-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HpYqK4tDnsv5dS+6jv3oR/QUgT2Dp6ychsoxCIo32osc8zzcXdX549KeCf6wGoh2 eXm+qmtLl026oXWgwlJtbA== 0000950134-02-009505.txt : 20020812 0000950134-02-009505.hdr.sgml : 20020812 20020812160629 ACCESSION NUMBER: 0000950134-02-009505 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BADGER METER INC CENTRAL INDEX KEY: 0000009092 STANDARD INDUSTRIAL CLASSIFICATION: TOTALIZING FLUID METERS & COUNTING DEVICES [3824] IRS NUMBER: 390143280 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06706 FILM NUMBER: 02726965 BUSINESS ADDRESS: STREET 1: 4545 WEST BROWN DEER ROAD CITY: MILWAUKEE STATE: WI ZIP: 53223 BUSINESS PHONE: 4143715702 MAIL ADDRESS: STREET 1: 4545 W BROWN DEER RD CITY: MILWAUKEE STATE: WI ZIP: 53223 FORMER COMPANY: FORMER CONFORMED NAME: BADGER METER MANUFACTURING CO DATE OF NAME CHANGE: 19710729 10-Q 1 c71084e10vq.txt FORM 10-Q FOR QUARTER ENDING JUNE 30, 2002 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number 1-6706 ------ BADGER METER, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0143280 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4545 West Brown Deer Road, Milwaukee, Wisconsin 53223 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 355-0400 -------------- None ------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 5 , 2002 - ----------------------------- ------------------------------ Common Stock, $1.00 par value 3,193,068 BADGER METER, INC. INDEX
Page No. -------- Part I. Financial Information: Item 1 Financial Statements: Consolidated Condensed Balance Sheets - - June 30, 2002 and December 31, 2001 3 Consolidated Condensed Statements of Operations - - Three and Six Months Ended June 30, 2002 and 2001 4 Consolidated Condensed Statements of Cash Flows - - Six Months Ended June 30, 2002 and 2001 5 Notes to Consolidated Condensed Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3 Quantitative and Qualitative Disclosures about Market Risk 10 Item 4 Submission of Matters to a Vote of Security Holders 11 Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 11 Part II. Other Information: Item 6(a) Exhibits 12 Item 6(b) Reports on Form 8-K 12 Exhibit Index 14
-2- Part I - Financial Information BADGER METER, INC. Item 1 Financial Statements CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
Assets June 30, December 31, 2002 2001 ------- ----------- (Unaudited) Current assets: Cash and cash equivalents $ 2,924 $ 3,410 Receivables 27,742 18,700 Inventories: Finished goods 9,134 5,260 Work in process 6,422 8,190 Raw materials 9,057 8,037 ----------- ----------- Total inventories 24,613 21,487 Prepaid expenses 968 767 Deferred income tax 2,457 2,588 ----------- ----------- Total current assets 58,704 46,952 Property, plant and equipment, at cost 96,656 91,443 Less accumulated depreciation (52,396) (50,319) ----------- ----------- Net property, plant and equipment 44,260 41,124 Intangible assets, at cost less accumulated amortization 1,153 227 Prepaid pension 8,364 8,965 Other assets 3,566 3,561 Goodwill 5,143 546 ----------- ----------- Total assets $ 121,190 $ 101,375 =========== =========== Liabilities and Shareholders' Equity Current liabilities: Short-term debt $ 8,209 $ 5,129 Current portion of long-term debt 4,996 3,135 Payables 15,737 8,887 Accrued compensation and employee benefits 5,152 2,992 Other accrued liabilities 3,550 3,453 Income and other taxes 2,179 186 ----------- ----------- Total current liabilities 39,823 23,782 Deferred income tax 2,539 2,539 Accrued non-pension postretirement benefits 5,733 6,093 Other accrued employee benefits 5,363 5,461 Long-term debt 21,996 20,498 Shareholders' equity: Common Stock 4,727 4,677 Capital in excess of par value 17,103 16,168 Reinvested earnings 53,084 50,736 Less: Employee benefit stock (1,535) (1,900) Treasury stock, at cost (27,643) (26,679) ----------- ----------- Total shareholders' equity 45,736 43,002 ----------- ----------- Total liabilities and shareholders' equity $ 121,190 $ 101,375 =========== ===========
See accompanying notes to consolidated condensed financial statements. -3- BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------- ------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 43,586 $ 33,949 $ 81,040 $ 69,403 Cost of sales 28,768 23,007 53,462 46,434 ----------- ----------- ----------- ----------- Gross margin 14,818 10,942 27,578 22,969 Selling, engineering and administration 10,838 9,890 20,782 20,096 ----------- ----------- ----------- ----------- Operating earnings 3,980 1,052 6,796 2,873 Interest expense 468 394 840 850 Other expense (income), net (57) (171) (88) (221) ----------- ------------ ----------- ------------ Earnings before income taxes 3,569 829 6,044 2,244 Provision for income taxes 1,249 300 2,117 781 ----------- ----------- ----------- ----------- Net earnings $ 2,320 $ 529 $ 3,927 $ 1,463 =========== =========== =========== =========== Per share amounts: * Earnings per share: Basic $ .73 $ .17 $ 1.24 $ .46 =========== =========== =========== =========== Diluted $ .70 $ .16 $ 1.20 $ .44 =========== =========== =========== =========== Dividends declared: $ .25 $ .25 $ .50 $ .50 =========== =========== =========== =========== Shares used in computation of: Basic 3,156,771 3,170,236 3,155,734 3,171,144 Impact of dilutive stock options 143,564 139,101 128,466 128,180 ----------- ----------- ----------- ----------- Diluted 3,300,335 3,309,337 3,284,200 3,299,324 =========== =========== =========== ===========
*Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share does not necessarily equal the total for the year. See accompanying notes to consolidated condensed financial statements. -4- BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Six Months Ended June 30, -------- 2002 2001 ---- ---- Operating activities: Net earnings $ 3,927 $ 1,463 Adjustments to reconcile net earnings to net cash provided by (used for) operations: Depreciation 3,742 3,276 Amortization 37 90 Tax benefit on stock options 118 248 Noncurrent employee benefits 508 738 Changes in: Receivables (4,140) (3,323) Inventory 61 (1,982) Current liabilities other than short-term debt 6,800 4,978 Prepaid expenses and other (181) (480) ------------ ----------- Total adjustments 6,945 3,545 ----------- ----------- Net cash provided by (used for) operations 10,872 5,008 ----------- ----------- Investing activities: Property, plant and equipment (2,582) (2,772) Acquisitions, net of cash acquired (8,277) 0 Other - net (277) 10 ------------ ----------- Net cash provided by (used for) investing activities (11,136) (2,762) ------------ ----------- Financing activities: Net increase (decrease) in short-term debt 3,080 7,029 Repayments of long-term debt (1,626) (9,192) Dividends (1,579) (1,573) Stock options and ESSOP 867 434 Treasury stock transactions (964) (1,397) ------------ ----------- Net cash provided by (used for) financing activities (222) (4,699) ------------ ----------- Increase (decrease) in cash (486) (2,453) Beginning of year 3,410 4,237 ----------- ----------- End of period $ 2,924 $ 1,784 =========== ===========
See accompanying notes to consolidated condensed financial statements. -5- BADGER METER, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter, Inc. (the "Company") contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated condensed financial position at June 30, 2002 and the results of operations for the three and six-month periods ended June 30, 2002 and 2001 and the cash flows for the six-month periods ended June 30, 2002 and 2001. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2001 data to conform to the 2002 presentation. 2. The consolidated condensed balance sheet at December 31, 2001, was derived from amounts included in the Annual Report to Shareholders, which was incorporated by reference in the Company's annual report on Form 10-K for the year ended December 31, 2001. Refer to the footnotes in those reports for a description of the accounting policies, which have been continued without change, and additional details of the Company's financial condition. The details in those notes have not changed except as discussed below and as a result of normal transactions in the interim. 3. In January 2002, the Company borrowed $20 million of long-term, unsecured debt from a local bank. The purpose of the loan was to replace short-term borrowings. As a result of obtaining the loan, $20 million of commercial paper was reclassified to long-term debt for financial statement presentation at December 31, 2001. The debt bears interest at 6.73% and is due in quarterly installments through January 2007. 4. Other expense (income), net includes foreign currency gains and losses, which are recognized as incurred. The Company's functional currency for its significant foreign subsidiaries is the U.S. dollar. 5. On May 1, 2002, the Company acquired 100% of the outstanding common stock of Data Industrial Corporation (DIC) of Mattapoisett, Massachusetts, for $5.1 million net of cash acquired. This amount included direct acquisition costs. DIC manufactures and markets a line of insertion flow meters that are sold to commercial and industrial markets. The Company has not finalized the allocation of the purchase price as of June 30, 2002. An estimation of this allocation was prepared and is included as part of these financial statements. The purchase price has been allocated as follows: $722,000 to receivables, $927,000 to inventory, $800,000 to property, plant and equipment, $250,000 to intangibles, $2,911,000 to goodwill, $492,000 to accounts payable, and other assets and liabilities. On June 1, 2002, the Company acquired 100% of the outstanding common stock of MecaPlus Equipements SA (MPE) of Nancy, France, for $3.2 million net of cash acquired. This amount included direct acquisition costs. MPE purchases lubrication meters, oil tanks, hoses, reels and other equipment for assembly into lubrication systems for use in measuring and dispensing automotive fluids such as oil, grease and transmission fluid. The acquisition of MPE brings the Company closer to its European automotive customers by offering a full line of lubrication systems in addition to the current metering products. The Company has not finalized the allocation of the purchase price of MPE as of June 30, 2002. An estimation of this allocation was prepared and is included as part of these financial statements. The purchase price has been allocated as follows: $4,180,000 to receivables, $2,260,000 to inventory, $3,497,000 to property, plant and equipment, $391,000 to intangibles, $1,686,000 to goodwill, $3,531,000 to accounts payable, $4,984,000 of assumed debt, and other assets and liabilities. The acquisitions of DIC and MPE were accounted for under the purchase method and the results of both have been included in the Company's consolidated results from the date of acquisition. Both acquisitions were funded through a combination of internally generated funds and commercial paper. These acquisitions are part of the Company's strategy to broaden its line of meters for commercial -6- and niche industrial markets. To date, the net results of the acquisitions have been minimally accretive. The following preliminary, unaudited proforma information combines historical results, as if DIC and MPE had been owned by the Company for the periods presented.
