,946 $ 59,682 $ 70,419 $ 70,419
$200,000.............. $ 27,223 $ 40,834 $ 54,446 $ 68,057 $ 81,669 $ 81,669
$250,000.............. $ 34,723 $ 52,084 $ 69,446 $ 86,807 $104,169 $104,169
$300,000.............. $ 42,223 $ 63,334 $ 84,446 $105,557 $126,669 $126,669
$350,000.............. $ 49,723 $ 74,584 $ 99,446 $124,307 $149,169 $149,169
$400,000.............. $ 57,223 $ 85,834 $114,446 $143,057 $171,669 $171,669
$450,000.............. $ 64,723 $ 97,084 $129,446 $162,807 $194,169 $194,169
$500,000.............. $ 72,223 $108,334 $144,446 $180,557 $216,669 $216,669
$550,000.............. $ 79,723 $119,584 $159,446 $199,307 $239,169 $239,169
$600,000.............. $ 87,223 $130,834 $174,446 $218,057 $261,669 $261,669
$650,000.............. $ 94,723 $142,084 $189,446 $236,807 $284,169 $284,169
$700,000.............. $102,223 $153,334 $204,446 $255,557 $306,669 $306,669
$750,000.............. $109,723 $164,584 $219,446 $274,307 $329,169 $329,169
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 (the "Code"), as amended, 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.
There are 23 years of credited service under the Pension Plan for Mr. Dix.
The current remuneration for this individual for purposes of the Pension Plan is
set forth in the Summary Compensation Table.
In 1990, Mr. Dix agreed to the cancellation of substantially all of his
post-retirement group term life insurance in exchange for an unfunded
supplemental retirement plan. This plan provides for the payment of 20% of his
final monthly salary for 120 months after retirement. Assuming no increase in
salary before retirement, Mr. Dix would be paid an additional annual pension of
$44,000.
Mr. Gras, a German resident and citizen, is not covered by the defined
benefit pension plan. The Company, through its European subsidiary, provides Mr.
Gras with an insurance policy that provides benefits similar to those of the
other named executives covered by the cash balance plan.
BOARD CORPORATE GOVERNANCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In addition to its responsibilities relating to corporate governance, the
Corporate Governance Committee administers the Company's executive compensation
program. The Committee is composed of four non-employee directors. Following the
Committee's review and approval, all matters related to its activities are
reported to the full Board of Directors for approval.
12
The compensation policies that are used as a general guideline for the
Committee as it carries out its duties are as follows:
- The design of executive pay programs should attract and retain qualified
executive officers, motivate and reward performance;
- Achievement of annual incentive compensation levels requires attainment
of performance goals as approved by the Committee;
- Long-term incentive programs must focus on the enhancement of shareholder
value through the use of stock options, restricted stock and long-term
cash incentives; and
- 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 Committee reviews:
- Competitive compensation data for organizations of similar size and
similar business activity, considering both base salary and bonus data
separately, on a combined basis and total cash and non-cash compensation;
- Financial performance for the Company as a whole and for various product
lines, relative to prior year, the budget and other meaningful financial
data; and
- Personal performance, including objectives approved by the 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, restricted stock and cash incentives.
Base Salaries. Salary rates are established for each officer by the
Committee, using data supplied by an independent consulting firm on
organizations of similar size and similar business activity. The compensation
survey incorporates privately-held as well as publicly-held companies of similar
size, 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 salaries, total
cash compensation and total compensation. In establishing the compensation of
each officer, including the President and Chief Executive Officer, the Corporate
Governance Committee is given a five-year history, including base salary,
short-term incentive awards, and long-term compensation programs. This process
has been consistently used by the Corporate Governance Committee for the past 15
years. The Company's policy is to pay executives at market, with appropriate
adjustments for performance and levels of responsibility.
Base salary increases approved for 2005 by the Committee ranged from 2.8 to
10.0 percent, with the President and Chief Executive Officer's compensation
increasing 10 percent, after evaluation of the factors set forth above relative
to each individual's circumstances and performance.
Short-Term Incentive Plan. Under the 2004 short-term incentive plan, the
target bonus payable is 60 percent of base salary for the President and Chief
Executive Officer and 50-55 percent for the other executive officers. Two
factors are used for the short-term incentive plan -- financial and
predetermined performance objectives. The financial factor is based on the
attainment of a certain level of earnings before interest and taxes for the
Company, approved at the beginning of each year by the Corporate Governance
Committee. The target bonus can be adjusted up or down 10 percent depending on
an individual's performance. For 2004, bonuses were paid to the executive
officers.
Long-Term Incentive Plans/Stock Option Plans. A long-term compensation
program, which includes the Company's 1993-2003 Stock Option Plans, 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 and are based on a factor of compensation.
13
The Company's Long-Term Incentive Plan provides annual cash bonuses to the
members of the management group with respect to a four-year performance period.
The awards are based upon annual attainment of earnings objectives for each
year, as established by the Board of Directors. The plan in effect for 2004 was
put in place for 2002-2005.
Section 162(m) Limitations. It is anticipated that all 2004 compensation
to executive officers will be fully deductible under Section 162(m) of the Code
and therefore the Corporate Governance 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 Corporate Governance Committee
of the Board of Directors
Andrew J. Policano, Chairman
Ulice Payne, Jr.
Steven J. Smith
John J. Stollenwerk
BOARD AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee (the "Committee") is a group of
independent directors whose responsibilities on behalf of the Board of Directors
(the "Board") include the oversight of financial and compliance processes and
procedures. Specifically, the Committee oversees the integrity of the Company's
financial statements, the Company's compliance with legal and regulatory
requirements, the independent auditor's qualifications and independence, the
performance of the Company's internal audit function and independent auditors,
and the Company's system of disclosure controls and system of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established. The Committee is required to meet at least quarterly
and report to the Board regularly. It met five times in 2004.
