SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss.240.14a-12
Bandag, Incorporated
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
BANDAG, INCORPORATED [GRAPHIC OMITTED]
Bandag Headquarters BANDAG(R)
2905 North Highway 61
Muscatine, Iowa 52761-5886
April 11, 2002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 14, 2002
To The Shareholders:
The Annual Meeting of the Shareholders of Bandag, Incorporated, an Iowa
corporation, will be held at the Bandag, Incorporated Learning Center, 2000
Bandag Drive, Muscatine, Iowa, on May 14, 2002, commencing at ten o'clock a.m.,
Central Daylight Time, for the following purposes:
(1) To elect two directors for terms of three years.
(2) To act upon a proposal to amend the Corporation's Restated Articles of
Incorporation, as amended, to limit directors' liability.
(3) To ratify the selection of Ernst & Young LLP as independent auditors
of the Corporation for the fiscal year ending December 31, 2002.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed March 26, 2002 as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
You are invited to attend the meeting; however, if you do not expect to
attend in person, you are urged to sign, date and return immediately the
enclosed Proxy, which is solicited by the Board of Directors. You may revoke
your Proxy and vote in person should you attend the meeting.
By Order of the Board of Directors
/s/ Warren W. Heidbreder
WARREN W. HEIDBREDER, Secretary
BANDAG, INCORPORATED [GRAPHIC OMITTED]
Bandag Headquarters BANDAG(R)
2905 North Highway 61
Muscatine, Iowa 52761-5886
April 11, 2002
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bandag, Incorporated (the "Corporation") to
be voted at the Annual Meeting of the Shareholders of the Corporation to be held
on Tuesday, May 14, 2002, or at any adjournment thereof, for the purposes set
forth in the foregoing Notice of Annual Meeting. Any shareholder giving a proxy
may revoke it at any time prior to its exercise.
Shareholders of record at the close of business on March 26, 2002, will be
entitled to vote at the meeting or any adjournment thereof. At the close of
business on March 26, 2002, there were 9,080,138 outstanding $1.00 par value
shares of Common Stock and 2,037,200 outstanding $1.00 par value shares of Class
B Common Stock. Each share of Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes at the meeting.
The Corporation's Annual Report for the fiscal year ended December 31,
2001, this Proxy Statement and the enclosed form of proxy are being mailed to
shareholders on or about April 11, 2002.
The following table sets forth information as to the Common, Class A Common
and Class B Common shares of the Corporation beneficially owned by each director
and director-nominee, each of the executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group as of
March 26, 2002:
================================================================================
Percentage of
Aggregate
Voting Power
Percentage of Common
of Outstanding Stock
Amount Stock of and Class B
Directors, Nominees and Beneficially Respective Common
Executive Officers Owned[1][2] Class[1] Stock**
- --------------------------------------------------------------------------------
Lucille A. Carver
Common Stock 2,615,685 29% 47%
Class A Common Stock 3,735,756 39%
Class B Common Stock 1,114,746 55%
- --------------------------------------------------------------------------------
Martin G. Carver [3]
Common Stock 80,659 1% 17%
Class A Common Stock 564,099 6%
Class B Common Stock 502,622 25%
- --------------------------------------------------------------------------------
2
================================================================================
Percentage of
Aggregate
Voting Power
Percentage of Common
of Outstanding Stock
Amount Stock of and Class B
Directors, Nominees and Beneficially Respective Common
Executive Officers Owned[1][2] Class[1] Stock**
- --------------------------------------------------------------------------------
Roy J. Carver, Jr.
Common Stock -0- -0- 14%
Class A Common Stock 184,325 2%
Class B Common Stock 400,732 20%
- --------------------------------------------------------------------------------
Robert T. Blanchard
Common Stock 200 -0-
Class A Common Stock 5,325 * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
Gary E. Dewel
Common Stock -0- -0-
Class A Common Stock 6,525 * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
James R. Everline
Common Stock 100 * *
Class A Common Stock 7,275 *
Class B Common Stock 350 *
- --------------------------------------------------------------------------------
Phillip J. Hanrahan
Common Stock -0- -0-
Class A Common Stock 5,825 * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
Edgar D. Jannotta
Common Stock 7,000 *
Class A Common Stock 12,325 * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
R. Stephen Newman
Common Stock 2,500[4] *
Class A Common Stock 11,325[5] * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
Nathaniel L. Derby II
Common Stock 5,542 *
Class A Common Stock 25,760 * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
Warren W. Heidbreder
Common Stock 4,838[6] * *
Class A Common Stock 32,004[7] *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
3
================================================================================
Percentage of
Aggregate
Voting Power
Percentage of Common
of Outstanding Stock
Amount Stock of and Class B
Directors, Nominees and Beneficially Respective Common
Executive Officers Owned[1][2] Class[1] Stock**
- --------------------------------------------------------------------------------
John C. McErlane
Common Stock 1,161[8] * *
Class A Common Stock 22,642[9] *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
Charles W. Vesey
Common Stock 5,774[10] *
Class A Common Stock 10,657[11] * *
Class B Common Stock -0- -0-
- --------------------------------------------------------------------------------
All Directors, Nominees and
Executive Officers as a
Group (18 Persons)
Common Stock 2,727,348 30% 78%
Class A Common Stock 4,654,351 49%
Class B Common Stock 2,018,450 99%
- --------------------------------------------------------------------------------
* Shares owned constitute less than 1% of shares outstanding and less than 1%
of votes entitled to be cast.
** Shares of Class A Common Stock are non-voting.
[1] Beneficial owners exercise both sole voting and sole investment power
unless otherwise stated. The Class B Common Stock is convertible on a
share-for-share basis into Common Stock at the option of the shareholder.
As a result, pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of
1934, a shareholder is deemed to have beneficial ownership of the shares of
Common Stock which such shareholder may acquire upon conversion of the
Class B Common Stock. In order to avoid overstatement, the amount of Common
Stock beneficially owned does not take into account such shares of Common
Stock which may be acquired upon conversion (an amount which is equal to
the number of shares of Class B Common Stock held by a shareholder). The
percentage of outstanding Common Stock does not take into account shares of
Common Stock which may be issued upon conversion of the Class B Common
Stock.
[2] Includes the specified number of shares of Class A Common Stock which the
following individuals may acquire pursuant to the exercise of stock options
within 60 days after March 26, 2002: Lucille A. Carver - 5,325; Martin G.
