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
BADGER PAPER MILLS, INC.
----------------------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
BADGER PAPER MILLS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 13, 2003
To the Shareholders of Badger Paper Mills, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Badger Paper
Mills, Inc. will be held on Tuesday, May 13, 2003, at 10:00 a.m., local time, at
the Best Western Riverfront Inn, 1821 Riverside Avenue, Marinette, Wisconsin,
for the following purposes:
1. To elect three directors to hold office until the 2006 annual meeting of
shareholders and until their successors are duly elected and qualified.
2. To consider and act on any other business as may properly come before the
annual meeting or any adjournment or postponement thereof.
The close of business on March 21, 2003, has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at, the
annual meeting and any adjournment or postponement thereof.
A proxy for the meeting and a proxy statement are enclosed herewith.
By Order of the Board of Directors
BADGER PAPER MILLS, INC.
/s/ William H. Peters
William H. Peters
Secretary
Peshtigo, Wisconsin
April 11, 2003
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH IS
SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS THEREON
AND RETURN IMMEDIATELY.
BADGER PAPER MILLS, INC.
200 West Front Street
Peshtigo, Wisconsin 54157-0149
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 13, 2003
This proxy statement is being furnished to shareholders by the Board of
Directors (the "Board") of Badger Paper Mills, Inc. (the "Company") beginning on
or about April 11, 2003, in connection with a solicitation of proxies by the
Board for use at the annual meeting of shareholders to be held on Tuesday, May
13, 2003, at 10:00 a.m., local time, at the Best Western Riverfront Inn, 1821
Riverside Avenue, Marinette, Wisconsin, and all adjournments or postponements
thereof (the "Annual Meeting"), for the purposes set forth in the attached
Notice of Annual Meeting of Shareholders.
Execution of a proxy given in response to this solicitation will not affect
a shareholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke a proxy. Any shareholder giving a proxy may revoke it at any
time before it is first exercised by giving notice thereof to the Company in
writing at or before the Annual Meeting.
A proxy, in the enclosed form, when properly executed, duly returned to the
Company and not revoked, will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies will
be voted: (i) "FOR" the three persons nominated by the Board for election as
directors as referred to herein and (ii) on such other business or matters which
may properly come before the Annual Meeting in accordance with the best judgment
of the persons named as proxies in the enclosed form of proxy. Other than the
election of directors, the Board has no knowledge of any matters to be presented
for action by the shareholders at the Annual Meeting.
Only holders of record of the Company's common stock, no par value (the
"Common Stock"), as of the close of business on March 21, 2003 (the "Record
Date"), are entitled to vote at the Annual Meeting. On that date, the Company
had outstanding and entitled to vote 2,030,185 shares of Common Stock, each of
which is entitled to one vote per share.
ELECTION OF DIRECTORS
The Company's Board currently consists of seven members. The Company's
By-Laws provide that the directors shall be divided into three classes,
designated as Class I, II and III, respectively, with staggered terms of three
years each. At the Annual Meeting, the shareholders will elect three directors
to Class I to hold office until the 2006 annual meeting of shareholders and
until their successors are duly elected and qualified. Unless shareholders
otherwise specify, shares represented by the proxies received will be voted in
favor of the election as directors of the three persons named as nominees
herein. The Board has no reason to believe that any of the listed nominees of
the Board will be unable or unwilling to serve as a director if elected.
However, in the event that any nominee should be unable to serve or for good
cause will not serve, the shares represented by proxies received will be voted
for another nominee selected by the Board.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting (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. Inspectors of election
appointed by the Board will tabulate votes.
The following paragraphs set forth certain information, as of the Record
Date, about the Board's nominees for election at the Annual Meeting and each
director of the Company whose term will continue after the Annual Meeting.
Nominees for Election at the Annual Meeting
Class I, Term Expiring at the 2006 Annual Meeting
L. Harvey Buek, 61, has served as a director of the Company since May 1998.
Mr. Buek is a consultant based in Everett, Washington, and served as the
Company's Interim President from March through July 1998. From January 1997
until March 1998, Mr. Buek was a self-employed consultant in Everett,
Washington. From 1994 until December 1996, Mr. Buek was a consultant for Harris
Group, Inc., an international engineering firm in Seattle, Washington. For 29
years prior to joining Harris Group, Inc., Mr. Buek was employed by Scott Paper
Company in various positions, including service as Vice President-Everett
(Washington) Operations from 1991 until his retirement in 1994.