The Committee is vested with all responsibilities and authority required by
Rule 10A-3 under the Securities Exchange Act of 1934. It is comprised of the
three members of the Board of Directors named below, each of whom is independent
as required by the American Stock Exchange and U.S. Securities Exchange
Commission rules currently in effect. The Board evaluates the independence of
the directors on at least an annual basis. All three members of the Committee
have been determined by the Board to be financial experts as defined by
Securities and Exchange Commission rules. The Committee acts under a written
charter.
Company management ("Management") has the primary responsibility for the
preparation of financial statements and the reporting process, including the
systems of internal controls. In fulfilling its oversight responsibilities, the
Committee reviewed with Management the Company's audited financial statements as
of and for the year ended December 31, 2004, including discussion regarding the
propriety of the application of accounting principles by the Company, the
reasonableness of significant judgments and estimates used in the preparation of
the financial statements, and the clarity of disclosures in the financial
statements. Management represented to the Committee that the Company's financial
statements were prepared in accordance with accounting principles generally
accepted in the United States. The Committee also reviewed and discussed the
Company's audited 2004 financial statements with the Company's independent
auditors, Ernst & Young LLP, who are responsible for expressing an opinion on
the conformity of the Company's audited financial statements with accounting
principles generally accepted in the United States.
Ernst & Young LLP provided the Committee the written disclosures and the
letter required by Independence Standards Board Standard No. 1 (regarding
independence discussions with audit committees), and the Committee discussed
with Ernst and Young LLP the firm's independence from Management and the
Company, including the matters in those written disclosures.
14
Prior to the audits, the Committee discussed with Ernst & Young LLP and the
Company's internal auditors the overall scope and plans for their respective
audits. Ernst and Young LLP conducted their independent audit. The Committee met
with Ernst & Young LLP, with and without Management present, to discuss the
results of their audit examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting, as well
as the matters required to be discussed by the Statement on Auditing Standards
No. 61 (regarding communication with audit committees), as amended, that were
not otherwise covered and other professional standards and regulatory
requirements as currently in effect.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-K for fiscal 2004 for filing with the
U.S. Securities and Exchange Commission.
All members of the Committee have approved the foregoing report.
The Audit and Compliance Committee
of the Board of Directors
Thomas J. Fischer, Chairman
Kenneth P. Manning
Ulice Payne, Jr.
CORPORATE GOVERNANCE COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Corporate Governance Committee during 2004 consisted of Messrs.
Policano, Payne, Smith and Stollenwerk. There were no Corporate Governance
Committee interlocks. During the last fiscal year, Mr. Forbes served as a member
of the compensation committee of Journal Communications, Inc., of which Mr.
Smith is Chairman and Chief Executive Officer.
15
PERFORMANCE GRAPH
The following graph compares on a cumulative basis the yearly percentage
change since January 1, 2000 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 11 companies in similar
industries and with similar market capitalization as selected by an independent
consulting firm. The graph assumes $100 invested on December 31, 1999. 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
[LINE GRAPH]
DECEMBER 31 1999 2000 2001 2002 2003 2004
----------- ------- ------- ------- ------- ------- -------
Badger Meter........................ 100.00 78.70 79.82 118.17 145.05 233.50
Peer Group*......................... 100.00 250.05 127.71 116.42 173.94 177.56
Broad Market**...................... 100.00 98.77 94.22 90.46 123.12 140.99
---------------
* Peer Group consists of Axcess, Inc., Badger Meter, Inc., Bio/Rad Labs, Inc.,
Candela Corporation, Frequency Electronics, Inc., Innovex, Inc., Integral
Vision, Inc., K-Tron International, Inc., Keithley Instruments, Inc., Newport
Corporation, and Research Frontiers, Inc.
** Broad Market consists of the AMEX Market Index.
PROPOSED 2005 RESTRICTED STOCK PLAN
GENERAL
The Board of Directors approved the Badger Meter, Inc. 2005 Restricted
Stock Plan (the "2005 Plan") on February 18, 2005, subject to approval by the
Company's shareholders. The 2005 Plan, if approved by the Company's
shareholders, will become effective on May 1, 2005.
As of February 28, 2005, there were 6,745,441 shares of Common Stock issued
and outstanding, and the closing price of a share of Common Stock on the
American Stock Exchange on that date was $28.33.
16
The following summary of the 2005 Plan is qualified in its entirety by
reference to the full text of the 2005 Plan, which is attached to this Proxy
Statement as Appendix A. Any defined term used in this section of the Proxy
Statement has the meaning given it in the 2005 Plan.
PURPOSE
The 2005 Plan has two complementary purposes; (1) to promote the success of
the Company by providing incentives to the officers and other key employees of
the Company and its subsidiaries that will link their personal interests to the
Company's long-term financial success; and (2) to permit the Company and its
subsidiaries to attract, motivate and retain experienced and knowledgeable
employees upon whose judgment, interest and special efforts the Company's
success is largely dependent.
ADMINISTRATION
The 2005 Plan will be administered by the Corporate Governance Committee
(the "Committee") of the Board of Directors. The Committee has full power and
discretionary authority to implement the 2005 Plan including, without
limitation, the authority to select Participants, grant Awards and determine the
terms and conditions of each such Award. The Committee has broad authority to
modify, adjust or waive any of the restrictions and/or limitations of the 2005
Plan. The Committee's determinations and decisions made pursuant to the
provisions of the 2005 Plan are final, conclusive and binding.
ELIGIBILITY
The Committee may grant Restricted Share Awards to any full-time, exempt
employee of the Company or its subsidiaries or to such other key employees as
the Committee may determine. As of February 28, 2005, the Company and its
subsidiaries had approximately 235 Eligible Employees eligible to receive Awards
under the 2005 Plan. The number of Eligible Employees is expected to increase
over time based upon the Company's future growth.