Carver - 43,700; Roy J. Carver, Jr. - 5,325; Robert T. Blanchard - 5,325;
Gary E. Dewel - 5,325; James R. Everline - 5,325; Phillip J. Hanrahan -
5,325; Edgar D. Jannotta - 5,325; R. Stephen Newman - 5,325; Nathaniel L.
Derby II - 11,300; Warren W. Heidbreder - 16,300; John C. McErlane -
15,100; Charles W. Vesey - 5,560.
4
[3] Mr. Carver disclaims beneficial ownership of 52,554 shares of Common Stock,
12,376 shares of Class A Common Stock and 525 shares of Class B Common
Stock held by members of his family.
[4] Mr. Newman shares voting and investment power over 946 shares with his
wife.
[5] Mr. Newman shares investment power over 2,946 shares with his wife.
[6] Mr. Heidbreder shares voting and investment power over 126 shares with his
wife.
[7] Mr. Heidbreder shares investment power over 4,942 shares with his wife.
[8] Mr. McErlane shares voting and investment power over 365 shares with his
wife.
[9] Mr. McErlane shares investment power over 488 shares with his wife.
[10] Mr. Vesey shares voting and investment power over 1,800 shares with his
wife.
[11] Mr. Vesey shares investment power over 1,400 shares with his wife.
Shareholders Owning More Than Five Percent. The following table provides
information concerning persons known by the Corporation to beneficially own more
than five percent of any class of the Corporation's voting securities as of
March 26, 2002, other than the ownership of Lucille A. Carver, Martin G. Carver
and Roy J. Carver, Jr., which is contained in the previous table:
================================================================================
Percentage
Of
Amount Outstanding Percentage of
Beneficially Common Aggregate
Name and Address Owned Stock Voting Power
- --------------------------------------------------------------------------------
Dimensional Fund Advisors, Inc. (1)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 582,500 6.4% 1.97%
- --------------------------------------------------------------------------------
Capital Group International, Inc. (2) 987,600 (2) 10.9% 3.4%
11100 Santa Monica Blvd.
Los Angeles, CA 90025-3384
- --------------------------------------------------------------------------------
(1) Information shown is based on a Schedule 13G filed with the Securities and
Exchange Commission for the period ended December 31, 2001 by Dimensional
Fund Advisors Inc. Of the shares shown, Dimensional Fund Advisors Inc. has
sole voting power over all such shares and has sole power to dispose or
direct the disposition of all such shares.
(2) Shares shown as beneficially owned is based on a jointly filed Schedule 13G
filed with the Securities and Exchange Commission for the period ended
December 31, 2001 by Capital Group International, Inc. and Capital Guardian
Trust Company, affiliated entities. Of the shares shown, such parties have
sole voting power over
5
901,600 of such shares, and shared voting power over none of such shares
and have sole power to dispose or direct the disposition of all such
shares.
Proposal No. 1 - ELECTION OF DIRECTORS
The Articles of Incorporation require election of directors to staggered
terms of three years. Two nominees this year are to be elected for three-year
terms. Mrs. Lucille A. Carver, a director since 1957 and the widow of the
founder of the Corporation, Roy J. Carver, will not be standing for election,
resulting in a vacancy on the Board of Directors. The Board of Directors has
discretion to either amend the Corporation's By-laws to reduce the number of
directors, thereby eliminating the vacancy, or to appoint an interim director to
serve until the next annual meeting of shareholders. The Board has not yet made
a decision, but intends to address the matter in the near future.
Proxies will be voted for the election of each of the nominees listed
below, unless the shareholder giving the proxy votes against, or abstains from
voting for, any nominee. If, as a result of unforeseen circumstances, any such
nominee shall be unable to serve as director, proxies will be voted for the
election of such person or persons as the Board of Directors may select.
Information about the nominees is set forth below:
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
-------------------------------------------
MARTIN G. CARVER, age 53, was elected Chairman of the Board effective June
23, 1981, Chief Executive Officer effective May 18, 1982, and President
effective May 25, 1983. Mr. Carver was also Vice Chairman of the Board from
January 5, 1981 to June 23, 1981. He is a member of the Executive Committee,
Nominating Committee and Strategic Planning Committee. Mr. Carver has been a
Director since 1978.
EDGAR D. JANNOTTA, age 70. In March 2001, Mr. Jannotta became Chairman of
William Blair & Company, L.L.C. and also Chairman of the firm's Executive
Committee. Previously, Mr. Jannotta served as Senior Director of William Blair &
Company, L.L.C. (January 1996 to March 2001); Senior Director of William Blair &
Company, a partnership (January 1995 to January 1996) and also served as
Managing Partner for more than five years. He holds directorships in AAR Corp.,
Aon Corporation, Exelon Corporation, Inforte Corp. and Molex Incorporated.
William Blair & Company, L.L.C. provided investment banking services to the
Corporation in 2001 and the Corporation anticipates that services may be
provided to the Corporation in the current fiscal year. He is a member of the
Nominating Committee. Mr. Jannotta has been a Director since 1973.
DIRECTORS CONTINUING IN OFFICE
------------------------------
ROBERT T. BLANCHARD, age 57, since November 1999 has been President of
Strategic & Marketing Services, a consulting firm. On November 1, 1999, Mr.
Blanchard retired from The Procter & Gamble Company where he had been employed
since 1967 and had held numerous positions, including President-Global Skin Care
and Cosmetics (January 1, 1999 to November 1, 1999), President, North American
Beauty Care Sector (1992 to 1998), Vice President/General Manager - Northern
European Division, Vice President/General Manager - Beverages Division, and
Group Vice President, Global Strategic Planning - Health and Beauty Care. Mr.
Blanchard holds directorships in Best
6
Buy Co., Inc., a retailer of consumer electronics, computers and software and
Signet Group, plc., retail jewelry. He is a member of the Audit Committee,
Management Continuity and Compensation Committee and Strategic Planning
Committee. Mr. Blanchard has been a Director since May 1996. Mr. Blanchard's
term expires in 2003.