Thousands, except per share amounts ------------------------------------------------------------------------------------------------ Three Months Ended Six Months Ended June 30, June 30, ------- ------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 46,710 $ 39,760 $ 89,276 $ 80,511 Net earnings $ 2,288 $ 691 $ 3,923 $ 1,701 Diluted earnings per share $ .69 $ .21 $ 1.19 $ .52
The proforma results include amortization of the intangibles mentioned above and interest expense on debt incurred to finance the purchases. The proforma results are not necessarily indicative of what would have occurred if the acquisitions had been completed as of the beginning of each fiscal period presented, nor are they necessarily indicative of future consolidated results. 6. In the ordinary course of business, the Company enters into various material purchase agreements with its vendors, some of which contain minimum purchase quantity commitments extending beyond one year. Future purchase commitments are not expected to exceed normal usage requirements. -7- Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition In the second quarter of 2002, the Company completed two acquisitions, Data Industrial Corporation (DIC) and MecaPlus Equipements (MPE). These acquisitions were accounted for under the purchase accounting method, and as a result, some of the variances shown since December 31, 2001, were attributable to the assets acquired and liabilities assumed in the acquisitions. The acquisitions are further discussed in footnote 5 of the Notes to Consolidated Financial Statements in this Form 10-Q. Cash at June 30, 2002, declined nearly $0.5 million. This is the net result of higher cash flows associated with improved results of operations, the timing of accounts payable payments, and the utilization of short-term debt and cash for the acquisitions noted above. Receivables at June 30, 2002, increased $9.0 million, of which approximately $5.0 million was associated with receivables from the acquisitions. The remainder of the increase was due to the increased sales in 2002 compared to 2001. Nearly all of the increase associated with the inventory balances was due to the acquisitions. Without the acquisitions, inventory levels were very comparable to those as of December 31, 2001. Prepaid expenses have increased since December 31, 2001, due to the timing of the annual insurance payments. Property, plant and equipment and accumulated depreciation have both increased since December 31, 2001, due principally to assets acquired in the acquisitions referenced above, as well as normal impacts of capital expenditures and depreciation expense. The increase in patents was due principally to assets acquired in the acquisitions. Goodwill has increased nearly $4.6 million. This was related directly to the acquisitions of the above-referenced companies. As mentioned in footnote 5, the Company has not finalized the allocation of the purchase price of either acquisition as of June 30, 2002. Revisions to the purchase price allocations are not expected to be material. Accounts payable has increased since December 31, 2001, due to the timing of purchases and payment processing. In addition, $4.0 million represents accounts payable from the acquisitions. Compensation and employee benefits increased $2.2 million, of which $233,000 was associated with the acquisitions. The remainder was due to the accrual of anticipated incentives. Income and other taxes have increased nearly $2 million since year-end due to the timing of estimated tax payments. Common stock and capital in excess of par value both increased at June 30, 2002, due to new shares issued in connection with stock options exercised and ESSOP purchases. Treasury stock increased due to shares repurchased during the period. Employee benefits stock decreased $365,000 due to the regular repayment of the ESSOP debt and the related release of shares. As of June 30, 2002, the Company had approximately $35.5 million of short-term credit facilities with domestic and foreign banks of which $8.2 million was in use. The Company believes that the present lines of credit are adequate to meet operating requirements and future capital needs. The Company also believes it would have no difficulty securing additional term debt. Results of Operations Net sales for the second quarter of 2002 of $43,586,000 reflected a 28.4% increase compared to the second quarter of 2001. Net sales for the first six months of 2002 were $81,040,000 compared to $69,403,000, a 16.8% increase. The second quarter results include $2.5 million of sales associated with the acquired companies, which is also reflected in the six-month results. In addition, the six-month results for 2001 include approximately $1.4 million of sales from product lines that were discontinued. The balance of the sales increases for both the second quarter and first six months of 2002 was the result of stronger sales of residential and commercial water meter products offset somewhat by lower sales of automotive fluid meters, small precision valves and industrial products. The increase in residential water meter sales was due to higher volumes in both local manual-read water meters and automated meter reading technologies. Sales were also affected by modest price increases in certain automated meter reading technologies and in local bronze meters. -8- Sales of automotive fluid meters, small precision valves and other industrial products continued to be affected by the economic recession. Many of these products are sold to customers in the construction, manufacturing, and oil and gas industries, whose markets remain sluggish. Gross margins improved for the second quarter of 2002 to 34.0% compared with 32.2% for the second quarter of 2001. For the first six months of 2002, margins were 34% versus 33.1% for the first six months last year. Increases for both periods were the net result of increased water meter volumes and modest price increases to customers, offset by product cost increases and lower volumes and prices for automotive fluid meters, small precision valves and industrial products. Selling, engineering and administration costs increased 9.6% for the second quarter ended June 30, 2002, and 3.4% for the six months ended June 30, 2002, compared to the same periods in 2001. The increases for both periods were due principally to the effects of the acquisitions discussed above. Efforts begun in 2001 to reduce costs have helped offset inflation, wage increases and incentive accruals. Interest expense increased for the second quarter of 2002 over the same period in 2001 due to the effects of the acquisitions. Interest for the six months ended June 30, 2002, was less than the six months ended June 30, 2001, due to lower interest rates and less overall pre-acquisition debt. As a result of the above, earnings for the second quarter of 2002 were $2,320,000, an increase over the second quarter 2001 earnings of $529,000. On a diluted earnings per share basis, this equates to $0.70 per share for the second quarter of 2002 compared to $0.16 for the same period in 2001. Earnings for the six-month period ended June 30, 2002, were $3,927,000, compared to $1,463,000 for the same period in 2001. On a diluted earnings per share basis, earnings were $1.20 for the first six months of 2002 compared to $0.44 for the same period in 2001. Other Matters The Company is subject to contingencies relative to environmental laws and regulations. Currently, the Company is in the process of resolving an issue relative to a landfill site. The Company is also a defendant in three multi-party asbestos suits as a result of its membership in certain trade organizations. The cases are pending in state court in Mississippi. The Company does not believe the ultimate resolution of these claims will have a material adverse effect on the Company's financial position or results of operations. Provision has been made for all known settlement costs. No other risks or uncertainties were identified that could have a material impact on operations and no long-lived assets have become permanently impaired in value. -9- Item 3 Quantitative and Qualitative Disclosures about Market Risk The Company's quantitative and qualitative disclosures about market risk are incorporated by reference from Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, and have not materially changed since that report was filed. Forward Looking Statements Certain statements contained in this document, as well as other information provided from time to time by the Company or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. The words "anticipate," "believe," "estimate," "expect," "think," "should" and "objective" or similar expressions are intended to identify forward looking statements. The forward looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things: - the success or failure of new product offerings - the actions and financial condition of competitors and alliance partners - changes in competitive pricing and bids in the marketplace - changes in domestic conditions, including housing starts - changes in foreign economic conditions, including currency fluctuations - changes in laws and regulations - changes in customer demand and fluctuations in the prices of and availability of purchased raw materials and parts. Some or all of these factors are beyond the Company's control. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements and are cautioned not to place undue reliance on such forward looking statements. The forward looking statements made herein are made only as of the date of this document and the Company undertakes no obligation to publicly update such forward looking statements to reflect subsequent events or circumstances. -10- Part II - Other Information Item 4 Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held April 19, 2002. (b) 1. The following table represents the aggregate votes related to the election of directors:
Votes Votes NAME FOR WITHHELD Not Voted ---- --- -------- --------- DIRECTORS ELECTED TO THREE-YEAR TERMS EXPIRING AT 2005 ANNUAL MEETING James L. Forbes 2,861,166 25,023 304,408 Richard A. Meeusen 2,866,069 20,120 304,408
2. DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 2004 ANNUAL MEETING Kenneth P. Manning John J. Stollenwerk 3. DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 2003 ANNUAL MEETING Ulice Payne, Jr. Andrew J. Policano Steven J. Smith (c) Proxies were solicited for the adoption of the Badger Meter, Inc. 2002 Director Stock Grant Plan. There were no solicitations in opposition to the proposed adoption of the Plan, and the Plan was adopted with 94.7% votes in favor of its adoption. The following table represents the aggregate votes related to the adoption of the 2002 Director Stock Grant Plan:
Votes Votes Votes FOR AGAINST ABSTAIN --- ------- ------- 2,733,846 123,026 29,317
(d) Not applicable. Item 5 Market for Registrant's Common Equity and Related Stockholder Matters A shareholder wishing to include a proposal pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), in the proxy statement for the 2003 Annual Meeting of Shareholders must forward the proposal to the company by November 26, 2002. In addition, a shareholder who otherwise intends to present business at the 2003 Annual Meeting (including nominating persons for election as directors) must comply with the requirements set forth in the Company's Restated By-laws. Among other things, to bring business before an annual meeting, a shareholder must give written notice thereof, complying with the Restated By-laws, to the Secretary of the Company not less than 60 days and not more than 90 days prior to the second Saturday in the month of April (subject to certain exceptions if the annual meeting is advanced or delayed a certain number of days). Accordingly, if the Company does not receive notice of a shareholder proposal submitted otherwise than pursuant to Rule 14a-8 prior to February 11, 2003, then the notice will be considered untimely and the Company will not be required to present such proposal at the 2003 Annual Meeting. If the Board of Directors chooses to present such proposal at the 2003 Annual Meeting, then the persons named in the proxy solicited by the Board of Directors for the 2003 Annual Meeting may exercise discretionary voting power with respect to such proposal. -11- Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: ( 3.1) (ii) Restated By-laws as amended on April 19, 2002 (10.0) Material Contracts (99.0) Additional Exhibits (99.1) Written Statement of the Chief Executive Officer (99.2) Written Statement of the Chief Financial Officer (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended June 30, 2002. -12- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BADGER METER, INC. Dated: August 9, 2002 By /S/ Richard E. Johnson ----------------------- Richard E. Johnson Vice President -- Finance, Treasurer and Chief Financial Officer By /S/ Beverly L.P. Smiley ------------------------ Beverly L.P. Smiley Vice President -- Corporate Controller -13-
EXHIBIT INDEX Page Number (3.0) (ii) Restated By-laws as amended April 19, 2002 15 (10.0) Material Contracts 31 (99.0) Additional Exhibits 33 (99.1) Written Statement of the Chief Executive Officer 42 (99.2) Written Statement of the Chief Financial Officer 43