Robert A. Olah, 53, has served as the Company's President and Chief
Executive Officer since July 2001, when he was also appointed to the Board. He
was elected Chairman of the Company's Board in December 2001. Since August 1995,
Mr. Olah has held numerous senior level executive positions with Crown Vantage,
Inc., culminating with the role of President from September 1999 until July
2001. Prior to 1995, Mr. Olah held several managerial positions with James River
Corporation, including Vice President and General Manager of the Packaging
Group.
William A. Raaths, 56, has served as a director of the Company since
November 2000. Mr. Raaths was appointed Chief Executive Officer of Great
Northern Corporation, a packaging manufacturer located in Appleton, Wisconsin,
in September 2002.
2
From 1999 to 2002, Mr. Raaths served as President and Chief Executive Officer of
Anchor Appetizer Group/McCain in Appleton, Wisconsin. His past paper industry
experience includes service as President of Georgia Pacific Tissue, Executive
Vice President-Chesapeake and President-Wisconsin Tissue Mills, Inc. from 1994
until 1999.
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND
URGES EACH SHAREHOLDER TO VOTE "FOR" ALL OF THE NOMINEES. SHARES OF COMMON STOCK
REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" ALL OF THE
FOREGOING NOMINEES.
Directors Continuing in Office
Class II, Term Expiring at the 2004 Annual Meeting
Harold J. Bergman, 67, has served as a director of the Company since
October 2000. Mr. Bergman was President of Riverside Paper Corporation in
Appleton, Wisconsin from 1989 until his retirement in 1999. His extensive paper
industry experience includes senior level positions with Little Rapids
Corporation and the Sorg Division of Mosinee Paper Corporation from 1979 through
1988. Mr. Bergman currently serves as a director of Outlook Group Corp., a
printing, packaging and direct marketing company located in Neenah, Wisconsin.
John T. Paprocki, 51, has served as a director of the Company since March
2001. In October 2002, Mr. Paprocki was appointed Executive Vice President and
Chief Financial Officer of Analysts International, Inc., a publicly traded
information technology staffing and solutions company headquartered in
Minneapolis, Minnesota. Since January 2001, Mr. Paprocki has served as principal
consultant for Paprocki & Associates, an independent turnaround management
consulting firm headquartered in Wausau, Wisconsin. He was Chief Operating
Officer at Marquip, Inc. in Phillips, Wisconsin, from November 1999 until
January 2001. From 1994 to June 1996, he was Vice President and Chief Financial
Officer of Medalist Industries, Inc. in Milwaukee, Wisconsin.
Class III, Term Expiring at the 2005 Annual Meeting
Mark D. Burish, 49, has served as a director of the Company since May 1997.
Since 1984, Mr. Burish has been President of the Madison, Wisconsin law firm of
Hurley, Burish & Milliken, S. C., the Company's outside general counsel.
James L. Kemerling, 63, has served as a director of the Company since March
1997. Since July 1999, Mr. Kemerling has served as President and Chief Executive
Officer of Riiser Oil Company, Inc., a fuel oil and gasoline retailer in Wausau,
Wisconsin. Prior to his employment with Riiser Oil Company, Inc., Mr. Kemerling
was a self-employed consultant. He also serves as a director of WPS Resources
Corporation, a public utility holding company based in Green Bay, Wisconsin.
3
BOARD OF DIRECTORS
Committee Meetings and Attendance
The Board has standing Audit and Compensation Committees.
The Audit Committee, which held two meetings in 2002, is responsible for
reviewing (i) the scope of annual audit activities; (ii) professional services
performed by auditors approved by the Board and (iii) the independence of such
auditors. The Committee also reviews the Company's annual financial statements
and such other matters with respect to the Company's accounting, auditing and
financial reporting practices and procedures as the Committee may find
appropriate or as have been brought to its attention. James L. Kemerling
(Chairman), Harold J. Bergman, L. Harvey Buek, Mark D. Burish, John T. Paprocki
and William A. Raaths are the members of the Audit Committee.
The Compensation Committee, which held one meeting in 2002, reviews
executive compensation policies and also recommends from time to time to the
Board compensation of the elected officers of the Company. Mark D. Burish
(Chairman), Harold J. Bergman, L. Harvey Buek and William A. Raaths are the
members of the Compensation Committee.
The Board does not have a nominating committee. The Board selects the
director nominees to stand for election at the Company's annual meetings of
shareholders and to fill vacancies occurring on the Board. The Board will
consider nominees recommended by shareholders, but has no established procedures
that shareholders must follow to make a recommendation.
The Board held nine meetings in 2002. During 2002, each director attended
at least 75% of the aggregate of the total meetings held by the Board and the
total meetings held by all committees on which each such director served.