GARY E. DEWEL, age 59, retired. Mr. Dewel was Executive Vice President,
Supply Chain, for Clarion Technologies, Inc., Schaumburg, Illinois, an injection
molding business supplier to the automotive industry, until his retirement in
April 2000. Previously, he was Vice President, Supply Chain, for Solutia Inc., a
spinoff of the chemical businesses of Monsanto Company (1997-April 1999); Vice
President, Supply Chain, of Monsanto Company (1994-August 1997) and held several
Vice President positions with Navistar International Corporation (1979-1993).
Mr. Dewel was elected Vice Chairman of the Board in May 2000. He is a member of
the Audit Committee, Executive Committee, Management Continuity and Compensation
Committee and Strategic Planning Committee. Mr. Dewel has been a Director since
August 1997. Mr. Dewel's term expires in 2003.
R. STEPHEN NEWMAN, age 58, since November 2001, has served as President of
Observer North America, an operating unit of Observer AB, listed on the
Stockholm Stock Exchange. Prior to November 2001, Mr. Newman was President and
Chief Executive Officer of Primedia Information, Inc., an operating unit of
Primedia Inc. Mr. Newman continues as Chief Executive Officer of Bacon's
Information, Inc., where he served as Chief Executive Officer and President from
1994 to November 2001, and President and Chief Operating Officer from 1990 to
1994. Mr. Newman is a member of the Audit Committee, Management Continuity and
Compensation Committee and Strategic Planning Committee. Mr. Newman has been a
Director since 1983. Mr. Newman's term expires in 2003.
ROY J. CARVER, JR., age 58, since June 1982 has been Chairman of the Board
of Directors of Carver Pump Company, Muscatine, Iowa, a builder of centrifugal
pumps. Mr. Carver is President of Carver Aero, Inc., which operates fixed base
operations at airports in Muscatine, Iowa and Davenport, Iowa and President of
Carver Hardware, Inc., which operates a chain of hardware stores. Mr. Carver
holds directorships in Catalyst, Inc. and Iowa First Bancshares Corp. He is a
member of the Nominating Committee and the Strategic Planning Committee. Mr.
Carver has been a Director since 1982. Mr. Carver's term expires in 2004.
JAMES R. EVERLINE, age 60, is President of Everline & Co., a mergers and
acquisitions/management consulting company. Previously, Mr. Everline was
President, Investment Banking Division, of Henry & Company (1990-December 1991).
Henry & Company is engaged in the venture capital and investment banking
business. Prior to Mr. Everline's employment by Henry & Company, he was a
Partner of Founders Court Investors Inc. (1988-1989) and served as Vice
President, Capital Markets Group, Bank of America (1981-1988). He is a member of
the Audit Committee, Executive Committee, Management Continuity and Compensation
Committee and Nominating Committee. Mr. Everline has been a Director since 1982.
Mr. Everline's term expires in 2004.
7
PHILLIP J. HANRAHAN, age 62, has been for more than five years a partner in
the Milwaukee law firm of Foley & Lardner. In 2001, the Corporation paid fees
for legal services to Foley & Lardner, and the Corporation anticipates that
similar services may be provided by Foley & Lardner in the current fiscal year.
Mr. Hanrahan's cash fees as a Director are paid to Foley & Lardner, which
credits the sums to the Corporation's legal services account. Mr. Hanrahan is a
member of the Executive Committee. Mr. Hanrahan has been a Director since August
1997. Mr. Hanrahan's term expires in 2004.
Directors are elected by a majority of the votes cast (assuming a quorum is
present). Consequently, any shares not voted at the Annual Meeting, whether due
to abstentions, broker non-votes or otherwise, will have no impact on the
election of directors.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met seven times in 2001.
The Audit Committee met nine times in 2001. The members of the Audit
Committee, whose names appear at the end of the Audit Committee Report herein,
are independent (as independence is defined in the listing standards of the New
York Stock Exchange). The major functions of the Audit Committee are to assist
the Board of Directors in: monitoring the integrity of published financial
statements and accounting principles; appointing of, and overseeing of, the
relationship with the independent auditors; monitoring compliance with
appropriate regulations regarding financial reporting and audit committee
functioning; and carrying out other functions which may, from time to time, be
assigned to the Audit Committee by the Board of Directors. See "Audit Committee
Report" herein. The Board of Directors has adopted a written charter for the
Audit Committee.
The Management Continuity and Compensation Committee met four times in
2001; its functions are to review, evaluate and determine executive level
compensation, to recommend to the Board of Directors the election of corporate
officers, to administer the Stock Award Plan and the Restricted Stock Grant
Plan, including the awarding of options and restricted stock grants under the
Stock Award Plan, all pursuant to the terms and conditions of such plans.
The Nominating Committee met two times in 2001; its duties relate to the
evaluation and recommendation to the Board of Directors of prospective
candidates for election as directors of the Corporation. The Nominating
Committee will consider recommended nominations for the position of director
which are submitted in writing by the shareholders and addressed to the
Nominating Committee in care of the Corporation at Muscatine, Iowa.
Mrs. Lucille A. Carver attended less than 75% of the aggregate number of
Board of Directors meetings.
8
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
------------------------------------------------
Summary Compensation Information
The following table sets forth certain information concerning compensation paid
for the last three fiscal years to the Corporation's Chief Executive Officer and
each of its four other most highly compensated executive officers as of December
31, 2001, whose total cash compensation exceeded $100,000 for fiscal 2001. The
persons named in the table are sometimes referred to herein as the "named
executive officers."