STOCK SUBJECT TO THE PLAN; LIMITATIONS ON AWARDS
The number of shares of Common Stock available for Restricted Share Awards
under the 2005 Plan will be 50,000, subject to adjustment as set forth below.
Shares of Common Stock to be granted under the 2005 Plan will come from the
Company's authorized but unissued shares or from treasury shares. If a
Restricted Share Award is forfeited or terminated for any reason, the Restricted
Shares subject to such Award will be available for regranting under the 2005
Plan.
No individual Participant may be granted Restricted Share Awards under the
2005 Plan for more than 20,000 shares.
RESTRICTED SHARE AWARDS
The Committee has authority to determine the number of Restricted Shares
subject to an Award as well as the terms and conditions applicable to such
Award, including the term of the Restriction Period, which is the time period
during which such shares are restricted, and any conditions relating to the
lapse of the Restriction Period, including the attainment of one or more
Performance Goals, if any, set by the Committee.
The Committee has determined that the initial Awards of Restricted Shares
under the 2005 Plan will vest 100% after a three-year Restriction Period.
TERMINATION OF EMPLOYMENT
If a Participant leaves the employ of the Company (other than by reason of
death, Total and Permanent Disability or Retirement) prior to the expiration of
the applicable Restriction Period, then he or she forfeits all of his or her
Restricted Shares. In the event of a Change in Control, all Restricted Shares
automatically vest in full.
17
TRANSFER RESTRICTIONS
A Participant may not sell, transfer, assign or otherwise transfer his or
her Restricted Shares during the Restriction Period. During the applicable
Restriction Period, the Company (or its transfer agent) will hold all stock
certificates representing Restricted Shares.
PARTICIPANT RIGHTS
During the Restriction Period, the Participant has the right to vote his or
her Restricted Shares until vested or forfeited. During the Restriction Period,
any dividends or other distributions with respect to Restricted Shares will be
held by the Company (or its transfer agent) pending vesting or forfeiture.
ADJUSTMENTS
In the event of a merger, reorganization, consolidation, recapitalization,
stock dividend, stock split or other comparable change in the Company's
corporate structure affecting the Common Stock, the Committee may adjust the
number and class of stock to be issued under the 2005 Plan, the individual
Participant Award limit and the number and class of shares subject to
outstanding Restricted Share Awards to prevent dilution or enlargement of the
rights intended to be granted under the 2005 Plan.
AMENDMENT AND TERMINATION
The Board may amend or terminate the 2005 Plan at any time, subject to
applicable law and the vested rights of Participants. The 2005 Plan will
terminate on April 30, 2015, unless earlier terminated by the Board of Directors
or when all shares of Common Stock available for issuance have been issued.
TAX WITHHOLDING
The Company is entitled to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy all taxes required by law
to be withheld with respect to the issuance of Restricted Shares under the 2005
Plan or the lapse of the Restriction Period. The Company also has the right to
withhold Common Stock as to which the Restriction Period has lapsed and which
have a fair market value equal to a Participant's minimum tax withholding
liability.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Generally, a Participant will not recognize income, and the Company will
not be entitled to a deduction, at the time a Restricted Share Award is made
under the 2005 Plan, unless the Participant makes the election described below.
A Participant who has not made such an election will recognize ordinary income
at the time the Restriction Period ends in an amount equal to the fair market
value of the Restricted Shares at that time. The Company will generally be
entitled to a corresponding deduction in the same amount and at the same time as
the Participant recognizes income. Under certain circumstances involving a
Change in Control, the Company may not be entitled to a deduction with respect
to Restricted Shares granted to certain executive officers. Any otherwise
taxable disposition of the Common Stock after the Restriction Period ends will
result in a capital gain or loss to the extent the amount realized from the sale
differs from the tax basis, i.e., the fair market value of the Common Stock on
the date the Restriction Period ends. Dividends, if any, paid in cash and
received by a Participant prior to the time the Restriction Period ends will
constitute ordinary income to the Participant in the year paid, and the Company
will generally be entitled to a corresponding deduction for such payments. (The
2005 Plan currently contemplates that no dividends will be paid on Restricted
Shares until the Restriction Period ends, although the Committee has authority
to accelerate the payment of such dividends.) Any dividends paid in Common Stock
will be treated as an Award of additional Restricted Shares subject to the tax
treatment described herein.
A Participant may, within 30 days after the date of a Restricted Share
Award, elect under Section 83(b) of the Internal Revenue Code to recognize
ordinary income as of the date of the Award in an amount equal to the fair
market value of such Restricted Shares on the date of the Award (less the
amount, if any, the
18
Participant paid for such Restricted Shares). If the Participant makes a proper
election, then the Company will generally be entitled to a corresponding
deduction in the same amount and at the same time as the Participant recognizes
income. If the Participant makes the election, then cash dividends, if any, that
the Participant receives with respect to the Restricted Shares will be treated
as dividend income to the Participant in the year of payment and will not be
deductible by the Company. Any otherwise taxable disposition of the Restricted
Shares (other than by forfeiture) or the Common Stock received upon the
termination of the Restriction Period will result in a capital gain or loss. If
the Participant who has made an election subsequently forfeits the Restricted
Shares, then the Participant will not be entitled to deduct any loss. In
addition, the Company would then be required to include in its ordinary income
the amount of any deduction the Company originally claimed with respect to such
shares.
NEW PLAN BENEFITS
The Company cannot currently determine the Awards that may be granted under
the 2005 Plan in the future to the executive officers named in this Proxy
Statement, other executive officers, directors (who are also Eligible Employees)
or other persons. The Committee will make such determinations from time to time.
EQUITY COMPENSATION PLAN INFORMATION
Securities available under the Company's equity compensation plans as of
December 31, 2004, are listed under "EXECUTIVE COMPENSATION -- Equity
Compensation Plan Information as of December 31, 2004" earlier in this proxy
statement.