-14- EX-3.(II) 3 c71084exv3wxiiy.txt RESTATED BY-LAWS AS AMENDED APRIL 19, 2002 EXHIBIT (3.0) (ii) RESTATED BY-LAWS OF BADGER METER, INC. (AS AMENDED APRIL 19, 2002) ARTICLE I SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders (the "Annual Meeting") shall be held on the second Saturday in April of each year, or at such other time and date as may be fixed by resolution of the Board of Directors. In fixing a meeting date for any Annual Meeting, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment. At each Annual Meeting, the shareholders shall elect that number of directors equal to the number of directors in the class whose term expires at the time of such meeting. At any such Annual Meeting, only other business properly brought before the meeting in accordance with Section 12 of Article I of these By-laws may be transacted. If the election of directors shall not be held on the date designated herein, or fixed as herein provided, for any Annual Meeting, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of shareholders (a "Special Meeting") as soon thereafter as is practicable. Section 2. Special Meetings. (a) A Special Meeting may be called only by (i) the Chairman, (ii) the Chief Executive Officer or (iii) the Board of Directors and shall be called by the Chief Executive Officer upon the demand, in accordance with this Section 2, of the holders of record of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting. (b) In order that the Corporation may determine the shareholders entitled to demand a Special Meeting, the Board of Directors may fix a record date to determine the shareholders entitled to make such a demand (the "Demand Record Date"). The Demand Record Date shall not precede the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors and shall not be more than ten days after the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors. Any shareholder of record seeking to have shareholders demand a Special Meeting shall, by sending written notice to the Secretary of the Corporation by hand or by certified or registered mail, return receipt requested, request the Board of Directors to fix a Demand Record Date. The Board of Directors shall promptly, but in all events within ten days after the date on which a valid request to fix a Demand Record Date is received, adopt a resolution fixing the Demand Record Date and shall make a public announcement of such Demand Record Date. If no Demand Record Date has been fixed by the Board of Directors within ten days after the date on which such request is received by the Secretary, the Demand Record Date shall be the 10th day after the first date on which a valid written request to set a Demand Record Date is received by the Secretary. To be valid, such written request shall set forth the purpose or purposes for which the Special Meeting is to be held, shall be signed by one or more shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative) and shall set forth all information about each such shareholder and about the beneficial owner or owners, if any, on whose behalf the request is made that would be required to be set forth in a shareholder's notice described in paragraph (a) (ii) of Section 12 of Article I of these By-laws. (c) In order for a shareholder or shareholders to demand a Special Meeting, a written demand or demands for a Special Meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the Special Meeting must be delivered to the Corporation. To be valid, each written demand by a shareholder for a Special Meeting shall set forth the specific purpose or purposes for which the Special Meeting is to be held -15- (which purpose or purposes shall be limited to the purpose or purposes set forth in the written request to set a Demand Record Date received by the Corporation pursuant to paragraph (b) of this Section 2), shall be signed by one or more persons who as of the Demand Record Date are shareholders of record (or their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative), and shall set forth the name and address, as they appear in the Corporation's books, of each shareholder signing such demand and the class and number of shares of the Corporation which are owned of record and beneficially by each such shareholder, shall be sent to the Secretary by hand or by certified or registered mail, return receipt requested, and shall be received by the Secretary within seventy days after the Demand Record Date. (d) The Corporation shall not be required to call a Special Meeting upon shareholder demand unless, in addition to the documents required by paragraph (c) of this Section 2, the Secretary receives a written agreement signed by each Soliciting Shareholder (as defined below), pursuant to which each Soliciting Shareholder, jointly and severally, agrees to pay the Corporation's costs of holding the Special Meeting, including the costs of preparing and mailing proxy materials for the Corporation's own solicitation, provided that if each of the resolutions introduced by any Soliciting Shareholder at such meeting is adopted, and each of the individuals nominated by or on behalf of any Soliciting Shareholder for election as a director at such meeting is elected, then the Soliciting Shareholders shall not be required to pay such costs. For purposes of this paragraph (d), the following terms shall have the meanings set forth below: (i) "Affiliate" of any Person (as defined herein) shall mean any Person controlling, controlled by or under common control with such first Person. (ii) "Participant" shall have the meaning assigned to such term in Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (iii) "Person" shall mean any individual, firm, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. (iv) "Proxy" shall have the meaning assigned to such term in Rule 14a-1 promulgated under the Exchange Act. (v) "Solicitation" shall have the meaning assigned to such term in Rule 14a-11 promulgated under the Exchange Act. (vi) "Soliciting Shareholder" shall mean, with respect to any Special Meeting demanded by a shareholder or shareholders, any of the following Persons: (A) if the number of shareholders signing the demand or demands of meeting delivered to the Corporation pursuant to paragraph (c) of this Section 2 is ten or fewer, each shareholder signing any such demand; (B) if the number of shareholders signing the demand or demands of meeting delivered to the Corporation pursuant to paragraph (c) of this Section 2 is more than ten, each Person who either (I) was a Participant in any Solicitation of such demand or demands or (II) at the time of the delivery to the Corporation of the documents described in paragraph (c) of this Section 2 had engaged or intended to engage in any Solicitation of Proxies for use at such Special Meeting (other than a Solicitation of Proxies on behalf of the Corporation); or (C) any Affiliate of a Soliciting Shareholder, if a majority of the directors then in office determine, reasonably and in good faith, that such Affiliate should be required to sign the written notice described in paragraph (c) of this Section 2 and/or the written agreement described in this paragraph (d) in order to prevent the purposes of this Section 2 from being evaded. (e) Except as provided in the following sentence, any Special Meeting shall be held at such hour and day as may be designated by whichever of the Chief Executive Officer, the Secretary or the Board of Directors shall have called such meeting. In the case of any Special Meeting called by the Chief Executive Officer upon the demand of shareholders (a "Demand Special Meeting"), such meeting shall be held at such hour and day as may be designated by the Board of Directors; provided, however, that the date of any Demand Special Meeting shall be not more than seventy days after the Meeting Record Date (as -16- defined in Section 5 of Article I of these By-laws); and provided further that in the event that the directors then in office fail to designate an hour and date for a Demand Special Meeting within ten days after the date that valid written demands for such meeting by the holders of record as of the Demand Record Date of shares representing at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting are delivered to the Corporation (the "Delivery Date"), then such meeting shall be held at 2:00 P.M. local time on the 100th day after the Delivery Date or, if such 100th day is not a Business Day (as defined below), on the first preceding Business Day. In fixing a meeting date for any Special Meeting, the Chief Executive Officer, the Secretary or the Board of Directors may consider such factors as he or it deems relevant within the good faith exercise of his or its business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding any demand for such meeting, and any plan of the Board of Directors to call an Annual Meeting or a Special Meeting for the conduct of related business. (f) The Corporation may engage regionally or nationally recognized independent inspectors of elections to act as an agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported written demand or demands for a Special Meeting received by the Secretary. For the purpose of permitting the inspectors to perform such review, no purported demand shall be deemed to have been delivered to the Corporation until the earlier of (i) five Business Days following receipt by the Secretary of such purported demand and (ii) such date as the independent inspectors certify to the Corporation that the valid demands received by the Secretary represent at least 10% of all the votes entitled to be cast on each issue proposed to be considered at the Special Meeting. Nothing contained in this paragraph (f) shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any demand, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto). (g) For purposes of these By-laws, "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Wisconsin are authorized or obligated by law or executive order to close. Section 3. Place of Meeting. The Chairman, the Chief Executive Officer, the Board of Directors or the Secretary may designate any place, either within or without the State of Wisconsin, as the place of meeting for an Annual Meeting or Special Meeting. If no designation is made, the place of meeting shall be the principal office of the Corporation. Any meeting may be adjourned to reconvene at any place designated by vote of the Board of Directors or by the Chief Executive Officer or the Secretary. Section 4. Notice of Meeting. Written notice stating the date, time and place of any meeting of shareholders shall be delivered not less than ten days nor more than sixty days before the date of the meeting (unless a different time period is provided by the Wisconsin Business Corporation Law (the "WBCL") or the Articles of Incorporation), either personally or by mail, by or at the direction of the Chairman, the President or the Secretary, to each shareholder of record entitled to vote at such meeting and to such other persons as required by the WBCL. In the event of any Demand Special Meeting, such notice of meeting shall be sent not more than thirty days after the Delivery Date. If mailed, notice pursuant to this Section 4 shall be deemed to be effective when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock record books of the Corporation, with postage thereon prepaid. Unless otherwise required by the WBCL or the Articles of Incorporation, a notice of an Annual Meeting need not include a description of the purpose for which the meeting is called. In the case of any Special Meeting, (a) the notice of meeting shall describe any business that the Board of Directors shall have theretofore determined to bring before the meeting and (b) in the case of a Demand Special Meeting, the notice of meeting (i) shall describe any business set forth in the statement of purpose of the demands received by the Corporation in accordance with Section 2 of Article I of these By-laws and (ii) shall contain all of the information required in the notice received by the Corporation in accordance with Section 12(b) of Article I of these By-laws. If an Annual Meeting or Special Meeting is adjourned to a different date, time or place, the Corporation shall not be required to give notice of the new date, time or place if the new date, time or place is announced at the meeting before adjournment; provided, however, that if a new Meeting Record Date for an adjourned meeting is or must be fixed, the Corporation shall give notice of the adjourned meeting to persons who are shareholders as of the new Meeting Record Date. Section 5. Fixing of Record Date. The Board of Directors may fix in advance a date not less than ten days and not more than seventy days prior to the date of an Annual Meeting or Special Meeting as the record date for the determination of shareholders entitled to notice of, or to vote at, such meeting (the "Meeting Record Date"). In the case of any Demand Special Meeting, (i) the Meeting Record Date shall be -17- not later than the 30th day after the Delivery Date and (ii) if the Board of Directors fails to fix the Meeting Record Date within thirty days after the Delivery Date, then the close of business on such 30th day shall be the Meeting Record Date. The shareholders of record on the Meeting Record Date shall be the shareholders entitled to notice of and to vote at the meeting. Except as provided by the WBCL for a court-ordered adjournment, a determination of shareholders entitled to notice of and to vote at an Annual Meeting or Special Meeting is effective for any adjournment of such meeting unless the Board of Directors fixes a new Meeting Record Date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. The Board of Directors may also fix in advance a date as the record date for the purpose of determining shareholders entitled to take any other action or determining shareholders for any other purpose. Such record date shall be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. The record date for determining shareholders entitled to a distribution (other than a distribution involving a purchase, redemption or other acquisition of the Corporation's shares) or a share dividend is the date on which the Board of Directors authorizes the distribution or share dividend, as the case may be, unless the Board of Directors fixes a different record date. Section 6. Shareholders' List for Meetings. After a Meeting Record Date has been fixed, the Corporation shall prepare a list of the names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder or his or her agent may, on written demand, inspect and, subject to the limitations imposed by the WBCL, copy the list, during regular business hours and at his or her expense, during the period that it is available for inspection pursuant to this Section 6. The Corporation shall make the shareholders' list available at the meeting and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. Section 7. Quorum and Voting Requirements; Postponements; Adjournments. (a) Shares entitled to vote as a separate voting group may take action on a matter at any Annual Meeting or Special Meeting only if a quorum of those shares exists with respect to that matter. If the Corporation has only one class of stock outstanding, such class shall constitute a separate voting group for purposes of this Section 7. Except as otherwise provided in the Articles of Incorporation or the WBCL, a majority of the votes entitled to be cast on the matter shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at any Annual Meeting or Special Meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new Meeting Record Date is or must be set for the adjourned meeting. If a quorum exists, except in the case of the election of directors, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation or the WBCL requires a greater number of affirmative votes. Unless otherwise provided in the Articles of Incorporation, each director to be elected shall be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors at an Annual Meeting or Special Meeting at which a quorum is present. (b) The Board of Directors acting by resolution may postpone and reschedule any previously scheduled Annual Meeting or Special Meeting; provided, however, that a Demand Special Meeting shall not be postponed beyond the 100th day following the Delivery Date. Any Annual Meeting or Special Meeting may be adjourned from time to time, whether or not there is a quorum, (i) at any time, upon a resolution by shareholders if the votes cast in favor of such resolution by the holders of shares of each voting group entitled to vote on any matter theretofore properly brought before the meeting exceed the number of votes cast against such resolution by the holders of shares of each such voting group or (ii) at any time prior to the transaction of any business at such meeting, by the President or pursuant to a resolution of the Board of Directors. No notice of the time and place of adjourned meetings need be given except as required by the WBCL. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. Voting of Shares. Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at an Annual Meeting or Special Meeting, except to the extent that the voting -18- rights of the shares of any class or classes are enlarged, limited or denied by the WBCL or the Articles of Incorporation. Section 9. Proxies. At any Annual Meeting or Special Meeting, a shareholder may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the Corporation authorized to tabulate votes. An appointment is valid for eleven months from the date of its signing unless a different period is expressly provided in the appointment form. Unless otherwise provided, a proxy may be revoked at any time before it is voted, either by written notice filed with the Secretary or the acting secretary of the meeting or by oral notice given by the shareholder to the presiding officer during the meeting. The presence of a shareholder who has filed his or her appointment of proxy shall not itself constitute a revocation. The Board of Directors shall have the power and authority to make rules establishing presumptions as to the validity and sufficiently of proxies. Section 10. Acceptance of Instruments Showing Shareholder Action. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the Corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the Corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (a) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity. (b) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation is presented with respect to the vote, consent, waiver or proxy appointment. (c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation is presented with respect to the vote, consent, waiver or proxy appointment. (d) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment. (e) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The Corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the Corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. Section 11. Waiver of Notice. A shareholder may waive any notice required by the WBCL, the Articles of Incorporation or these By-laws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice, contain the same information that would have been required in the notice under applicable provisions of the WBCL (except that the time and place of meeting need not be stated) and be delivered to the Corporation for inclusion in the corporate records. A shareholder's attendance at any Annual Meeting or Special Meeting, in person or by proxy, waives objection to all of the following: (a) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting; and (b) consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 12. Notice of Shareholder Business and Nomination of Directors. (a) Annual Meetings. -19- (i) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an Annual Meeting (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this By-law and who is entitled to vote at the meeting and complies with the notice procedures set forth in this Section 12. (ii) For nominations or other business to be properly brought before an Annual Meeting by a shareholder pursuant to clause (C) of paragraph (a)(i) of this Section 12, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be received by the Secretary of the Corporation at the principal offices of the Corporation not less than sixty days nor more than ninety days prior to the second Saturday in the month of April; provided, however, that in the event that the date of the Annual Meeting is advanced by more than thirty days or delayed by more than sixty days from the second Saturday in the month of April, notice by the shareholder to be timely must be so received not earlier than the 90th day prior to the date of such Annual Meeting and not later than the close of business on the later of (x) the 60th day prior to such Annual Meeting and (y) the 10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall be signed by the shareholder of record who intends to make the nomination or introduce the other business (or his duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (A) the name and address, as they appear on this corporation's books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination or proposal is made; (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder or beneficial owner or owners; (C) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make the nomination or introduce the other business specified in the notice; (D) in the case of any proposed nomination for election or re-election as a director, (I) the name and residence address of the person or persons to be nominated, (II) a description of all arrangements or understandings between such shareholder or beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder, (III) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors and (IV) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected; and (E) in the case of any other business that such shareholder proposes to bring before the meeting, (I) a brief description of the business desired to be brought before the meeting and, if such business includes a proposal to amend these By-laws, the language of the proposed amendment, (II) such shareholder's and beneficial owner's or owners' reasons for conducting such business at the meeting and (III) any material interest in such business of such shareholder and beneficial owner or owners. (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 12 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least seventy days prior to the second Saturday in the month of April, a shareholder's notice required by this Section 12 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings. Only such business shall be conducted at a Special Meeting as shall have been described in the notice of meeting sent to shareholders pursuant to Section 4 of Article I of these By-laws. Nominations of persons for election to the Board of Directors may be made at a Special Meeting at which directors are to be elected pursuant to such notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation who (A) is a shareholder of record at the time of giving of such notice of meeting, (B) is entitled to vote at the meeting and (C) complies with the notice procedures set forth in this Section 12. Any shareholder desiring to nominate persons for election to the -20- Board of Directors at such a Special Meeting shall cause a written notice to be received by the Secretary of the Corporation at the principal offices of the Corporation not earlier than ninety days prior to such Special Meeting and not later than the close of business on the later of (x) the 60th day prior to such Special Meeting and (y) the 10th day following the day on which public announcement is first made of the date of such Special Meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. Such written notice shall be signed by the shareholder of record who intends to make the nomination (or his duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (A) the name and address, as they appear on the Corporation's books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination is made; (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder or beneficial owner or owners; (C) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make the nomination specified in the notice; (D) the name and residence address of the person or persons to be nominated; (E) a description of all arrangements or understandings between such shareholder or beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder; (F) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors; and (G) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected. (c) General. (i) Only persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as directors. Only such business shall be conducted at an Annual Meeting or Special Meeting as shall have been brought before such meeting in accordance with the procedures set forth in this Section 12. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or business is not in compliance with this Section 12, to declare that such defective proposal shall be disregarded. (ii) For purposes of this Section 12, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 12, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Nothing in this Section 12 shall be deemed to limit the Corporation's obligation to include shareholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act. ARTICLE II BOARD OF DIRECTORS Section 1. General Powers and Number. All corporate powers of the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation managed under, the direction of its Board of Directors, which shall consist of seven (7) directors. The Board of Directors shall elect one of its members as Chairman, who, when present, shall preside at all meetings of the shareholders and Board of Directors. Section 2. Tenure and Qualifications. Each director shall hold office until the annual meeting of shareholders at which his term expires and until his successor shall have been elected, or until his prior death, resignation or removal. A director shall not be eligible to stand for re-election at any annual meeting of shareholders following his 70th birthday, except that any directors who are over 70 years old on or before November 1, 1999, may be appointed as director emeritus to serve until he resigns or his -21- appointment is terminated by resolution of the Board of Directors, and shall serve in an advisory capacity to the Board of Directors, shall be entitled to attend meetings of the Board and its committees, shall be reimbursed for his expense in attending meetings, and shall receive the same fees and compensation paid to directors, but shall have no vote and shall not be considered as a director under the Articles of Incorporation or By-laws of the Corporation except for purposes of officers' and directors' liability insurance. A director may resign at any time by delivering written notice which complies with the Wisconsin Business Corporation Law to the Board of Directors, to the Chairman of the Board, if any, or to the Corporation. A director's resignation is effective when such notice is delivered unless the notice specifies a later date. Directors need not be residents of the State of Wisconsin or shareholders of the Corporation. Section 3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this By-law immediately after, and at the same place as, the annual meeting of shareholders, and each adjourned session thereof. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman, the Chief Executive Officer, Secretary or any two directors. The person or persons calling any special meeting of the Board of Directors may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors called by them, and if no other place is fixed, the place of meeting shall be the principal business office of the Corporation in the State of Wisconsin. Section 5. Notice; waiver. Notice of each meeting of the Board of Directors (unless otherwise provided in or pursuant to Section 4, Article II) shall be given by written notice delivered personally or given by telegram, teletype, facsimile or other form of wire or wireless communication not less than twenty-four (24) hours prior to the meeting or mailed or delivered by private carrier not less than forty-eight (48) hours prior to the meeting to each director at his business address or at such other address as such director shall have designated in writing filed with the Secretary. If mailed or delivered by a private carrier, such notice shall be deemed to be delivered when deposited in the United States mail or delivered to the private carrier so addressed, with postage or delivery cost thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. If notice be given by teletype, facsimile or other form of wire or wireless communication, such notice shall be deemed to be delivered when evidence of its transmittal is received. Whenever any notice whatever is required to be given to any director of the Corporation under the Articles of Incorporation or By-laws or any provision of law, a waiver thereof in writing, signed at any time, whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to the giving of such notice. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting and objects thereat to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 6. Quorum. A majority of the directors shall constitute a quorum for the transaction of business; and, except as otherwise provided by law or by the Articles of Incorporation or these By-laws, a majority of the votes cast at any meeting of the Board of Directors at which a quorum is present shall be decisive of any action. A majority of the directors present at a meeting, though less than quorum, may adjourn the meeting from time to time without further notice. Section 7. Vacancies. Any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled until the next succeeding annual election by the affirmative vote of a majority of the directors then in office, though less than a quorum of the Board of Directors; provided, that in case of a vacancy created by the removal of a director by vote of the shareholders, the shareholders shall have the right to fill such vacancy at the same meeting or any adjournment thereof. Section 8. Compensation. The Board of Directors, by affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, may establish -22- reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise, or may delegate such authority to an appropriate committee. The Board of Directors also shall have authority to provide for or to delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers and employees and to their estates, families, dependents or beneficiaries on account of prior services rendered by such directors, officers and employees to the Corporation. Section 9. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors or a committee thereof of which he is a member at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 10. Committees. The Board of Directors by resolution adopted by the affirmative vote of a majority of the number of directors set forth in Section 1 of this Article II may designate one or more committees, each committee to consist of three or more directors elected by the Board of Directors, which shall have and may exercise, when the Board of Directors is not in session, the powers of the Board of Directors in the management of the business and affairs of the Corporation, in the committee's designated area of responsibility, except action in respect to dividends to shareholders, election of the principal officers or the filling of vacancies on the Board of Directors or committees created pursuant to this section, with respect to the approval or proposal of actions that the law requires to be approved by the shareholders, amendment of the Articles of Incorporation, the adoption, amendment or repeal of the by-laws, the approval of a plan of merger not requiring shareholder approval, the authorization or approval of the re-acquisition of shares other than according to a method prescribed by the Board of Directors, and the authorization for approval of the issuance or sale or contract for sale of shares, or the determination of the designation and relative rights, preferences and limitations of a class or series of shares, unless authorized to do so by the Board of Directors within prescribed limits. The Board of Directors may elect one or more of its members as alternate members of any such committee who may take the place of any absent member or members at any meeting of such committee, upon request by the Chairman or upon request by the chairman of such meeting. Each such committee shall fix its own rules governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. Section 11. Unanimous Consent Without Meeting. Any action required or permitted by the Articles of Incorporation or By-laws or any provision of law to be taken by the Board of Directors at a meeting or by resolution may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors then in office. Section 12. Telephonic Meetings. Notwithstanding any place set forth in the notice of the meeting or these By-laws, members of the Board of Directors may participate in regular or special meetings of the Board of Directors and all Committees of the Board of Directors by or through the use of any means of communication by which all directors participating may simultaneously hear each other, such as by conference telephone; provided, however, that the Chairman of the Board or the chairman of the respective Committee and the Board or other person or persons calling a meeting may determine that the directors cannot participate by such means, in which case the notice of the meeting, or other notice to directors given prior to the meeting, shall state that each director's physical presence shall be required. If a meeting is conducted through the use of such means of communication, then at the commencement of such meeting all participating directors shall be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by such means shall be deemed present in person at such meeting. -23- ARTICLE III OFFICERS Section 1. General Officers. The general officers of the Corporation shall be the Chief Executive Officer, the President, one or more Vice Presidents, a Secretary, a Treasurer, a Controller, and one or more Assistant Secretaries and one or more Assistant Treasurers, each of whom shall be elected annually by the Board of Directors and shall hold office until his or her successor shall have been duly elected and qualified. The Chief Executive Officer of the Corporation shall exercise general supervision of the business and affairs of the Corporation subject to the directives of the Board of Directors. Further, each general officer shall have such powers and duties as generally pertain to his or her respective office; provided, that such powers and duties may from time to time be modified, enlarged, restricted or augmented by the Board of Directors. Section 2. Additional Officers. The Board of Directors may appoint such additional corporate officers as it may deem necessary, each of whom shall have such powers and duties as from time to time may be conferred by the Board of Directors, and shall serve for such terms as the Board may fix. Section 3. Removal of Officers. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. The resignation of an officer by the delivery of written notice to the Chief Executive Officer or Secretary of the Corporation is effective upon delivery of the notice, unless the notice specifies a later date and the Corporation accepts the later date. ARTICLE IV SPECIAL CORPORATE ACTS Section 1. Voting of Securities Owned by This Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this Corporation may be voted at any meeting of security holders of such other corporation by the Chairman of this Corporation if he be present, or in his absence by the President or any Vice President of this Corporation who may be present, and (b) whenever, in the judgment of the Chairman, or in his absence, of the President or any Vice President, it is desirable for this Corporation to execute a proxy or give a shareholder's consent in respect to any shares or other securities issued by any other corporation and owned by this Corporation, such proxy or consent shall be executed in the name of this Corporation by the Chairman, or the President or one of the Vice Presidents of this Corporation without necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Corporation shall have full right, power and authority to vote the share or shares of stock issued by such other corporation and owned by this Corporation the same as such share or shares might be voted by this Corporation. Section 2. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any instrument in the name of and on behalf of the Corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages, and instruments of assignment or pledge made by the Corporation shall be executed in the name of the Corporation by the Chairman or the President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. -24- ARTICLE V CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman or the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except as provided in Section 6 of this Article V. Section 2. Facsimile Signatures and Seal. The seal of the corporation on any certificates for shares may be a facsimile. The signatures of the Chairman or President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. Section 3. Signature by Former Officers. In case any officer, who has signed or whose facsimile signature has been placed upon any certificate for shares, shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. Section 4. Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer the Corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. Where a certificate for shares is presented to the Corporation with a request to register for transfer, the Corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if (a) there were on or with the certificate the necessary endorsements, and (b) the Corporation had no duty to inquire into adverse claims or has discharged any such duty. The Corporation may require reasonable assurance that said endorsements are genuine and effective and in compliance with such other regulations as may be prescribed under the authority of the Board of Directors. Section 5. Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction imposed by the Corporation upon the transfer of such shares. Section 6. Lost, Destroyed or Stolen Certificates. Where the owner claims that his certificate for shares has been lost, destroyed or wrongfully taken, then a new certificate shall be issued in place thereof if the owner (a) so requests before the Corporation has notice that such shares have been acquired by a bona fide purchaser, and (b) files with the Corporation a sufficient indemnity bond, and (c) satisfied such other reasonable requirements as the Board of Directors may prescribe. Section 7. Consideration for Shares. The shares of the Corporation may be issued for such consideration as shall be fixed from time to time by the Board of Directors, provided that any shares having a par value shall not be issued for a consideration less than the par value thereof. The consideration to be paid for shares may be paid in whole or in part, in money, in other property, tangible or intangible, or in labor or services actually performed for the Corporation. When payment of the consideration for which shares are to be issued shall have been received by the Corporation, such shares shall be deemed to be fully paid and nonassessable by the Corporation. No certificate shall be issued for any share until such share is fully paid. Section 8. Stock Regulations. The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. -25- ARTICLE VI CORPORATE SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". ARTICLE VII AMENDMENTS Section 1. By Shareholders. These By-laws may be altered, amended, repealed, augmented and new By-laws may be adopted by the shareholders by affirmative vote of not less than a majority of the votes represented by the shares present or represented at any annual or special meeting of the shareholders at which a quorum is in attendance. Section 2. By Directors. These By-laws may also be altered, amended, repealed, augmented and new By-laws may be adopted by the Board of Directors by affirmative vote of a majority of the number of directors present at any meeting at which a quorum is in attendance; but no By-law adopted by the shareholders shall be amended or repealed by the Board of Directors if the By-law so adopted so provides. Section 3. Implied Amendments. Any action taken or authorized by the shareholders or by the Board of Directors, which would be inconsistent with the By-laws then in effect but is taken or authorized by affirmative vote of not less than the number of shares or the number of directors required to amend the By-laws so that the By-laws would be consistent with such action, shall be given the same effect as though the By-laws had been temporarily amended or suspended so far, but only so far, as is necessary to permit the specific action so taken or authorized. ARTICLE VIII INDEMNIFICATION Section 1.01. Certain Definitions. All capitalized terms used in this Article VIII and not otherwise hereinafter defined in this Section 1.01 shall have the meaning set forth in Section 180.0850 of the Statute (as hereinafter defined). The following capitalized terms (including any plural forms thereof) used in this Article VIII shall be defined as follows: (a) "Affiliate" shall include, without limitation, any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Corporation. (b) "Authority" shall mean the entity selected by the Director or Officer to determine his or her right to indemnification pursuant to Section 1.04 of this Article. (c) "Board" shall mean the entire then elected and serving board of directors of the Corporation, including all members thereof who are Parties to the subject Proceeding or any related Proceeding. (d) "Breach of Duty" shall mean the Director or Officer breached or failed to perform his or her duties to the Corporation and his or her breach of or failure to perform those duties is determined, in accordance with Section 1.04 of this Article, to constitute misconduct under Section 180.0851 (2) (a) 1, 2, 3 or 4 of the Statute. -26- (e) "Corporation, " as used herein and as defined in the Statute and incorporated by reference into the definitions of certain capitalized terms used herein, shall mean this Corporation, including, without limitation, any successor corporation or entity to the Corporation by way of merger, consolidation or acquisition of all or substantially all of the capital stock or assets of this Corporation. (f) "Director or Officer" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article, it shall be conclusively presumed that any Director or Officer serving as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of an Affiliate shall be so serving at the request of the Corporation. (g) "Disinterested Quorum" shall mean a quorum of the Board who are not Parties to the subject Proceeding or any related Proceeding. (h) "Party" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article, the term "Party" shall also include any Director, Officer or employee who is or was a witness in a Proceeding at a time when he or she has not otherwise been formally named a Party thereto. (i) "Proceeding" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article, "Proceeding" shall include all Proceedings (i) brought under (in whole or in part) the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their respective state counterparts, and/or any rule or regulation promulgated under any of the foregoing; (ii) brought before an Authority or otherwise to enforce rights hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in which the Director or Officer is a plaintiff or petitioner because he or she is a Director or Officer, provided, however, that such Proceeding is authorized by a majority vote of a Disinterested Quorum. (j) "Statute" shall mean Sections 180.0850 through 180.0859, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes, including any amendments thereto, but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than the Statute permitted or required the Corporation to provide prior to such amendment. Section 1.02. Mandatory Indemnification. To the fullest extent permitted or required by the Statute, the Corporation shall indemnify a Director or Officer against all Liabilities incurred by or on behalf of such Director or Officer in connection with a Proceeding in which the Director or Officer is a Party because he or she is a Director or Officer. Section 1.03. Procedural Requirements. (a) A Director or Officer who seeks indemnification under Section 1.02 of this Article shall make a written request therefor to the Corporation. Subject to Section 1.03 (b) of this Article, within sixty days of the Corporation's receipt of such request, the Corporation shall pay or reimburse the Director or Officer for the entire amount of Liabilities incurred by the Director or Officer in connection with the subject Proceeding (net of any Expenses previously advanced pursuant to Section 1.05 of this Article). (b) No indemnification shall be required to be paid by the Corporation pursuant to Section 1.03 (a) of this Article if, within such sixty-day period: (i) a Disinterested Quorum, by a majority vote thereof, determines that the Director or Officer requesting indemnification engaged in misconduct constituting a Breach of Duty; or (ii) a Disinterested Quorum cannot be obtained. (c) In either case of nonpayment pursuant to Section 1.03 (b) of this Article, the Board shall immediately authorize by resolution that an Authority, as provided in Section 1.04 of this Article, determine whether the Director's or Officer's conduct constituted a Breach of Duty and, therefore, whether indemnification should be denied hereunder. -27- (d) (i) If the Board does not authorize an Authority to determine the Director's or Officer's right to indemnification hereunder within such sixty-day period and/or (ii) if indemnification of the requested amount of Liabilities is paid by the Corporation, then it shall be conclusively presumed for all purposes that a Disinterested