Summary Compensation Table
--------------------------
========================================================================================================================
Long Term Compensation
========================================================================================================================
Other
Annual Restricted Options
Name and Principal Compensa- Stock (Number All Other
Position Year Salary Bonus tion(1) Award(s)[2] of Shares) Compensation[3]
========================================================================================================================
Martin G. Carver
Chairman of the Board, 2001 $428,500 $ -0- $ 667 $ -0- 50,400 $ 14,868
Chief Executive Officer 2000 400,000 -0- 681 391,875 47,900 23,044
and President 1999 486,539 -0- 681 -0- 24,100 14,086
- ------------------------------------------------------------------------------------------------------------------------
Warren W. Heidbreder
Vice President, Chief 2001 $306,000 $ -0- $ 1,248 $ -0- 19,300 $ 14,868
Financial Officer and 2000 292,500 -0- 681 144,375 17,600 23,044
Secretary 1999 320,625 -0- 681 -0- 9,000 14,086
- ------------------------------------------------------------------------------------------------------------------------
John C. McErlane
Vice President; 2001 $292,750 $ -0- $ 326 $ -0- 19,300 $ 13,915
President of Tire 2000 274,500 -0- 444 144,375 17,600 23,044
Distribution Systems, Inc. 1999 300,894 -0- 444 -0- 7,000 14,086
- ------------------------------------------------------------------------------------------------------------------------
Nathaniel L. Derby II 2001 $288,500 $ -0- $ 1,248 $ -0- 13,300 $ 14,868
Vice President, 2000 279,000 -0- 1,275 103,125 12,600 23,044
Manufacturing Design 1999 305,827 -0- 1,275 -0- 6,000 14,086
- ------------------------------------------------------------------------------------------------------------------------
Charles W. Vesey 2001 $253,713 $ -0- $ 1,248 $ -0- 7,000 $ 18,427
Vice President and 2000 244,813 -0- 1,275 -0- 10,400 23,044
Corporate Controller 1999 244,813 -0- 1,275 -0- -0- 14,086
========================================================================================================================
[1] Amounts shown represent certain fringe benefits.
[2] At December 31, 2001, the number of shares held and the aggregate market
value of restricted stock held by the named executive officers are as
follows: Martin G. Carver, 5,560 shares Common Stock, value $193,266, and
21,653 shares Class A Common Stock, value $649,590; Warren W. Heidbreder,
1,390 shares Common Stock, value $48,316, and 7,319 shares Class A Common
Stock, value $219,570; John C. McErlane, 585 shares Common Stock, value
$20,335, and 6,514 shares Class A Common Stock, value $195,420; ; Nathaniel
L. Derby II, 1,310 shares Common Stock, value $45,536, and 5,545 shares
Class A Common Stock, value $166,350; and Charles W. Vesey, 715 shares
Common Stock, value $24,853, and 715 shares Class A Common Stock, value
$21,450. Dividends are paid on the shares of restricted stock prior to
vesting.
9
[3] Of the amounts shown in this column for 2001, $14,250 is the Corporation's
contribution under its Salaried Profit Sharing, Retirement and Savings Plan
for Martin G. Carver, Warren W. Heidbreder and Nathaniel L. Derby II;
$13,915 for John C. McErlane and $12,930 for Charles W. Vesey (of which,
because of limitations under the Internal Revenue Code of 1986, as amended,
$8,500 was paid into such Plan for Martin G. Carver, Warren W. Heidbreder,
Nathaniel L. Derby II, Charles W. Vesey; $2,649 for John C. McErlane and
the balance to be paid by the Corporation outside such Plan); and $618 is
the Corporation's contribution to its Bandag Security Program, a
combination defined benefit and defined contribution plan, for Martin G.
Carver, Warren W. Heidbreder, Nathaniel L. Derby II and Charles W. Vesey.
The remainder of the amount shown for Mr. Vesey in 2001 is $4,879,
representing cash paid in lieu of vacation to Mr. Vesey.
Stock Options
The following table contains information concerning the grant of stock
options under the Corporation's Stock Award Plan for the year ended December 31,
2001, all of which are reflected above in the Corporation's Summary Compensation
Table.
Option Grants in Last Fiscal Year
Percentage of
Shares Total Options
Underlying Granted to all Exercise
Options Employees in Price per Expiration Grant Date
Name Granted(1) Fiscal Year Share (2) Date (3) Present Value (4)
---- ---------- ----------- --------- --------- -----------------
Martin G. Carver 50,400 13.5% $24.35 3/13/11 $339,696
Warren W. Heidbreder 19,300 5.2% $24.35 3/13/11 $130,082
John C. McErlane 19,300 5.2% $24.35 3/13/11 $130,082
Nathaniel L. Derby II 13,300 3.6% $24.35 3/13/11 $ 89,642
Charles W. Vesey 7,000 1.9% $24.35 3/13/11 $ 47,180
(1) These options are options to purchase Class A Common Stock and are
nonqualified stock options under the Internal Revenue Code.
(2) An option holder can pay the exercise price of options in cash, by
delivering previously issued shares of the Corporation's Common Stock
and/or Class A Common Stock, or a combination of both.
(3) Options granted to all participants are exercisable at the rate of 20% per
year, beginning March 13, 2002.
(4) The option values presented are based on the Black-Scholes option pricing
model adapted for use in valuing stock options. The actual value, if any,
that an optionee may realize upon exercise will depend on the excess of the
market price of the Class A Common Stock over the option exercise price on
the date the option is exercised. There is no assurance that the actual
value realized by an optionee upon the exercise of an option will be at or
near the value estimated under the Black-Scholes model. The estimated
values under the Black-Scholes model are based on arbitrary assumptions as
to variables such as interest rates, the stock price volatility and future
dividend yield, including the following: (a) an assumed United States
Treasury security rate of 5.3%; (b) stock price volatility of 31.3% (based
on the three-year weekly stock price history ending January 31, 2001); and
(c) a dividend yield of 4.1% (based on the weighted average dividend yield
of the Class A Common Stock for the one-year period ended January 31,
2001).
The following table sets forth information regarding the exercise of stock
options and the fiscal year-end value of unexercised options held by the named
executive officers:
10
Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 2001 December 31, 2001[1]
Shares ----------------- --------------------
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Martin G. Carver 40,000 $62,600 19,220 103,180 $ 85,322 $626,048
Warren W. Heidbreder --- --- 7,120 38,780 31,350 234,445
John C. McErlane --- --- 6,320 37,580 31,350 234,445
Nathaniel L. Derby II --- --- 4,920 26,980 22,444 164,920
Charles W. Vesey --- --- 2,080 15,320 18,525 113,650
[1] The dollar values are calculated by determining the difference between the fair market value of the
underlying Class A Common Stock at December 31, 2001 and the exercise price of the options.
Pension Plan Benefits. The following table sets forth annual normal retirement
age pension benefits under the Bandag Salaried Pension Plan at the specified
remuneration and years-of-service classifications. The table assumes retirement
in 2001. To the extent benefits are not paid under the Salaried Pension Plan due
to limitations under the Internal Revenue Code of 1986, as amended, they are
paid by the Corporation.