VOTE REQUIRED
The affirmative vote of a majority of the votes represented and voted at
the Meeting (assuming a quorum is present) is required to approve the 2005 Plan.
Any shares not voted at the Meeting (whether as a result of broker non-votes,
abstentions or otherwise) with respect to the 2005 Plan will have no impact on
the vote. Shares of Common Stock represented at the Meeting by executed but
unmarked proxies will be voted FOR the 2005 Plan.
THE BOARD UNANIMOUSLY RECOMMENDS THAT COMPANY SHAREHOLDERS VOTE FOR THE 2005
RESTRICTED STOCK PLAN.
CERTAIN TRANSACTIONS
During 2004, the Company paid Mr. Forbes $66,667 pursuant to a consulting
contract.
19
PRINCIPAL ACCOUNTING FIRM FEES
Ernst & Young LLP, the Company's independent auditors for many years, has
been selected to audit the Company and its subsidiaries for 2005.
Representatives of Ernst & Young LLP will be present at the Meeting to respond
to appropriate questions and to make a statement if they desire to do so. Fees
for professional services provided by the independent registered public
accounting firm in each of the last two fiscal years is as follows:
2004 2003
-------- --------
Audit(1).................................................... $508,900 $306,500
Audit Related(2)............................................ 55,200 6,000
Tax......................................................... 0 0
All Other Fees.............................................. 0 5,800
-------- --------
Total Fees.................................................. $564,100 $318,300
======== ========
---------------
(1) Includes annual financial statement audit, review of the Company's quarterly
report on Form 10-Q and statutory audits required internationally.
(2) Includes primarily internal control consultations in both years.
As part of its duties, the Audit and Compliance Committee pre-approves
services provided by Ernst & Young LLP. In selecting Ernst & Young LLP as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2005, the Audit Committee has determined that the non-audit
services provided by Ernst & Young LLP are compatible with maintaining the
independence of Ernst & Young LLP. No additional non-audit services will be
performed without the Committee's prior approval.
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,
the Company believes that all reports required by Section 16(a) to be filed by
the Company on behalf of 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, 2004. THE FORM 10-K
IS POSTED ON THE COMPANY'S WEB SITE AT WWW.BADGERMETER.COM. THE COMPANY WILL
PROVIDE A COPY OF THIS FORM 10-K WITHOUT EXHIBITS TO EACH PERSON WHO IS A RECORD
OR BENEFICIAL HOLDER OF SHARES OF COMMON STOCK ON THE RECORD DATE FOR THE
MEETING. THE COMPANY WILL PROVIDE A COPY OF THE EXHIBITS WITHOUT CHARGE TO EACH
PERSON WHO IS A RECORD OR BENEFICIAL HOLDER OF SHARES OF COMMON STOCK ON THE
RECORD DATE FOR THE MEETING 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 245036, MILWAUKEE, WISCONSIN 53224-9536.
Pursuant to the rules of the Securities and Exchange Commission, services
that deliver the Company's communications to shareholders that hold their stock
through a bank, broker or other holder of record may deliver to multiple
shareholders sharing the same address a single copy of the Company's annual
report to shareholders and proxy statement. Upon written or oral request, the
Company will promptly deliver a separate copy of the annual report to
shareholders and/or proxy statement to any shareholder at a shared address to
which a single copy of each document was delivered, or a single copy to any
shareholders sharing the same address to whom multiple copies were delivered.
Shareholders may notify the Company of their requests by calling or writing the
Secretary, Badger Meter, Inc., 4545 West Brown Deer Road, P.O. Box 245306,
Milwaukee, WI, 53224-9536; (414) 355-0400.
20
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 at 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
2006 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 16, 2005.
A shareholder who intends to present business, other than a shareholder's
proposal pursuant to Rule 14a-8, at the 2006 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 between January 8, 2006 and February 7, 2006, then the notice will
be considered untimely and the Company will not be required to present such
proposal at the 2006 Annual Meeting. If the Board of Directors chooses to
present such proposal at the 2006 Annual Meeting, then the persons named in
proxies solicited by the Board of Directors for the 2006 Annual Meeting may
exercise discretionary voting power with respect to such proposal.
Ronald H. Dix
Secretary
March 17, 2005
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APPENDIX A
BADGER METER, INC.
2005 RESTRICTED STOCK PLAN
ARTICLE 1.
PURPOSE AND DURATION
SECTION 1.1 Purpose. The Badger Meter, Inc. 2005 Restricted Stock Plan
has two complementary purposes: (a) to promote the success of the Company by
providing incentives to the officers and other key employees of the Company and
its subsidiaries that will link their personal interests to the long-term
financial success of the Company and to growth in value; and (b) to permit the
Company and its subsidiaries to attract, motivate and retain experienced and
knowledgeable employees upon whose judgment, interest, and special efforts the
successful conduct of the Company's operations is largely dependent.
SECTION 1.2 Duration. Subject to the approval of the Company's
shareholders at the Company's 2005 annual meeting of shareholders, the Plan will
become effective on May 1, 2005. The Plan shall continue in effect until the
earliest of: (a) April 30, 2015, (b) the date the Board terminates the Plan
pursuant to Article 9 herein, or (c) the date all Shares reserved for issuance
under the Plan have been issued.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
SECTION 2.1 Definitions. Wherever used in the Plan, the following terms
shall have the meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:
(a) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 under the Exchange Act.
(b) "Award" means a grant of Restricted Shares.
(c) "Beneficial Owner" (or derivatives thereof) shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means: (1) if the Participant is subject to an employment
agreement, severance agreement or similar agreement with the Company or a
subsidiary that contains a definition of "cause", such definition; or (2)
otherwise, any of the following as determined by the Committee: (a)
violation of the provisions of any employment agreement, non-competition
agreement, confidentiality agreement, or similar agreement with the Company
or any of its subsidiaries, or the Company's or any of its subsidiaries'
code of ethics, as then in effect; (b) conduct rising to the level of gross
negligence or willful misconduct in the course of employment with the
Company or any of its subsidiaries; (c) commission of an act of dishonesty
or disloyalty involving the Company or any of its subsidiaries; (d)
violation of any federal, state or local law in connection with the
Participant's employment; or (e) breach of any fiduciary duty to the
Company or any of its subsidiaries.