Director Compensation
In 2002, each outside director received an annual retainer of $16,000,
payable quarterly in shares of Common Stock with a fair market value of $2,000
plus $2,000 cash.
4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date by: (i) each director and
nominee; (ii) the executive officers named in the Summary Compensation Table set
forth below; (iii) all of the directors, nominees and executive officers named
in the Summary Compensation Table as a group and (iv) each person or other
entity known by the Company to own beneficially more than 5% of the class of
Common Stock. Except as otherwise indicated in the footnotes, each of the
holders listed below has sole voting and investment power over the shares
beneficially owned.
Shares of Percent of
Common Stock Common Stock
Beneficially Beneficially
Name of Beneficial Owner Owned Owned
- ------------------------ ------------ ------------
Michael J. Bekes, Former Vice
President of Operations7 5 *
Harold J. Bergman, Director 7,019 *
L. Harvey Buek, Director 16,680(8) *
Mark D. Burish, Director 132,136(1) 6.52
James G. Davis, Vice President Sales
and Marketing 2,000(9) *
James L. Kemerling, Director 15,558 *
Robert A. Olah, Director, Chairman of the
Board, President and Chief Executive Officer 1,732(11) *
John T. Paprocki, Director 5,412 *
William H. Peters, Vice President, Chief
Financial Officer, Secretary and Treasurer 3,000(10) *
William A. Raaths, Director 7,119 *
All directors, nominees and executive
officers as a group (10 persons) 190,661(2,6) 9.39
Edwin A. Meyer, Jr. 289,558(3) 14.26
James D. Azzar 276,864(4) 13.64
Donna M. Burish 112,598(5) 5.55
____________________________
*Denotes less than 1%.
(1) Includes 101,048 shares held by the Survivor's Trust, effective December 8,
1999 (the "Trust"), for which Mr. Burish is sole trustee, and 1,400 shares
owned by Mr. Burish's spouse and minor children as to which Mr. Burish
shares voting and dispositive power but disclaims beneficial ownership.
5
(2) In the aggregate, directors and executive officers have sole voting and
dispositive power with respect to 86,843 shares; in the aggregate,
directors and executive officers have shared voting and dispositive power
with respect to 1,350 shares; and in the aggregate, directors and executive
officers have sole voting and shared dispositive power with respect to
101,048 shares.
(3) The beneficial ownership shown is the best information available to the
Company as of the date of this proxy statement. Includes 251,564 shares
held by the Edwin A. Meyer, Jr. and Gloria L. Meyer Revocable Living Trust,
for which Mr. Meyer is co-trustee, and 37,994 shares as to which Mr. Meyer
has voting rights but disclaims beneficial ownership. Mr. Meyer's address
is 7255 Cortland Circle, Egg Harbor, Wisconsin 54209.
(4) According to report of beneficial ownership on an amended Schedule 13D
dated February 18, 1998, James D. Azzar, Bomarko, Inc. ("Bomarko") and
Extrusions Division, Inc. ("EDI") (collectively referred to as the "Azzar
Group") constitute a "group" with respect to the acquisition of Common
Stock. Of the reported shares, 276,664 are owned by Bomarko, and 200 are
owned by EDI. Mr. Azzar is deemed to beneficially own all of such shares in
his capacity as chairman of the board, chief executive officer and director
of, and investor in, Bomarko, and president, sole director and sole
shareholder of EDI. Mr. Azzar's address is 208 Pioneer Club Road, East
Grand Rapids, Michigan 49506. The address of Bomarko's principal office is
North Oak Road, P. O. Box K, Plymouth, Indiana 46563. The address of EDI's
principal office is 208 Pioneer Club Road, East Grand Rapids, Michigan
49506.
(5) The beneficial ownership shown is the best information available to the
Company as of the date of this proxy statement. Includes 101,048 shares
held by the Trust for which Mrs. Burish is the sole beneficiary with
complete withdrawal rights. Mrs. Burish's address is 352 Brown Avenue
South, Peshtigo, Wisconsin 54157. Mrs. Burish is Mark D. Burish's mother.
(6) Includes shares of Common Stock that may be purchased under currently
exercisable stock options as follows: Mr. Buek, 5,000 shares; Mr. Davis,
2,000 shares; Mr. Peters, 2,000 shares.
(7) Mr. Bekes terminated his employment with the Company effective November 1,
2002.
(8) Includes 5,000 shares of Common Stock that may be purchased under a
currently exercisable stock option.