PENSION PLAN TABLE
Annual Pension Per Years of Service
-----------------------------------
Highest 5-Year
Average Annual
Compensation 5-Years 10-Years 15-Years 20-Years 25-Years 30-Years 35-Years
------------ ------- -------- -------- -------- -------- -------- --------
$ 50,000 $ 2,844 $ 5,688 $ 8,531 $ 11,100 $ 13,600 $ 16,100 $ 17,850
$ 100,000 $ 6,906 $ 13,813 $ 20,719 $ 26,100 $ 31,100 $ 36,100 $ 39,600
$ 150,000 $ 10,969 $ 21,938 $ 32,906 $ 41,100 $ 48,600 $ 56,100 $ 61,350
$ 200,000 $ 15,031 $ 30,063 $ 45,094 $ 56,100 $ 66,100 $ 76,100 $ 82,100
$ 250,000 $ 19,094 $ 38,188 $ 57,281 $ 71,100 $ 83,600 $ 96,100 $ 104,850
$ 300,000 $ 21,369 $ 42,738 $ 64,106 $ 79,500 $ 93,400 $ 107,300 $ 117,030
$ 350,000 $ 21,369 $ 42,738 $ 64,106 $ 79,500 $ 93,400 $ 107,300 $ 117,030
$ 400,000 $ 21,369 $ 42,738 $ 64,106 $ 79,500 $ 93,400 $ 107,300 $ 117,030
$ 450,000 $ 21,369 $ 42,738 $ 64,106 $ 79,500 $ 93,400 $ 107,300 $ 117,030
$ 500,000 $ 21,369 $ 42,738 $ 64,106 $ 79,500 $ 93,400 $ 107,300 $ 117,030
Pension amounts are based upon an employee's base salary and credited years
of service. The base salaries for each of the last three fiscal years to the
named executive
11
officers are set forth in the Summary Compensation Table under "Salary." As of
March 26, 2002, Messrs. Carver, Heidbreder, McErlane, Derby, and Vesey had
completed approximately 23, 20, 17, 31, and 31 years of credited service under
the Corporation's pension plan, respectively. Benefits shown in the table are
computed as a straight line single life annuity assuming retirement at age 65
and are not subject to offset for Social Security Benefits.
In addition, certain of the named executive officers also have a "Bandag
Security Program" benefit under the Bandag Salaried Pension Plan. The annual
defined benefit payable at age 62 for each of the following named executive
officers is fixed and is as follows: Martin G. Carver, $732; Warren W.
Heidbreder, $542; Nathaniel L. Derby II, $1,108; and Charles W. Vesey, $1,121.
Executive Officer Agreements
Each of the executive officers named in the Summary Compensation Table,
except Mr. Vesey, is a party to a Severance Agreement with the Corporation. The
Severance Agreements provide for severance benefits equal to the greater of
$1,000,000, $650,000, $620,000 and $610,000 for Messrs. Carver, Heidbreder,
Derby and McErlane, respectively, or an amount equal to twenty-four (24) months
base salary in the event of the executive's involuntary termination of
employment or voluntary termination for good cause, except for death, disability
or retirement. For purposes of the Severance Agreements, "good cause" means (i)
a 15% or greater reduction in the executive's base pay, (ii) a materially
adverse change, without the executive's prior written consent, in the nature or
scope of the executive's title or responsibilities, or (iii) the relocation of
the executive's principal place of employment by more than fifty (50) miles. The
Severance Agreements restrict the named executive officers from competing with
the Corporation for twenty-four months following termination of employment and
also contain extensive restrictions on disclosure of the Corporation's
confidential information.
Report of Management Continuity and Compensation Committee on Executive
Compensation
The Management Continuity and Compensation Committee of the Board of
Directors (the "Compensation Committee") makes all decisions regarding
compensation of the Corporation's executive officers, including the awarding of
stock options and restricted stock. The Compensation Committee is comprised of
four non-employee independent Directors. Set forth below is a report submitted
by the Compensation Committee addressing the Corporation's compensation policies
applicable to the Corporation's executive officers, including the named
executive officers in the Summary Compensation Table.
The Corporation's executive compensation strategy is designed to:
o Increase the alignment of executive compensation and rewards with the
interests of the Corporation's shareholders;
o Provide a closer linkage between executive compensation earned and the
short-term and long-term performance of the Corporation;
12
o Provide the opportunity to better position executive compensation with
competitive market levels as the Corporation's performance dictates;
and
o Recognize the role of executives in making the Corporation successful
and allow them to share in that success.
Bandag's Executive Compensation Plan
Under the Corporation's executive compensation plan, the total compensation
opportunity for each executive officer, including the Chief Executive Officer,
is based on a target level of total direct compensation for each individual
position. The total direct compensation target for each position approximates
the 60th percentile of competitive compensation (cash and stock) from executive
compensation surveys, which encompasses manufacturing companies with revenues at
or approximating $1 billion.
The actual level of total compensation an executive will achieve depends
upon a variety of factors, including the responsibilities of the position,
experience of the executive, current level of total compensation relative to the
target level, the financial performance of the Corporation, national trends, and
the Corporation's competitive need to retain and recruit the very best and most
capable individuals. In reviewing the Corporation's financial performance, the
Compensation Committee considers the Corporation's revenues, net income and net
income per share in light of the competitive and economic conditions during the
fiscal year. In addition, the Compensation Committee considers the Corporation's
financial performance resulting from investment in marketing programs, research
and development, plant, machinery, and equipment and in personnel and related
programs.
The Corporation's executive compensation plan consists of the following
components:
Base Salary
- -----------
Base salaries were established based on the pay-at-risk level appropriate
for each executive's job, including the Chief Executive Officer. For the Chief
Executive Officer, base salary represented 39% of the targeted total direct
compensation opportunity. For the other named executive officers, base salaries
averaged 61% of their targeted total direct compensation opportunity.
During 2001, executive officers, including the Chief Executive Officer
received a 4.2% increase based on the midpoint established for their role. The
midpoint is the base salary target under which an executive officer's salary is
administered. Under the midpoint compensation system, midpoints were used to
calculate the annual increase for each executive officer by multiplying the
midpoint (not the current base salary) by a percentage established by the
Compensation Committee. The resulting amount was then added to the current base
salary.
In determining the percentage increase for base salary, the Compensation
Committee considered a variety of factors, including inflation rate, the
Corporation's financial performance, and trends in salaried employee
compensation increases, as
13
disclosed by published salary budget forecasts. Future base pay increases will
be based on factors similar to those just discussed.