(f) "Change in Control" means the occurrence of any one of the
following:
(i) any Person (other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under
any employee benefit plan of the Company or any of its subsidiaries, (C)
an underwriter temporarily holding securities pursuant to an offering of
such securities or (D) a corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as
their ownership of stock in the Company ("Excluded Persons") is or
becomes the "Beneficial Owner" (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities
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beneficially owned by such Person any securities acquired directly from
the Company or its Affiliates after January 1, 2005, pursuant to express
authorization by the Board that refers to this exception and not
including securities of the Company subject to proxies held by such
Person, but including securities of the Company subject to exercisable
options held by such Person) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
January 1, 2005, constituted the Board and any new director (other than
a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company, as such terms are used in former Rule 14a-11 of Regulation 14A
under the Exchange Act) whose appointment or election by the Board or
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on January 1, 2005, or whose appointment,
election or nomination for election was previously so approved; or
(iii) the shareholders of the Company approve a merger,
consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the Company
in connection with a merger, consolidation or share exchange of the
Company in connection with a merger, consolidation or share exchange of
the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the voting
securities of the Company outstanding immediately prior to such merger,
consolidation or share exchange continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 50% of the combined
voting power of the voting securities of the Company of such surviving
entity or any parent thereof outstanding immediately after such merger,
consolidation or share exchange, or (B) a merger, consolidation or share
exchange effected to implement a recapitalization of the Company (or
similar transaction) in which no Person (other than an Excluded Person)
is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company
or its Affiliates after January 1, 2005 pursuant to express
authorization by the Board that refers to this exception) representing
20% or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then outstanding
voting securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets (in one transaction or a series of related transactions
within any period of 24 consecutive months), other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity at least 75% of the combined voting power of the
voting securities of which are owned by Persons in substantially the
same proportions as their ownership of the Company immediately prior to
such sale.
(g) "Code" means the Internal Revenue Code of 1986, as interpreted by
rules and regulations issued pursuant thereto, all as amended and in effect
from time to time. Any reference to a specific provision of the Code shall
be deemed to include reference to any successor provision thereto.
(h) "Committee" means the Corporate Governance Committee of the Board,
or such other committee appointed by the Board to administer the Plan
pursuant to Article 3 herein.
(i) "Company" means Badger Meter, Inc., a Wisconsin corporation, and
any successor as provided in Article 12.
(j) "Eligible Employee" means a full-time exempt employee of the
Company or any of its subsidiaries or such other key employees as
determined by the Committee.
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(k) "Exchange Act" means the Securities Exchange Act of 1934, as
interpreted by rules and regulations issued pursuant thereto, all as
amended and in effect from time to time. Any reference to a specific
provision of the Exchange Act shall be deemed to include reference to any
successor provision thereto.
(l) "Fair Market Value" means with respect to any property other than
Shares, such value as is determined by the Committee, and means with
respect Shares, (1) the closing price of the Shares as of the date in
question, or, if no closing price is available on that date, then the
closing price on the immediately preceding business day on which there is a
closing price, if such security is listed or admitted for trading on any
domestic national securities exchange, as officially reported on the
principal securities exchange on which the Shares are listed; (2) if not
reported as described in clause (1), the closing sale price of the Shares
as of the date in question, or, if no closing sale price is available on
that date, then the closing sale price on the immediately preceding
business day on which there is a closing sale price, as reported by The
Nasdaq Stock Market, or any similar system of automated dissemination of
quotations of securities prices then in common use, if so quoted; or (3) if
not reported as described in clause (1) or quoted as described in clause
(2), then the Committee shall determine in good faith and on a reasonable
basis the applicable Fair Market Value, which determination shall be
conclusive.
(m) "Inimical Conduct" means any act or omission that is inimical to
the best interests of the Company or any of its subsidiaries, as determined
by the Committee in its sole discretion, including but not limited to: (1)
violation of the provisions of any employment agreement, non-competition
agreement, confidentiality agreement, or similar agreement with the Company
or any of its subsidiaries, or the Company's or any of its subsidiaries'
code of ethics, as then in effect; (2) taking any steps or doing anything
which would damage or negatively reflect on the reputation of the Company
or any of its subsidiaries; or (3) failure to comply with applicable laws
relating to trade secrets, confidential information or unfair competition.
(n) "Participant" means an Eligible Employee who has been granted an
Award.
(o) "Performance Goals" means any goal(s) the Committee establishes
that relate to one or more of the following with respect to the Company or
any one or more of its subsidiaries or other business units: net sales;
cost of sales; gross income; operating income; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization;
income from continuing operations; net income; basic earnings per share;
diluted earnings per share; cash flow; net cash provided by operating
activities; net cash provided by operating activities less net cash used in
investing activities; ratio of debt to debt plus equity; return on
shareholder equity; return on invested capital; return on average total
capital employed; return on net assets employed before interest and taxes;
operating working capital; average accounts receivable (calculated by
taking the average of accounts receivable at the end of each month);
average inventories (calculated by taking the average of inventories at the
end of each month); and economic value added. As to each Performance Goal,
the relevant measurement of performance shall be computed in accordance
with generally accepted accounting principles, but, unless otherwise
determined by the Committee, will exclude the effects of (1) extraordinary,
unusual and/or non-recurring items of gain or loss; (2) gains or losses on
the disposition of a business; (3) changes in tax or accounting regulations
or laws; or (4) the effect of a merger or acquisition, that in each case
the Company identifies in its audited financial statements, including
footnotes, or the Management's Discussion and Analysis section of the
Company's annual report on Form 10-K. In the case of Awards that the
Committee determines will not be considered "performance-based
compensation" under Code Section 162(m), the Committee may establish other
Performance Goals not listed in the Plan.