Quorum has determined that the Director or Officer did not engage in misconduct constituting a Breach of Duty and, in the case of subsection (i) above (but not subsection (ii)), indemnification by the Corporation of the requested amount of Liabilities shall be paid to the Officer or Director immediately. Section 1.04. Determination of Indemnification. (a) When the Board authorized an Authority to determine a Director's or Officer's right to indemnification pursuant to Section 1.03 of this Article, then the Director or Officer requesting indemnification shall have the absolute discretionary authority to select one of the following as such Authority: (i) An independent legal counsel; provided, that such counsel shall be mutually selected by such Director or Officer and by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board; (ii) A panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Milwaukee, Wisconsin; provided, that (A) one arbitrator shall be selected by such Director or Officer, the second arbitrator shall be selected by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board, and the third arbitrator shall be selected by the two previously selected arbitrators; and (B) in all other respects, such panel shall be governed by the American Arbitration Association's then existing Commercial Arbitration Rules; or (iii) A court pursuant to and in accordance with Section 180.0854 of the Statute. (b) In any such determination by the selected Authority there shall exist a rebuttable presumption that the Director's or Officer's conduct did not constitute a Breach of Duty and that indemnification against the requested amount of Liabilities is required. The burden of rebutting such a presumption by clear and convincing evidence shall be on the Corporation or such other party asserting that such indemnification should not be allowed. (c) The Authority shall make its determination within sixty days of being selected and shall submit a written opinion of its conclusion simultaneously to both the Corporation and the Director or Officer. (d) If the Authority determines that indemnification is required hereunder, the Corporation shall pay the entire requested amount of Liabilities (net of any Expenses previously advanced pursuant to Section 1.05 of this Article), including interest thereon at a reasonable rate, as determined by the Authority, within ten days of receipt of the Authority's opinion; provided, that, if it is determined by the Authority that a Director or Officer is entitled to indemnification as to some claims, issues or matters, but not as to other claims, issues or matters, involved in the subject Proceeding, the Corporation shall be required to pay (as set forth above) only the amount of such requested Liabilities as the Authority shall deem appropriate in light of all of the circumstances of such Proceeding. (e) The determination by the Authority that indemnification is required hereunder shall be binding upon the Corporation regardless of any prior determination that the Director or Officer engaged in a Breach of Duty. (f) All Expenses incurred in the determination process under this Section 1.04 by either the Corporation or the Director or Officer, including, without limitation, all Expenses of the selected Authority, shall be paid by the Corporation. -28- Section 1.05. Mandatory Allowance of Expenses. (a) The Corporation shall pay or reimburse, within ten days after the receipt of the Director's or Officer's written request therefor, the reasonable Expenses of the Director or Officer as such Expenses are incurred, provided the following conditions are satisfied: (i) The Director or Officer furnishes to the Corporation an executed written certificate affirming his or her good faith belief that he or she has not engaged in misconduct which constitutes a Breach of Duty; and (ii) The Director or Officer furnishes to the Corporation an unsecured executed written agreement to repay any advances made under this Section 1.05 if it is ultimately determined by an Authority that he or she is not entitled to be indemnified by the Corporation for such Expenses pursuant to Section 1.04 of this Article. (b) If the Director or Officer must repay any previously advanced Expenses pursuant to this Section 1.05, such Director or Officer shall not be required to pay interest on such amounts. Section 1.06. Indemnification and Allowance of Expenses of Certain Others. (a) The Corporation shall indemnify a director or officer of an Affiliate (who is not otherwise serving as a Director or Officer) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Affiliate. (b) Except as hereinafter provided, the Corporation shall indemnify each employee of the Corporation or an Affiliate of the Corporation acting within the scope of his or her duties as such, against all Liabilities, and shall advance Reasonable Expenses, incurred by or on behalf of such employee in connection with a Proceeding in which he or she is a Party by virtue of being an employee of the Corporation or an Affiliate of the Corporation, to the same extent and in the same manner as a Director or Officer hereunder. The foregoing provision shall not apply, and the Corporation shall not indemnify any employee, with respect to any Liability to the extent covered by insurance maintained by or on behalf of such employee (other than insurance maintained by the Corporation or an Affiliate of the Corporation). (c) The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify against Liabilities incurred by, and/or provide for the allowance of reasonable Expenses of, an authorized agent of the Corporation acting within the scope of his or her duties as such and who is not otherwise a Director or Officer. Section 1.07. Insurance. The Corporation may purchase and maintain insurance on behalf of a Director, Officer and/or any individual who is or was an authorized employee or agent of the Corporation against any Liability asserted against or incurred by such individual in his or her capacity as such or arising from his or her status as such, regardless of whether the Corporation is required or permitted to indemnify against any such Liability under this Article. Section 1.08. Notice to the Corporation. A Director, Officer or employee shall promptly notify the Corporation in writing when he or she has actual knowledge of a Proceeding which may result in a claim or indemnification against Liabilities or allowance of Expenses hereunder, but the failure to do so shall not relieve the Corporation of any liability to the Director, Officer or employee hereunder unless the Corporation shall have been irreparably prejudiced by such failure (as determined by an Authority). Section 1.09. Report to Shareholders. In the event that the Corporation indemnifies or advances expenses to a Director or Officer in connection with a proceeding brought in the right of the Corporation, the Corporation shall report the indemnification or advance in writing to shareholders with or before the notice of the next meeting of shareholders. The report shall be delivered to shareholders who are entitled to receive notice of the next meeting of shareholders. -29- Section 1.10. Severability. If any provision of this Article shall be deemed invalid or inoperative, or if a court of competent jurisdiction determines that any of the provisions of this Article contravene public policy, this Article shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the Corporation, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable. Section 1.11. Nonexclusivity of this Article. The rights of a Director, Officer or employee (or any other person) granted under this Article shall not be deemed exclusive of any other rights to indemnification against Liabilities or advancement of Expenses which the Director, Officer or employee (or such other person) may be entitled to under any written agreement, Board resolution, vote of shareholders of the Corporation or otherwise, including without limitation under the Statute. Nothing contained in this Article shall be deemed to limit the Corporation's obligations to indemnify a Director, Officer or employee under the Statute. Section 1.12. Contractual Nature of this Article; Repeal or Limitation of Rights. This Article shall be deemed to be a contract between the Corporation and each Director, Officer and employee and any repeal or other limitation of this Article or any repeal or limitation of the Statute or any other applicable law shall not limit any rights of indemnification against Liabilities or allowance of Expenses then existing or arising out of events, acts or omissions occurring prior to such repeal or limitation, including, without limitation, the right of indemnification against Liabilities or allowance of Expenses for Proceedings commenced after such repeal or limitation to enforce this Article with regard to acts, omissions or events arising prior to such repeal or limitation. Section 1.13. Subrogation Rights. Notwithstanding any provision to the contrary set forth herein, the Corporation's obligations hereunder are not intended to constitute, and shall not constitute, a waiver of any right to subrogation which the Corporation may have against any person or entity. -30- EX-10 4 c71084exv10.txt MATERIAL CONTRACTS EXHIBIT (10.0) BADGER METER, INC. 2002 DIRECTOR STOCK GRANT PLAN 1. Purpose. The purpose of the Badger Meter, Inc. 2002 Director Stock Grant Plan (the "Plan") is to promote the best interests of Badger Meter, Inc. (the "Company") and its shareholders by providing a means to attract and retain outstanding independent directors and to provide opportunities for additional stock ownership by such directors which will further increase their proprietary interest in the Company and, consequently, their identification with the interests of the shareholders of the Company. 2. Administration. The Plan shall be administered by the Management Review Committee (the "Committee") of the Board of Directors (the "Board") as such Committee may be constituted from time to time, subject to review by the Board. The Committee shall consist of not less than two members of the Board selected by the Board, each of whom shall qualify as a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation thereto. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may adopt such rules and regulations for carrying out the Plan as it may deem proper and in the best interests of the Company. The interpretation by the Committee of any provision of the Plan or any related documents shall be final. 3. Stock Subject to the Plan. Subject to adjustment in accordance with the provisions of Paragraph 6, the total number of shares of the Company's Common Stock, $1 par value (including the associated Common Share Purchase Rights) ("Common Stock"), available for awards under the Plan shall be Ten Thousand (10,000). Shares of Common Stock to be delivered under the Plan shall be made available from presently authorized but unissued Common Stock or from presently authorized and issued but not outstanding shares of Common Stock which are held by the Company as treasury shares. In no event shall the Company be required to issue fractional shares of Common Stock under the Plan. Whenever under the terms of the Plan a fractional share of Common Stock would otherwise be required to be issued, there shall be paid in lieu thereof one full share of Common Stock. 4. Grants of Stock. Commencing with the 2002 annual meeting of the Company's shareholders, each Company director who is not an employee of the Company or any subsidiary of the Company shall receive a grant of three hundred (300) shares of Common Stock (a "Director Grant") annually on the first business day following the annual meeting of shareholders of the Company. Awards made under the Plan shall be evidenced by a Stock Award Agreement and such other appropriate documentation as the Committee may prescribe. Any shares of Common Stock granted pursuant to the Plan to a director may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. 5. Restrictions on Transfer. Shares of Common Stock acquired under the Plan may not be sold or otherwise disposed of except pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), or except in a transaction which, in the opinion of the Company's legal counsel, is exempt from registration under the 1933 Act. All certificates evidencing shares acquired pursuant to a Director Grant shall bear an appropriate legend evidencing such transfer restriction. The Committee may require each person receiving a Director Grant to execute and deliver a written representation that such person is acquiring the shares of Common Stock without a view to the distribution thereof. 6. Adjustment Provisions. In the event of any change in the Common Stock, whether by reason of a declaration of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend), spin-off, merger, consolidation, recapitalization, split-up, combination or exchange of shares, or otherwise, the aggregate number of shares available under the Plan shall be appropriately adjusted in order to prevent dilution or enlargement of the benefits intended to be made available under the Plan. 7. Amendment of the Plan. The Board shall have the right to amend the Plan at any time or from time to time in any manner that it may deem appropriate, subject to applicable law. -31- 8. Governing Law. The Plan, all awards hereunder, and all determinations made and actions taken pursuant to the Plan shall be governed by the internal laws of the State of Wisconsin and applicable federal law. 9. Effective Date and Term of Plan. Assuming approval of the Plan by the shareholders of the Company at the 2002 annual meeting of shareholders, the Plan shall be effective as of that date. The Plan shall terminate on such date as may be determined by the Board. -32- EX-99.0 5 c71084exv99w0.txt ADDITIONAL EXHIBITS EXHIBIT (99.0) FORWARD-LOOKING STATEMENTS Certain statements contained in the pages of this web site, as well as other information provided from time to time by the Company or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. The words "anticipate," "believe," "estimate," "expect," "think," "should" and "objective" or similar expressions are intended to identify forward looking statements. The forward looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things: - - the success or failure of new product offerings - - the actions and financial condition of competitors and alliance partners - - changes in competitive pricing and bids in the marketplace - - changes in domestic conditions, including housing starts - - changes in foreign economic conditions, including currency fluctuations - - changes in laws and regulations - - changes in customer demand and fluctuations in the prices of and availability of purchased raw materials and parts. Some or all of these factors are beyond the Company's control. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements and are cautioned not to place undue reliance on such forward looking statements. The forward looking statements made herein are made only as of the date of this document and the Company undertakes no obligation to publicly update such forward looking statements to reflect subsequent events or circumstances. OVERALL OUTLOOK From Richard A. Meeusen, President and CEO of Badger Meter, Inc.: Having completed a very strong second quarter, we are excited about the prospects for Badger Meter's future. Our sales of residential and commercial water meters remain strong, as does the demand for the related automated meter reading systems. Although the industrial markets have continued to lag, we have several new products, both recently released (such as the Radio Frequency Oil Management System) or in development. We expect that these products will have a favorable impact on our industrial meter sales. You can read about the second quarter results and some of these new products in the detail sections of this website. Many of our strategic initiatives continue to generate positive results. In the water meter market, we are continuing our connectivity strategy, developing technologically-advanced water meter products and systems that communicate with a wide range of meter reading technologies. At the same time, we are rounding out our product line by developing products for specific market segments that we have not addressed in the past. These include non-leaded brass meters, lower-cost meters and systems, and other new offerings. We are working to develop new alliances that will enable us to access new technologies and new markets, such as our recently-announced alliance with Hydrometer GmbH of Ansbach, Germany. In the industrial markets, we will continue to grow in our niche markets through a combination of new product development and strategic acquisitions. In accordance with this strategy, we completed two acquisitions during the second quarter. Data Industrial Corporation of Mattapoisett, Massachusetts, is a leading supplier of impeller flow sensors, which measure in-pipe flow in the industrial markets. This acquisition broadens Badger's line of industrial meters and enables us to offer another metering technology to our customers. We also acquired SA MecaPlus Equipments of Nancy, France. MecaPlus is the largest supplier of automotive fluid systems in France and is one of Badger's largest customers for automotive fluid meters and metering systems. MecaPlus purchases meters, oil tanks, hoses, reels and other equipment, and assembles them into complete lubrication systems for use in measuring and dispensing automotive fluids. This acquisition will enable MecaPlus to expand its sales through Badger Meter's international sales organization and distribution channels in Europe. -33- Badger Meter remains focused on creating long-term shareholder value. With daily disclosures of accounting and financial problems in many large corporations, Badger is proud of our history of conservative and ethical business practices. We are pleased to see that many US corporations are adopting some of the policies that have been standard practices at Badger Meter for many years, including an active and independent Audit Committee, segregation of audit and non-audit services, a clear Code of Corporate Conduct (adopted and monitored by our Board's Compliance Committee) and conservative application of accounting principles. We believe that Badger Meter has a strong future and can continue to provide solid, long-term value to our customers and shareholders. Richard A. Meeusen President and CEO ABOUT OUR MARKETS The majority of Badger Meter sales are in the water utility market of the United States and, to a lesser degree, in the country of Mexico. Badger Meter's position in the water utility market is that of a market share leader, providing meters and meter reading systems which are utilized by water utilities to generate utility bills, thus revenue. The utility products of Badger Meter are further classified by the specific market segments they serve, which include U.S. and Mexican water meters (residentialand commercial/industrial meters) and submetering (apartments and condominiums). In addition, Badger has a strong presence in several niche segments of the industrial flow measurement and control market, including research control valves, automotive fluid meters, electromagnetic meters for industrial and utility applications and traditional industrial meters utilized in various industrial applications. The outlook for these markets is discussed in the following sections. Click on the selected market for further discussion: - -------------------------------------------------------------------------------- DOMESTIC WATER VALVE MARKET METER MARKET - -------------------------------------------------------------------------------- MEXICAN WATER AUTOMOTIVE METER MARKET FLUID MARKETS - -------------------------------------------------------------------------------- OTHER INDUSTRIAL FINANCIAL METER MARKETS OUTLOOK - -------------------------------------------------------------------------------- BACK - -------------------------------------------------------------------------------- DOMESTIC WATER METER MARKET At the present time, approximately 11% of the water utility meter market has been converted to automatic meter reading ("AMR") systems. The majority of systems being installed in the water industry are drive-by radio frequency. Badger continues to be the leading supplier of AMR systems to the water industry. We believe that in the long- term, system installation of new meters and AMR products will assist utilities to fund required investments due to improved revenues and reduced expenses. Click on the following to review related topics: [ ] How large is the U.S. water meter market and how fast is it growing? [ ] What is automatic meter reading (AMR)? -34- [ ] What is the AMR conversion rate, and why is it important to Badger Meter? [ ] How does Badger compare to other companies in AMR shipments? [ ] What is Badger's share of the U.S. market? [ ] Why are housing starts important to Badger Meter? [ ] Who are Badger Meter's major competitors in the U.S. water meter industry? [ ] What is Badger Meter's current capacity for manufacturing water meters? [ ] What new water meter products are being introduced by Badger Meter? [ ] Who are Badger's major alliance partners and why are they important? How large is the U.S. water meter market and how fast is it growing? It is estimated that by the end of the year 2001 there were approximately 64,000,000 water meters used to generate revenue from residential and commercial applications across America. Of that total, 10% are installed in commercial locations. Annually, an estimated 6 million water meters are sold in the United States. This includes about 1.3 million meters for new housing starts, 4 million meters for replacements, and the balance for AMR conversions. Historically, the growth rate has been about three percent. The future growth of the water meter market in the United States could be significantly and favorably impacted by AMR conversions and by the impacts of water stress. Continued droughts and water shortages in many areas of the United States could result in similar increases in demand for water metering systems. What is automatic meter reading (AMR)? Automatic meter reading (AMR) refers to an automated process of collecting meter reading data. Traditionally, meter reading has been accomplished by utility personnel going to each meter location in order to read the meter and record the data. Automatic meter reading utilizes electronic components in conjunction with communication technology to automatically deliver the meter reading data for utility billing purposes. Automatic meter reading technologies include radio frequency, telephone and power line carrier. In the water utility industry, radio frequency meter reading has become the clear technology of choice currently in use. What is the AMR conversion rate, and why is it important to Badger Meter? The AMR conversion rate refers to the rate at which water utilities are changing their process of reading water meters from a manual method to an electronic method utilizing a communication technology such as radio frequency. It is currently estimated that through the year 2001 approximately 11% of water meters in the United States have converted to automatic meter reading. This means that approximately 89% of water meters in use, or more than 55 million, are yet to be converted to an AMR technology! Water meter life cycles vary across the country. Some utilities annually change out a percentage of installed meters, thus ensuring that the installed base of meters is yielding a high rate of accuracy. As utilities change out water meters, it is logical to install automatic meter reading technologies that will improve customer relations and reduce expenses. The per-unit price of AMR-equipped meters is three to six times the price of non-AMR meters. As the provider of various automatic meter reading technologies, Badger expects to benefit as a growing number of water utilities recognize the value of converting to AMR. How does Badger compare to other companies in AMR shipments? For the fifth consecutive year, Badger Meter continues to lead the water utility industry in AMR shipments. Through 2001, BMI has sold 2,436,672 Recordall(R) water meters and RTR(R)'s installed in AMR applications. Without question, Badger Meter is the leading choice for product solutions as water utilities implement automatic meter reading. According to the 2002 edition of "The Scott Report: AMR Deployments in America(C)" (a leading industry report on AMR deployments in all utility industries), AMR units shipped for the past five years by the top 10 vendors were as follows: -35-
- ----------------------------------------------------------------------------- * VENDOR SHIPPED SHIPPED SHIPPED SHIPPED SHIPPED IN `01 IN `00 IN `99 IN `98 IN `97 - ----------------------------------------------------------------------------- Badger Meter 494,652 545,363 325,187 232,546 387,257 - ----------------------------------------------------------------------------- Invensys 357,597 264,508 128,761 149,407 119,219 - ----------------------------------------------------------------------------- Neptune 234,046 162,089 47,784 11,319 134,467 - ----------------------------------------------------------------------------- Itron 215,103 56,673 333,774 421,858 187,645 - ----------------------------------------------------------------------------- RAMAR 189,631 97,298 29,552 1,244 0 - ----------------------------------------------------------------------------- ABB 122,580 56,366 37,748 20,240 22,100 - ----------------------------------------------------------------------------- Datamatic.com 83,960 57,532 3,922 150 0 - ----------------------------------------------------------------------------- Master Meter 35,636 0 724 0 0 - ----------------------------------------------------------------------------- Hexagram 16,873 11,640 520 875 1,650 - ----------------------------------------------------------------------------- DCSI 2,500 13,148 0 0 20,000 - -----------------------------------------------------------------------------
* Taken From: The Scott Report: AMR Deployments in North America Copyright (C) 2002 by COGNYST Consulting, L.L.C., Pequannock, NJ 07440. All rights reserved. What is Badger's share of the U.S. market? Market share analysis needs to take into consideration utility meters and automatic meter reading. For the past three years, Badger Meter has consistently enjoyed a water meter market share of between 25 - 28% while our AMR market share averages more than 30%. One of the leading industry market reports on AMR deployments indicates that through 2001, Badger Meter was the overall market share leader with 35.4% of the total installed AMR market with 2.4 million units at 842 water utilities. Why are housing starts important to Badger Meter? Throughout the decade of the '90's, average annual housing starts were 1.374 million units. Since approximately 80% of these will be to homes served by municipal water supply, typically resulting in the installation of water meters, new housing is a significant portion of total annual meter sales. Who are Badger Meter's major competitors in the U.S. water meter industry? While Badger Meter enjoys the unique position as one of the largest independent producers of water meters and meter reading technologies in the world, we are certainly not without competitors. Over the course of the last two decades, several major international companies have acquired numerous water meter production facilities worldwide. Included as Badger's primary competitors in the United States are Neptune Technology Group, Inc. (previously, Schlumberger Industries Resource Management Division); Invensys Technologies (previously called Rockwell or Sensus) and the Water Meter Division of ABB Kent. Smaller competitors also include Master Meter, a subsidiary of ARAD from Israel, Hersey Meter and Metron-Farnier, LLC. What is Badger Meter's current capacity for manufacturing water meters? Similar to other manufacturing companies, any calculation of manufacturing capacity is a combination of multiple factors, including product mix, shifts worked, production bottlenecks, individual machine output, etc. In general terms, Badger Meter's historical capacity (prior to 2000) for water meter production was approximately 1.5 million meters per year. However, Badger Meter completed a major capacity expansion in 2000. This expansion included major expenditures for a facility addition in Milwaukee, Wisconsin, as well as significant expenditures for water meter manufacturing and assembly equipment in both the Milwaukee and the Nogales, Mexico facilities. This expansion increased water meter manufacturing capacity to approximately 2.5 million meters per year. Actual water meter production in 2000 totaled 1.6 million meters, or approximately 65% of capacity. Assuming a consistent mix of products, management believes that water meter production and sales could increase significantly over the next few years with only minor investments in auxiliary manufacturing equipment. -36- What new water meter products are being introduced by Badger Meter? COMPOUND SERIES WATER METERS: Badger Meter's Compound Series water meter line, sizes 2" through 6", measure the broadest flow range of meters used by water utilities. Typically used in well-populated buildings where water use varies throughout the day (such as hospitals, universities or apartment complexes), the compound meter provides remarkable low flow accuracy due to measurement through a positive displacement measurement chamber, as well as outstanding high flow accuracy due to incorporating an advanced turbine meter technology. The Recordall(R) compound series water meters use the same