Annual Award Plan
- -----------------
Four members of the Senior Leadership Team (SLT), including the Chief
Executive Officer, are eligible for an annual award consisting of restricted
stock, based on achievement of the Corporation's established diluted
"earnings-per-share" (EPS) target. The shares of restricted stock are to be
awarded at the first meeting of the Compensation Committee following the release
of year-end results. If awarded, restricted shares under this plan vest three
years from the date of grant if the recipient is still employed by the
Corporation, and vest immediately in the event of death, disability, retirement
at age 60 with ten or more years of service, or change in corporate control.
Members of the SLT eligible to participate in this plan are Martin G. Carver,
Chief Executive Officer; Warren W. Heidbreder, Vice President, Chief Financial
Officer; Nathaniel L. Derby II, Vice President, Manufacturing Design; and John
C. McErlane, Vice President and President, Tire Distribution Systems, Inc., a
wholly owned subsidiary .
There were no awards of restricted stock granted to the four eligible
participants based on the Corporation's diluted EPS results for 2001.
Long-term Award Plan
- --------------------
Executive officers, including the Chief Executive Officer, participate in a
long-term award plan designed to achieve the following objectives:
o Create a better link between the interests of the participants and the
Corporation's shareholders;
o Promote teamwork and provide participants with rewards for excellence
in the Corporation's performance;
o Provide flexibility to the Corporation in its ability to compensate,
attract, and retain the services of individuals who make significant
contributions to the Corporation's success; and
o Allow participants to further share in the success of the Corporation.
Under this plan, executive officers, including the Chief Executive Officer,
were granted a stock option under the Bandag, Incorporated Stock Award Plan, to
purchase shares of Class A Common Stock at fair market value as of the award
date of March 13, 2001. These options are non-qualified stock options under the
Internal Revenue Code.
Under this grant, stock options for the executive officers, including the
Chief Executive Officer, are exercisable at a rate of 20% per year, beginning
March 13, 2002, and have an exercise period of 10 years. The size of the grant
was based on the estimated value of the options using the Black-Scholes option
pricing model, and was made considering the executive's overall total direct
compensation target.
14
Each option becomes immediately exercisable at the end of the vesting
period, unless the participant's employment has been previously terminated, or
in the event of the participant's death, disability, retirement at age 60 with
ten or more years of service, or change in corporate control.
Bandag, Incorporated Management
Continuity and Compensation Committee
Robert T. Blanchard James R. Everline
Gary E. Dewel R. Stephen Newman, Chairman
Remuneration of Directors. Directors who are also full-time employees of
the Corporation do not receive remuneration for acting as directors.
Non-employee directors are compensated in accordance with the following
schedule:
Annual Fees - Chairman of Committee - $32,000. Other Directors - $30,000.
Board Meeting Attendance - $1,250 per meeting.
Committee Meeting Attendance - Chairman - $1,500 per meeting.
Other Directors - $1,250 per meeting.
Stock Option Award - Stock Options having a value computed under the
Black-Scholes method of $8.52 (covering 1,800 shares of Class A Common Stock at
an exercise price of $32.53 per share, being the fair market value of the Class
A Common Stock on the date of grant, March 12, 2002). The options are
immediately exercisable and expire 10 years from the date of grant. The value of
the annual stock option award and/or the number of shares covered by the award
will vary in future years.
Transactions with Management/Principal Shareholders and Directors. Roy J.
Carver, Jr., son of Lucille A. Carver and brother of Martin G. Carver, owns 100%
of Carver Aero, Inc., which operates fixed base operations at airports in
Muscatine, Iowa; Davenport, Iowa, and Clinton, Iowa. During 2001, it sold
$97,805.99 of aviation fuel and charter services to the Corporation at
competitive prices based on volume purchased and services utilized. Phillip J.
Hanrahan, a director, is a partner of the law firm of Foley & Lardner,
Milwaukee, Wisconsin, which has provided legal services to the corporation for
several years, including 2001, and expects to provide legal services in 2002.
Mr. Edgar D. Jannotta, a director, is Chairman of William Blair & Company,
L.L.C. and Chairman of that firm's Executive Committee. William Blair & Company,
L.L.C. has provided investment banking services to the Corporation for several
years, including 2001, and may provide services in 2002 if requested by the
Corporation.
AUDIT COMMITTEE REPORT
Pursuant to its written charter, the Audit Committee ("Committee") oversees
the Corporation's financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial
statements and the reporting process, including the systems of internal
controls. In fulfilling its oversight responsibilities, the Committee reviewed
the audited financial statements in the Annual Report with management, including
a discussion of the quality, not just the acceptability, of the
15
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Corporation's accounting
principles and such other matters as are required to be discussed with the
Committee under generally accepted auditing standards. In addition, the
Committee discussed with the independent auditors the auditors' independence
from management and the Corporation, including the matters in the written
disclosures required by the Independence Standards Board, and considered the
compatibility of non-audit services provided by the auditors to the Corporation
with their independence.
The Committee discussed with the Corporation's independent auditors the
overall scope and plans for their audit of the Corporation's consolidated
financial statements and the scope of internal audit activities which were
outsourced to the independent auditors in 2001 but will not be outsourced to the
independent auditors in 2002 and subsequent years. The Committee meets with the
independent auditors, both with and without management present, as deemed
advisable, to discuss the results of their examination, their evaluation of the
Corporation's internal controls, and the overall quality of the Corporation's
financial reporting. In addition, the Committee reviews with management and the
independent auditors proposed interim financial statements. The Committee held
nine meetings during fiscal year 2001.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board of Directors has accepted
that recommendation) that the audited financial statements be included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, for
filing with the Securities and Exchange Commission. The Committee and the Board
have selected, subject to shareholder ratification, the Company's independent
auditors.
Bandag, Incorporated
Audit Committee
Robert T. Blanchard, Chairman James R. Everline
Gary E. Dewel R. Stephen Newman
16
SHAREHOLDER RETURN PERFORMANCE INFORMATION
Set forth on the following pages is a line graph comparing the yearly
percentage change during the last five years in the cumulative total shareholder
return (assuming reinvestment of dividends) on the Corporation's Common Stock
and Class A Common Stock with the cumulative total returns of the Standard &
Poor's 500 Stock Index and the Dow Jones & Co., Inc. Tire and Rubber - Index
("Tire and Rubber Index"). The graph assumes $100 Invested on December 31, 1996
in Bandag, Incorporated Common Stock and Class A Common Stock, the S&P 500 Stock
Index and the Dow Jones & Co., Inc. Tire and Rubber - Index.