(p) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(q) "Plan" means this Badger Meter, Inc. 2005 Restricted Stock Plan,
as from time to time amended and in effect.
(r) "Restricted Shares" means Shares that are subject to a Restriction
Period.
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(s) "Restriction Period" means the period during which Shares issued
under the Plan may not be transferred and are subject to a substantial risk
of forfeiture.
(t) "Retirement" means a voluntary termination of employment from the
Company and its subsidiaries (other than for Cause) in accordance with a
Company retirement plan or policy.
(u) "Securities Act" means the Securities Act of 1933, as interpreted
by rules and regulations issued pursuant thereto, all as amended and in
effect from time to time. Any reference to a specific provision of the
Securities Act shall be deemed to include reference to any successor
provision thereto.
(v) "Share" means a share of the common stock, $1 par value, of the
Company, or such other securities specified in Section 4.4.
(w) "Total and Permanent Disability" means the Participant's inability
to perform the material duties of his occupation as a result of a
medically-determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
period of at least 12 months, as determined by the Committee. The
Participant will be required to submit such medical evidence or to undergo
a medical examination by a doctor selected by the Committee as the
Committee determines is necessary in order to make a determination
hereunder.
SECTION 2.2 Construction. Wherever any words are used in the masculine,
they shall be construed as though they were used in the feminine in all cases
where they would so apply; and wherever any words are use in the singular or the
plural, they shall be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply. Titles of
articles and sections are for general information only, and the Plan is not to
be construed by reference to such items.
SECTION 2.3 Severability. In the event any provision of the Plan is held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the said illegal or invalid provision had not been included.
ARTICLE 3.
ADMINISTRATION
SECTION 3.1 The Committee. The Plan shall be administered by the
Committee. If at any time the Committee shall cease to exist, then the Plan
shall be administered by the Board or another committee appointed by the Board,
and each reference to the Committee herein shall be deemed to refer to the Board
or such committee appointed by the Board.
SECTION 3.2 Authority of the Committee. In addition to the authority
specifically granted to the Committee in the Plan, and subject to the provisions
of the Plan, the Committee shall have full power and discretionary authority to:
(a) select Participants, grant Awards, and determine the terms and conditions of
each such Award, including but not limited to the Restriction Period and the
number of Shares to which the Award will relate; (b) administer the Plan,
including but not limited to the power and authority to construe and interpret
the Plan and any award agreement; (c) correct errors, supply omissions or
reconcile inconsistencies in the terms of the Plan and any award agreement; (d)
establish, amend or waive rules and regulations, and appoint such agents, as it
deems appropriate for the Plan's administration; and (e) make any other
determinations, including factual determinations, and take any other action as
it determines is necessary or desirable for the Plan's administration.
Notwithstanding the foregoing, the Committee shall have no authority to act
to adversely affect the rights or benefits granted under any outstanding Award
without the consent of the person holding such Award (other than as specifically
provided herein).
SECTION 3.3 Decision Binding. The Committee's determination and decisions
made pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all persons
who have an interest in the Plan or an Award, and such determinations and
decisions shall not be reviewable.
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SECTION 3.4 Procedures of the Committee. The Committee's determinations
must be made by not less than a majority of its members present at the meeting
(in person or otherwise) at which a quorum is present, or by written majority
consent, which sets forth the action, is signed by each member of the Committee
and filed with the minutes for proceedings of the Committee. A majority of the
entire Committee shall constitute a quorum for the transaction of business.
Service on the Committee shall constitute service as a director of the Company
so that the Committee members shall be entitled to indemnification, limitation
of liability and reimbursement of expenses with respect to their Committee
services to the same extent that they are entitled under the Company's By-laws
and Wisconsin law for their services as directors of the Company.
SECTION 3.5 Award Agreements. The Committee shall evidence the grant of
each Award by an award agreement which shall be signed by an authorized officer
of the Company and by the Participant, and shall contain such terms and
conditions as may be approved by the Committee, subject to the terms of the
Plan. Terms and conditions of such Awards need not be the same in all cases.
ARTICLE 4.
SHARES SUBJECT TO THE PLAN; ADJUSTMENTS
SECTION 4.1 Number of Shares. Subject to adjustment as provided in
Section 4.4, the aggregate number of Shares that may be issued under the Plan
shall not exceed Fifty Thousand (50,000) Shares.
SECTION 4.2 Lapsed Awards. If any Award is forfeited or terminated for
any reason, the Restricted Shares subject to such Award that are forfeited shall
be available for the grant of a new Award under the Plan.
SECTION 4.3 Individual Limit. Subject to adjustment as provided in
Section 4.4, no Participant may be granted Awards during the term of the Plan of
more than 20,000 Restricted Shares.
SECTION 4.4 Adjustments in Number of Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Shares, the Committee may adjust: (a) the
number and class of Shares which may be delivered under the Plan; (b) the
individual Share limit described in Section 4.3; and (c) the number and class of
Shares subject to outstanding Awards, as it determines to be appropriate and
equitable to prevent dilution or enlargement of the rights intended to be
granted hereunder and under any Award; provided, however, that the number of
Shares subject to any individual Award shall be rounded down to the nearest
whole number.
ARTICLE 5.
PARTICIPATION
Subject to the provisions of the Plan, the Committee shall have the
authority to select the Eligible Employees to receive Awards. No Eligible
Employee shall have any right to be granted an Award, even if previously granted
an Award.
ARTICLE 6.
TERMS AND CONDITIONS OF AWARDS
SECTION 6.1 Grant of Award. Subject to the terms and provisions of the
Plan, the Committee shall have the authority to determine the number of Shares
to which an Award shall relate, the term of the Restriction Period and
conditions for lapse thereof, including but not limited to the attainment of one
or more Performance Goals, and any other terms and conditions of an Award.