field-proven turbine technology as the Recordall Turbo Series meters. One of the most significant features of the new compound series meter is a dramatic improvement in crossover accuracy. Crossover accuracy refers to the meter accuracy at flow rates changing from low flow to high flow and back to low flow through the two measuring elements. Coupled with this vast improvement in crossover accuracy is increased simplicity of design resulting in reduced maintenance in the field. RET(TM): Most water utilities require connectivity to process control instrumentation. To simplify and improve the interface to process control equipment, Badger introduced the Recordall Electronic Transmitter (RET(TM)). The RET incorporates numerous improvements over other transmitting devices currently used in the water industry. The electronics are housed in a glass and copper package which utilizes the advanced sealing system of Badger's RTR(R), field-proven -- with millions of units in use throughout North America. The RET provides scaled and unscaled digital outputs and an optional 4-20 mA signal output. The RET is compatible with all Recordall(R) positive displacement, turbine and compound meters. MAGNETOFLOW(R) ELECTROMAGNETIC METER: The commercial market segment within the water utility industry is benefiting from Badger's Magnetoflow(R) electromagnetic meter -- a sophisticated non-intrusive metering technology ideally suited to specific applications of water and wastewater utilities. By combining Magnetoflow electromagnetic meters with the Cybersensor(TM) AMR products, Badger is able to offer an exclusive capability to water and wastewater utilities for satellite reading of meters in remote or difficult locations. CYBERSENSOR(TM) SATELLITE COMMUNICATION: Cybersensor technology incorporates satellite communication capability to provide automatic reporting of meter activity from any location. Data gathered via the Cybersensor technology is delivered to the utility via Cybersensor's Internet server. It's a real breakthrough in AMR technologies, and Badger Meter is Cybersensor's exclusive partner for the water market. NEW ORION(R) RF SYSTEM: In June of 2002, Badger Meter previewed Orion, a new radio frequency based automatic meter reading system, at a major industry tradeshow. With the advanced Orion technology, utility customers can easily upgrade their meter reading system. Orion is designed for maximum flexibility to meet the various system and application needs of even the smallest water municipality. No FCC licensing is required! Customers will get faster meter reading, greater accuracy and can eliminate the need for estimated readings. Plus, with optional features like leak detection and GPS mapping programs, customers can tailor Orion to fit their system's needs. AMR technology has never been more accessible to water utilities. Orion(R) is a registered trademark of Badger Meter, Inc. Who are Badger's major alliance partners and why are they important? For almost one hundred years, Badger has been a leader in flow measurement technology as is evident by our strong market share within the water utility industry. We have strengthened our capability through alliances with other recognized leaders in flow measurement technology. Included in this group is H. Meinecke AG of Hannover, Germany, the world's largest producer of bulk water meters used in commercial applications. The alliance has developed turbine water meter technology that is world class. Through a close alignment with Ames Company, Inc., Division of Watts Industries, Badger has developed a superior line of water meters for the utility fire service applications. These are water meters that are used in commercial and industrial buildings where fire protection systems are installed. Requirements for these meters include rigorous testing along with approval under and conformance to Underwriters Laboratories Inc. and Factory Mutual Insurance Co. standards. -37- In the field of AMR, Badger recognized the need to cooperate with industry leaders in communication technology in order to provide water utilities with product solutions that meet their needs. To that end, several alliances have been developed. - -------------------------------------------------------------------------------- [PHOTO] For more than a decade, Badger Meter has had a distribution agreement with American Meter Company, marketing the TRACE(R) radio frequency AMR technology to the water utility industry. - -------------------------------------------------------------------------------- More recently, Badger Meter and Itron, [PHOTO] Inc., the world's largest provider of AMR products and systems, have executed a joint marketing and distribution agreement. Joint marketing efforts of Badger and Itron have resulted in AMR and meter system sales to major utilities in the United States, such as Philadelphia, Houston and Milwaukee. - -------------------------------------------------------------------------------- Cybersensor is the latest AMR technology added to Badger's portfolio. This advanced form of AMR via satellite communication is designed for use with remote, high-dollar revenue generating utility meters, and Badger Meter has exclusive rights to this technology in the water market. This advanced technology sets a new standard in AMR communication capability. Badger Meter also has a marketing agreement with Honeywell DMC Services that will enable Badger to offer its customers not only meters and automatic meter reading technologies, but also a full line of related services including needs assessment, financing, implementation, meter reading and billing. - -------------------------------------------------------------------------------- MEXICAN WATER METER MARKET Badger Meter has a significant installed based of automatic meter reading systems in Mexico, most notably in Mexico City. We expect to see opportunities in Mexican water meter markets as the new government moves forward in its efforts to improve the fresh water situation in Mexico. In February of 2001, Mexican President Vicente Fox stated that "the water problem in this country in the next ten years requires investments worth $30 billion." He further stated that one source of the funding "would be to charge real prices for water throughout our national territory." Such an initiative would require investments in metering systems. Badger is currently pursuing opportunities to sell water meters and related systems to various Mexican communities. [PHOTO] -38- OTHER INDUSTRIAL METER MARKETS Badger Meter offers a wide range of flow meters for industrial applications. These meters include: - Research Control electromagnetic flow meters that measure extremely low flows, corrosive fluids, sanitary fluids and batching processes. [PHOTO] - Electromagnetic flow meters (under the name "Magnetoflow(R)") that measure a large variety of fluids used in various industries, including food and beverage, pharmaceutical, chemical and mining. - Oscillating piston meters that handle most fluids regardless of viscosity in areas such as batching, inventory control and process transfer of fluids. - Concrete meters and dispensing systems that are interfaced with computer batching systems to measure and add chemicals to concrete. [PHOTO] Click on the following to review related topics: [ ] What new industrial meter products are being introduced by Badger Meter? What new industrial meter products are being introduced by Badger Meter? The principal area for development in the Company's other industrial products is with the electromagnetic flow meters product line. The Company expects to introduce a new version of its Magnetoflow(R) product line later this year. The new model will have enhanced features for both the utility and industrial markets. VALVE MARKET Badger Meter offers a line of small valves under the name "Research Control(R) Valves." These valves are used to control the flow of fluids in a wide variety of applications in medical research, pharmaceutical production, food and beverage, petroleum, and heating, ventilation and air conditioning. These valves are sold throughout the world, with the largest sales in North America and Europe. Click on the following to review related topics: [ ] How large is the valve market and how fast is it growing? [ ] What new valve products are being introduced by Badger Meter? How large is the valve market and how fast is it growing? It is difficult to ascertain Badger Meter's market share for control valves. Badger Meter participates in a niche market for small, precision control valves for research facilities and industrial process industries. Past studies have indicated that the Company has over a 65% market share in the domestic market and approximately a 15% market share of the world market for 1/4" diameter control valves. The same studies indicated that the Company has over a 50% market share of the domestic market and approximately a 10% market share of the world market for 1/2" diameter control valves. -39- North American (U.S. and Canada) demand for all industrial control valves reached $2.1 billion in 1998 representing the world's largest market for industrial control valves. North American demand for industrial control valves is projected to increase 6.0% a year to $2.8 billion in 2003. World demand for industrial control valves reached $10.1 billion in 1998. World demand for industrial control valves is projected to increase 6.2% a year to $13.4 billion in 2003. What new valve products are being introduced by Badger Meter? Badger Meter acquired a small product line of magnetic flow meters for low flows in the latter part of 2000. The low flow magnetic flow meters are an ideal compliment to the Research Control valves. The Research Control Mag was launched in the first quarter of 2001. Badger Meter recently introduced a new actuator for its larger size valves (3/4" to 2"). There were some industrial applications where the performance of our current actuator was not sufficient to produce enough shut-off force. The new actuator produces over 60 square inches of shut-off force, which is nearly double the capacity of the current model. Badger Meter is currently developing products to further update its line of electric valve actuators and to address the growing market for intelligent valve positioners. AUTOMOTIVE FLUIDS MARKET Badger Meter serves the automotive fluids market with a full line of meters that measure and dispense automotive fluids such as oil, grease and transmission fluids. These meters are used in industrial applications throughout the world and are marketed through approximately 25 OEM's in North America and Europe - the two largest markets for our products. Click on the following to review related topics: [ ] How large is the automotive fluids market and how fast is it growing? [ ] What new automotive fluids products are being introduced by Badger Meter? How large is the automotive fluids market and how fast is it growing? The domestic market for Badger Meter's automotive fluids products is estimated at just over $10 million annually while the world market is estimated at approximately $20 million annually. The Company estimated its current market share to be approximately 50% in both the domestic and world markets. The annual growth rate for the automotive fluids market is estimated at less than 5%. What new automotive fluids products are being introduced by Badger Meter? Badger recently introduced both an advanced series and a standard series Electronic Preset Meter (EPM). Additionally, Badger Meter Europe has introduced a new radio frequency oil management system (RF-OMS) which greatly improves the control and management of automotive fluid products. A U.S. version of the product is expected to be released later this year. Badger expects to release the new Oval Gear Junior (OG-JR), a low-feature, end-of-hose meter, handle, swivel and nozzle configuration, later in the year. FINANCIAL OUTLOOK Earnings for the first and second quarters of 2002 have rebounded from those same periods in 2001 due to stronger sales of residential and commercial water meter products. Markets for our industrial products remain sluggish. While the timing of the recovery of the industrial markets is uncertain, we anticipate that our sales will continue to track their overall industries. We continue to believe the long-term outlook for Badger Meter is positive. Our utility product line has excellent future growth potential as we continue to pursue new sales opportunities and develop new products. The new products include a recently introduced series of non-leaded water meters and the planned introduction of a low-cost AMR product later in the year. Long-term, automatic meter reading continues to be our most significant growth opportunity, with only 10% of existing meters currently converted to this type of system. -40- In the second quarter of 2002, the Company completed two acquisitions: Data Industrial Corporation of Mattapoisett, Massachusetts, and Meca Plus Equipements of Nancy, France. The acquisitions are consistent with our strategy to expand our line of industrial products for niche markets. They also provide synergies with Badger Meter's product offerings. While the acquisitions contributed minimally to earnings in the second quarter, we expect a favorable impact from both of these companies in future quarters. We believe these opportunities, combined with our strong balance sheet, position Badger Meter for continued success in the future. We have the resources and sufficient manufacturing capacity to support our future growth. We are confident that Badger Meter has the products and services to answer our customers' needs. We are also confident that our marketplace will provide us with growth opportunities as we move forward. -41- EX-99.1 6 c71084exv99w1.txt STATEMENT OF THE CHIEF EXECUTIVE OFFICER EXHIBIT (99.1) WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 Solely for the purpose of complying with 18 U.S.C. Section 1350, I, the undersigned Chief Executive Officer of Badger Meter, Inc., (the "Company), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13 (a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. BADGER METER, INC. Dated: August 9, 2002 By /S/ Richard A. Meeusen ---------------------- Richard A. Meeusen President and Chief Executive Officer -42- EX-99.2 7 c71084exv99w2.txt STATEMENT OF THE CHIEF FINANCIAL OFFICER EXHIBIT (99.2) WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 Solely for the purpose of complying with 18 U.S.C. Section 1350, I, the undersigned Chief Financial Officer of Badger Meter, Inc., (the "Company), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13 (a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. BADGER METER, INC. Dated: August 9, 2002 By /S/ Richard E. Johnson ---------------------- Richard E. Johnson Vice President-Finance, Treasurer and Chief Financial Officer -43- -----END PRIVACY-ENHANCED MESSAGE-----