Bandag, Incorporated Stock Performance Chart
[GRAPHIC OMITTED]
Comparison of Five Year Cumulative Total Return
- --------------------------------------------------------------------------------
December 31
- --------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
Bandag, Incorporated $100 110 84 54 90 82
- --------------------------------------------------------------------------------
S&P 500 Stock Index $100 133 171 208 189 166
- --------------------------------------------------------------------------------
Tire and Rubber -Index $100 126 103 62 53 61
- --------------------------------------------------------------------------------
17
Proposal No. 2 - AMENDMENT OF RESTATED ARTICLES OF INCORPORATION,
AS AMENDED
General
Section 490.832 of the Iowa Business Corporation Act (the "Act") permits an
Iowa corporation and its shareholders to eliminate or limit directors' liability
for monetary damages for certain breaches of fiduciary duty. Pursuant to Section
490.832 of the Act, the Corporation's Board of Directors has adopted an
amendment to the Corporation's Restated Articles of Incorporation, as amended,
that would eliminate personal monetary liability of the Corporation's directors
to the fullest extent permitted by the Act. In order for the amendment to be put
into effect, the shareholders of the Corporation must approve the amendment. The
Board of Directors believes that the adoption of the amendment would encourage
qualified individuals to serve as directors of the Corporation. Thus, the Board
of Directors recommends that the shareholders approve amending the Corporation's
Restated Articles of Incorporation, as amended, by adding the following
paragraph to Article V:
No person who is or was a director of the Corporation shall
be personally liable to the Corporation or its shareholders
for monetary damages for breach of fiduciary duty as a
director, provided that any such person's liability shall
not be eliminated or limited for a breach of the director's
duty of loyalty to the Corporation or its shareholders, for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for a
transaction from which the director derives an improper
personal benefit, or under Section 490.833 of the Iowa
Business Corporation Act. This provision shall not eliminate
or limit the liability of a director for an act or omission
occurring prior to the date when this provision becomes
effective.
Background and Reasons for Proposed Amendment
In order for a corporation to function properly, the directors of the
corporation must be able to exercise independent business judgment without the
fear of being second-guessed by courts and held liable for mistakes of judgment.
Directors' decisions are protected from being second-guessed by the so-called
"business judgment rule." The business judgment rule is a presumption that
directors acted in what they determined in good faith, after appropriate
consideration, to be in the best interests of the corporation and its
shareholders. Under the business judgment rule, a court will not hold directors
liable for mistakes of judgment unless the presumption is rebutted, as long as
the directors did not engage in self-dealing or otherwise have conflicts of
interest. Thus, the business judgment rule protects directors from personal
liability to the corporation and its shareholders when their business decisions
are subsequently challenged in court.
However, the business judgment rule alone is often not sufficient due to
the too frequent occurrence of unwarranted litigation against corporate
directors, the expense of defending or settling lawsuits, and the inevitable
uncertainties in applying the business
18
judgment rule to particular facts and circumstances. As a result, corporations
such as the Corporation extend indemnity to, and provide insurance for,
directors to protect them from litigation expenses and unforeseen liabilities.
As additional protection against such litigation expenses and unforeseen
liabilities, the Act allows Iowa corporations to eliminate or limit directors'
personal monetary liability for certain breaches of fiduciary duty. Under the
Iowa director exculpation provision, a corporation's directors are not
personally liable to the corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for:
o any breach of the directors' duty of loyalty to the corporation or its
shareholders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o any transaction from which the directors derive an improper personal
benefit; or
o unlawful dividends or unlawful stock repurchases or redemptions under
Section 490.833 of the Act.
The current environment is one that continues to present risks for
directors. Members of boards of directors and audit committees are taking on
greater responsibility respecting the business affairs and financial reporting
and disclosure issues of their corporations in increasingly complex markets. To
ensure that these increased responsibilities are adequately met, it is more
important than ever that corporations be able to attract and retain qualified
directors.
Prior to directors taking on increased responsibilities, the risk of
investigations, claims, actions, suits or proceedings (including derivative
actions) seeking to impose liability on directors of corporations was not
uncommon. As directors take on increased responsibilities, they will likely face
even more scrutiny and a greater threat of future shareholder litigation related
to their work. In this environment, an individual may conclude that the
potential exposure to the costs and risks of proceedings in which the individual
may become involved as a director exceed any benefit to the individual from
serving as a director.
The Board of Directors believes that the adoption of Iowa's director
exculpation provision would reduce the costs and risks related to serving as a
director and increase the Corporation's ability to continue to attract and
retain qualified individuals to serve as directors.
Effect of Proposed Amendment
The proposed amendment protects the Corporation's directors against
personal liability to the Corporation and its shareholders for monetary damages
for certain breaches of fiduciary duty. However, as indicated above, directors
remain liable for breaches of their duty of loyalty to the Corporation and its
shareholders, for acts or omissions not in
19
good faith or which involve intentional misconduct or a knowing violation of
law, and for transactions from which a director derives an improper personal
benefit. Also, the proposed amendment does not absolve directors of liability
under Section 490.833 of the Act, which make directors personally liable for
unlawful dividends or unlawful stock repurchases or redemptions. Finally, the
proposed amendment does not eliminate or limit the liability of directors
arising in causes of action brought under federal laws, including federal
securities laws.
While the Iowa director exculpation provision protects directors from
awards of monetary damages for certain breaches of fiduciary duty, it does not
eliminate a director's fiduciary duty. In other words, a director is still
required to exercise appropriate diligence, act in good faith and otherwise
comply with the standards of Section 490.830 of the Act in carrying out the
director's duties. Accordingly, the proposed amendment has no effect on the
availability of equitable remedies such as an injunction or rescission based on
a director's breach of fiduciary duty. Also, liabilities arising from acts or
omissions occurring prior to the adoption of the amendment are not covered, so
that directors remain potentially liable for monetary damages in connection with
any acts or omissions occurring prior to the adoption of the amendment.