SECTION 6.2 Terms and Conditions of Awards.
(a) Period of Restriction. Unless the Committee determines otherwise,
Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated by a Participant prior to the lapse
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of the Restriction Period, other than by will or the laws of descent and
distribution. The Restricted Shares shall be subject to a substantial risk of
forfeiture until the termination of the applicable Restriction Period as set
forth in the Participant's award agreement or as provided herein. During the
Restriction Period, the Company shall have the right to hold the Restricted
Shares. During the Restriction Period, Restricted Shares may not participate in
the Badger Meter, Inc. Automatic Dividend Reinvestment and Stock Purchase Plan.
(b) Certificate Legend. At the Committee's direction, each certificate
representing Restricted Shares may bear the following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE BADGER METER,
INC. 2005 RESTRICTED STOCK PLAN, IN THE RULES AND ADMINISTRATIVE PROCEDURES
ADOPTED PURSUANT TO SUCH PLAN AND/OR IN A RESTRICTED STOCK AGREEMENT, DATED
. A COPY OF THE 2005 RESTRICTED STOCK PLAN, SUCH RULES AND
ADMINISTRATIVE PROCEDURES AND SUCH RESTRICTED STOCK AGREEMENT MAY BE
OBTAINED FROM THE SECRETARY OF BADGER METER, INC."
(c) Removal of Restrictions. Except as otherwise provided in this Article
6, Restricted Shares shall become vested in, and freely transferable by, a
Participant after the last day of the Restriction Period. Once the Restricted
Shares are released from the restrictions, a Participant shall be entitled to
have the legend required by subsection (b) removed from his or her stock
certificate representing such shares.
(d) Voting Rights. Unless otherwise determined by the Committee, during
the Restriction Period Participants holding Restricted Shares may exercise full
voting rights with respect to those Shares.
(e) Dividends and Other Distributions. Any dividends or other
distributions paid or delivered with respect to Restricted Shares will be
subject to the same terms and conditions (including risk of forfeiture) as the
Restricted Shares to which they relate, and payment or delivery thereof will be
deferred accordingly; provided, however, that at any time and from time to time
the Committee may, in its sole discretion, provide for the earlier payout of
deferred and/or current dividends and distributions. No such deferred amount
shall bear interest.
SECTION 6.3 Termination of Employment. Except as otherwise provided by
the Committee in a Participant's award agreement, upon a Participant's
termination of employment with the Company and its subsidiaries, the following
rules shall apply:
(a) Retirement. If the Participant terminates employment due to
Retirement, any remaining Restriction Period shall continue as if the
Participant continued in active employment. Notwithstanding the foregoing,
if the Committee determines that the Participant has engaged in Inimical
Conduct after his or her Retirement, any Restricted Shares still subject to
a Restriction Period shall automatically be forfeited as of the date of the
Committee's determination.
(b) Death or Disability. If the Participant's employment terminates
because of death or Total and Permanent Disability at a time when the
Participant could not have been terminated for Cause, or if the Participant
dies after Retirement while holding an Award that is subject to a
Restriction Period, any remaining Restriction Period shall automatically
lapse as of the date of such termination of employment or death, as
applicable.
(c) Termination for Other Reasons. If the Participant's employment
terminates for any reason not described above, then any Restricted Shares
still subject to a Restriction Period as of the date of such termination
shall automatically be forfeited and returned to the Company; provided,
however, that in the event of an involuntary termination of the employment
of a Participant by the Company or any of its subsidiaries other than for
Cause, the Committee may waive the automatic forfeiture of any or all such
Shares and may add such new restrictions to such Restricted Shares as it,
in its sole and absolute discretion, deems appropriate.
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(d) Suspension. The Committee may suspend payment or delivery of
Shares (without liability for interest thereon) pending its determination
of whether a Participant was or should have been terminated for Cause or
whether a Participant has engaged in Inimical Conduct.
SECTION 6.4 Other Restrictions. The Committee may impose such other
restrictions on any Awards granted under the Plan (including after the
Restriction Period lapses) as it may deem advisable including, without
limitation, restrictions under applicable Federal or state securities laws, and
the Company may legend certificates to give appropriate notice of such
restrictions.
ARTICLE 7.
RIGHTS OF PARTICIPANTS
SECTION 7.1 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Company or any of its subsidiaries to terminate any
Participant's employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company or any of its subsidiaries.
SECTION 7.2 No Implied Rights; Rights on Termination of Service. Neither
the establishment of the Plan nor any amendment thereof shall be construed as
giving any Participant or any other person any legal or equitable right unless
such right shall be specifically provided for in the Plan or conferred by
specific action of the Committee in accordance with the terms and provisions of
the Plan.
SECTION 7.3 No Funding. Except as provided in Section 6.2(e),
Participants will only receive Shares upon the expiration of the Restriction
Period for Awards. Neither the Participant nor any other person shall acquire,
by reason of the Plan or any Award, any right in or title to any assets, funds
or property of the Company and its subsidiaries whatsoever including, without
limiting the generality of the foregoing, any specific funds, assets, or other
property which the Company or its subsidiaries may, in their sole discretion,
set aside in anticipation of a liability hereunder. Any amounts which may become
payable hereunder shall be paid from the general assets of the Company and its
subsidiaries, as applicable. The Participant shall have only a contractual right
to the amounts, if any, payable hereunder unsecured by any asset of the Company
or its subsidiaries. Nothing contained in the Plan constitutes a guarantee by
the Company or its subsidiaries that the assets of the Company or its
subsidiaries shall be sufficient to pay to any person any amount which may
become payable hereunder.
Section 7.4 Other Restrictions. As a condition to the issuance of any
Shares under the Plan, the Committee may require a Participant to enter into a
restrictive stock transfer agreement or other shareholder's agreement with the
Company.
ARTICLE 8.
CHANGE IN CONTROL
The Restriction Period for each outstanding Award shall automatically lapse
upon a Change in Control.
ARTICLE 9.
AMENDMENT, MODIFICATION, AND TERMINATION
Section 9.1 Amendment, Modification, and Termination of the Plan. The
Board may amend or terminate the Plan at any time, subject to the following
limitations: (a) shareholders must approve any amendment of the Plan if the
Committee determines such approval is required by: (i) the Exchange Act, (ii)
the Code, (iii) the listing requirements of the American Stock Exchange or any
principal securities exchange or market on which the Shares are then traded, or
(iv) any other applicable law. Without the written consent of the affected
Participant or except as expressly provided in the Plan, no termination,
amendment or modification of the Plan shall adversely affect any Award
theretofore granted under the Plan.
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Section 9.2 Amendment of Award Agreements. The Committee may at any time
amend any outstanding award agreement; provided, however, that any amendment
that decreases or impairs the rights of a Participant under such agreement shall
not be effective unless consented to by the Participant in writing, except that
Participant consent shall not be required if an Award is amended, adjusted or
cancelled under Section 4.4 .
Section 9.3 Survival Following Termination. Notwithstanding the
foregoing, to the extent provided in the Plan, the authority of (a) the
Committee to amend, alter, adjust, suspend, discontinue or terminate any Award,
waive any conditions or restrictions with respect to any Award, and otherwise
administer the Plan and any Award and (b) the Board to amend the Plan, shall
continue beyond the date of the Plan's termination. Termination of the Plan
shall not affect the rights of Participants with respect to Awards previously
granted to them, and all unexpired Awards shall continue in force and effect
after termination of the Plan except as they may lapse or be terminated by their
own terms and conditions.
Section 9.4 Shareholder Re-Approval. If determined by the Company, in
order to continue to grant performance-based Awards under Code Section 162(m),
the material terms of the Plan shall be re-approved by the Company's
shareholders no later than the first annual shareholders' meeting (or special
meeting in lieu of such meeting) that occurs in 2010.
ARTICLE 10.
WITHHOLDING
Section 10.1 Tax Withholding. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company,
an applicable amount sufficient to satisfy foreign, Federal, state and local
taxes (including the Participant's F.I.C.A. obligation) required by law to be
withheld with respect to the issuance of Shares under the Plan or the lapse of
the Restriction Period. The Company shall also have the right to withhold Shares
as to which the Restriction Period has lapsed and which have a Fair Market Value
equal to a Participant's minimum tax withholding liability, to satisfy any
withholding obligations. The value of the Shares to be withheld is to be based
on the Fair Market Value of the Shares on the date that the amount of tax to be
withheld is determined.
Section 10.2 Stock Delivery or Withholding. Participants may elect,
subject to the approval of the Committee and such rules as it shall prescribe,
to satisfy the withholding requirement, in whole or in part, by tendering to the
Company previously-acquired Shares (or by having the Company withhold Shares as
to which the Restriction Period has lapsed) in an amount having a Fair Market
Value equal to the amount required to be withheld to satisfy the tax withholding
obligations described in Section 10.1. Such election must be made on or before
the date the amount of tax to be withheld is determined. Once made, the election
is irrevocable. The value of the Shares to be tendered (or withheld) is to be
based on the Fair Market Value of the Shares on the date that the amount of tax
to be withheld is determined.
ARTICLE 11.
LEGENDS; PAYMENT OF EXPENSES
Section 11.1 Legends. The Company may endorse such legend or legends upon
the certificates for Shares issued under the Plan, including but not limited to
the legends referenced in Section 6.2(b) and Section 6.4, and may issue such
"stop transfer" instructions to its transfer agent in respect of such Shares as
it determines to be necessary, appropriate or convenient to (a) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, applicable state securities laws or other legal
requirements, or (b) implement the provisions of the Plan or any agreement
between the Company and a Participant with respect to such Shares.
Section 11.2 Payment of Expenses. The Company shall pay for all issuance
taxes with respect to the issuance of Shares under the Plan, as well as all fees
and expenses incurred by the Company in connection with such issuance.
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ARTICLE 12.
SUCCESSORS
All obligations of the Company under the Plan respecting Awards shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the business and/or assets of the
Company. The Plan shall be binding upon and inure to the benefit of the
Participants and their heirs, executors, administrators or legal
representatives.
ARTICLE 13.
REQUIREMENTS OF LAW
Section 13.1 Requirements of Law. The granting of Awards and the issuance
of Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
Section 13.2 Governing Law. The Plan and the rights and obligations
hereunder shall be governed by and construed in accordance with the internal
laws of the State of Wisconsin (excluding any choice of law rules that may
direct the application of the laws of another jurisdiction).
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PROXY
2005 ANNUAL MEETING OF SHAREHOLDERS
BADGER METER, INC.
The undersigned does hereby constitute and appoint Richard A. Meeusen,
Ronald H. Dix and William R. Bergum, or any of them, as proxies for the
undersigned at the Annual Meeting of Shareholders of Badger Meter, Inc. to be
held on Friday, April 29, 2005, at Badger Meter, Inc., 4545 W. 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 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 when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED AND FOR THE APPROVAL OF THE
2005 RESTRICTED STOCK PLAN. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
COMPLETE AND SIGN BELOW. DETACH AND RETURN USING THE ENVELOPE PROVIDED.
BADGER METER, INC. 2005 ANNUAL MEETING
1. ELECTION OF DIRECTORS:
THREE-YEAR TERM: 1-RONALD H. DIX 2-THOMAS J. FISCHER 3-RICHARD A. MEEUSEN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE, WRITE THE NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.)
2. Approval of the Badger Meter, Inc. 2005 Restricted Stock Plan.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments or
postponements thereof.
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Date ________________, 2005
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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.