Vote Required to Approve the Amendment
Assuming a quorum is present, approval of the amendment requires that more
votes of shares of Common and Class B Common Stock be voted in favor of such
approval than are voted against such approval. Any shares not voted at the
Annual Meeting with respect to such approval (whether as a result of
abstentions, broker-non votes or otherwise) will have no impact on the vote.
Recommendation
The directors acknowledge that they and future directors would personally
benefit from approval of the amendment. However, for the reasons given in the
section titled "Background and Reasons for Proposed Amendment," the Board of
Directors recommends a vote "for" the approval of the amendment to the
Corporation's Restated Articles of Incorporation, as amended. Shares represented
by proxies received will be voted "for" approval of the amendment unless a vote
against such approval or to abstain from voting is specifically indicated on the
proxy.
Proposal No. 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, based upon the recommendation of the Audit
Committee, has selected Ernst & Young LLP as the Corporation's independent
auditors for the fiscal year ending December 31, 2002.
Ernst & Young LLP served as the Corporation's independent auditors for the
fiscal year ended December 31, 2001. Representatives of Ernst & Young LLP will
be present at the Annual Meeting and will be available to respond to any
questions raised at the meeting and make any comments they deem appropriate.
20
Although this selection is not required by law to be submitted to a vote by
shareholders, the Board of Directors believes it appropriate, as a matter of
policy, to request that the shareholders ratify the selection of Ernst & Young
LLP as independent auditors for 2002. If the shareholders should not ratify, the
Board of Directors will reconsider the selection.
Assuming a quorum is present, ratification of the appointment requires that
more votes of shares of Common and Class B Common Stock be voted in favor of
such ratification than are voted against such ratification. Any shares not voted
at the Annual Meeting with respect to such ratification (whether as a result of
abstentions, broker non-votes or otherwise) will have no impact on the vote.
Audit Fees
The aggregate fees billed by Ernst & Young LLP for professional services
rendered for the audit of the Corporation's annual financial statements for the
fiscal year ended December 31, 2001 and the reviews of the financial statements
included in the Corporation's Forms 10-Q were $632,600.
Financial Information Systems Design and Implementation Fees
Ernst & Young LLP did not provide any professional services in connection
with financial systems design and implementation during the fiscal year ended
December 31, 2001.
All Other Fees
For the fiscal year ended December 31, 2001, the aggregate fees billed for
services rendered by Ernst & Young LLP, other than the audit fees described
above, were $988,300, including audit related services of $763,900 and nonaudit
services of $224,400. Internal audit services represent the majority of the
audit related services. Also included in audit related services are fees for
pension and foreign statutory audits, accounting consultations and SEC
registration statements. Except for certain tax and certain audit related
services (not to include internal audit), the Corporation will not engage Ernst
& Young LLP to provide services beyond those provided in conjunction with the
annual audit.
The Audit Committee took into consideration whether the providing of
services described above under "All Other Fees" was compatible with maintaining
the independence of Ernst & Young LLP.
Proposal No. 4 - OTHER MATTERS
The management of the Corporation knows of no matters to be presented at
the meeting other than those set forth in the Notice of Annual Meeting. However,
if any other matters properly come before the meeting, it is intended that the
persons named in the enclosed proxy will vote on such matters in accordance with
their best judgments.
21
2003 SHAREHOLDERS' PROPOSALS
The date by which proposals of shareholders intended to be presented at the
2003 Annual Meeting of the Corporation must be received by the Corporation for
inclusion in its Proxy Statement and form of proxy relating to that meeting is
December 12, 2002. The Corporation may exercise discretionary voting authority
under proxies solicited by it for the 2003 Annual Meeting of the Corporation if
it receives notice of a proposed non-Rule 14a-8 shareholder action after
February 25, 2003.
MISCELLANEOUS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers, directors and more than 10% shareholders
("Insiders") to file with the Securities and Exchange Commission reports on
prescribed forms of their beneficial ownership of the Corporation's stock and
furnish copies of such reports to the Corporation. Based solely on a review of
the copies of such forms furnished to the Corporation, or written
representations that no Form 5 was required to be filed, the Corporation
believes that during the year ended December 31, 2001, all reports required by
Section 16(a) to be filed by the Corporation's Insiders were filed on a timely
basis.
Expenses
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Corporation.
Some of the officers and regular employees of the Corporation may, without
extra remuneration, solicit proxies personally or by telephone, e-mail or
telefax. The Corporation will request brokerage houses, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of shares held
of record and will reimburse such persons for their expenses.
By Order of the Board of Directors
WARREN W. HEIDBREDER, Secretary
22
[THIS PAGE INTENTIONALLY LEFT BLANK]
PROXY
BANDAG, INCORPORATED
Muscatine, Iowa
PROXY FOR ANNUAL MEETING - MAY 14, 2002
The undersigned hereby appoints Martin G. Carver as Proxy with the power of substitution and hereby authorizes him to
represent and to vote as designated herein all shares of Common Stock (COM) and Class B Common Stock (CLB) which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Bandag, Incorporated to be held May 14, 2002 and at
any adjournment thereof.
This proxy is solicited on behalf of the Company's Board of Directors. Every properly signed proxy will be voted as
directed. The Board of Directors recommends a vote FOR the nominees in Item (1) and FOR Items (2) and (3). Unless otherwise
directed, proxies will be voted in accordance with the foregoing sentence and in the discretion of the proxy holder in
connection with Item (4).
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any
boxes if you wish to vote in accordance with the Board of Directors' recommendations. The proxy holder cannot vote your
shares unless you sign and return this card.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
|X| Please mark
votes as in
this example.
The signer revokes all proxies heretofore given by the signer to vote at said meeting or any adjournment thereof.
1. Election of Directors. FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
(01) Martin J. Carver |_| |_| |_| 2. Proposal to amend the Restated |_| |_| |_|
Articles of Incorporation, as
amended.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
(02) Edgar D. Jannotta |_| |_| |_| 3. Ratification of selection of Ernst |_| |_| |_|
& Young LLP as independent
auditors for the fiscal year
ending December 31, 2002.
4. In his discretion upon such other matters as may properly come
before the meeting.
MARK HERE FOR |_| MARK HERE |_|
COMMENTS/ADDRESS IF YOU PLAN
CHANGE AND NOTE TO ATTEND
AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such.
Signature_____________________________ Date:__________________ Signature_____________________________ Date:__________________