(9) Represents shares of Common Stock that may be purchased under a currently
exercisable stock option.
(10) Includes 2,000 shares of Common Stock that may be purchased under a
currently exercisable stock option.
(11) Includes 732 shares of Common Stock held by the Company's Profit Sharing
Plan and Trust for Non-Union Employees.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth certain information concerning the
compensation that the Company paid for its last three fiscal years to its
executive officers who earned over $100,000 combined base salary and bonus in
2002. The persons named in the table are sometimes referred to herein as "named
executive officers."
6
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Name and Underlying Stock All Other
Principal Position Year Salary($) Bonus($) Options(#)(1) Compensation($)(2)
- ------------------ ---- --------- -------- ---------------- ------------------
Robert A. Olah(3) 2002 $250,000 $129,673 - $ 27,458
President and Chief 2001 $119,391 $131,600 100,000 shares $ 24,222
Executive Officer
Chairman of the Board
William H. Peters(4) 2002 $131,000 $ 20,000 - $ 14,735
Vice President 2001 $ 44,615 $ 13,095 2,000 shares $ 144
Chief Financial Officer
Secretary and Treasurer
Michael J. Bekes(5) 2002 $126,885 - $125,073
Former Vice President of 2001 $147,000 - $ 26,351
Operations 2000 $147,000 - $ 15,640
James G. Davis(6) 2002 $105,300 $ 10,000 2,000 shares $ 12,172
Vice President
Sales and Marketing
- ----------------------------
(1) Consists of stock options awarded under the Badger Paper Mills, Inc. 1998
Stock Option Plan.
(2) Consists of (a) payments made by the Company to Mr. Olah under the
Company's Profit Sharing Plan and Trust for Non-Union Employees in the
amount of $15,755 in 2002 and $15,576 in 2001; (b) life insurance premiums
paid by the Company for Mr. Olah in the amount of $2,088 in 2002 and $473
in 2001; (c) vacation paid in lieu of time off to Mr. Olah in the amount of
$9,615 in 2002 and $8,173 in 2001; (d) payments made by the Company to Mr.
Peters under the Company's Profit Sharing Plan and Trust for Non-Union
Employees in the amount of $11,109 in 2002; (e) life insurance premiums
paid by the Company for Mr. Peters in the amount of $1,088 in 2002 and $144
in 2001; (f) vacation paid in lieu of time off to Mr. Peters in the amount
of $2,538 in 2002; (g) severance payments made by the Company to Mr. Bekes
in 2002 in the amount of $114,600; (h) payments made by the Company to Mr.
Bekes under the Company's Profit Sharing Plan and Trust for Non-Union
Employees in the amount of $14,173 in 2001 and $5,654 in 2000; (i) life
insurance premiums paid by the Company for Mr. Bekes in the amount of
$1,055 in 2002, $870 in 2001 and $822 in 2000; (j) vacation paid in lieu of
time off to Mr. Bekes in the amount of $9,418 in 2002, $11,308 in 2001 and
$9,164 in 2001; (k) payment made by the Company to Mr. Davis under the
Company's Profit Sharing Plan and Trust for Non-Union Employees in the
amount of $7,704 in 2002; (l) life insurance premiums paid by the Company
for Mr. Davis in the amount of $688 in 2002; and (m) vacation paid in lieu
of time off to Mr. Davis in the amount of $3,780 in 2002.
(3) Mr. Olah joined the Company as President and Chief Executive Officer in
July 2001. He was elected Chairman of the Board in December 2001.
(4) Mr. Peters joined the Company as Vice President and Chief Financial Officer
in August 2001. He was elected Secretary and Treasurer in May 2002.
(5) Mr. Bekes terminated his employment with the Company effective November 1,
2002.
(6) Mr. Davis joined the Company as Vice President - Sales and Marketing in
April 2002.
7
Stock Options
The following table provides details regarding stock options granted to the
named executive officers during fiscal year 2002 under the Badger Paper Mills,
Inc. 1998 Stock Option Plan.
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation
Underlying Employees Exercise or ---------------------
Options in Base Price Expiration
Name Granted (#) Fiscal Year ($/share) Date 5% ($) 10% ($)
---- ----------- ----------- ----------- ---------- ------ -------
James G. Davis 2,000 100% $8.68 4/1/2009 $7,067 $16,470
There were no stock option exercises by the named executive officers during
fiscal year 2002. The following table sets forth the number of exercisable and
unexercisable options held by the named executive officers at the end of 2002.
Number of Shares Underlying
Name Options at End of 2002
---- -----------------------------
Exercisable Unexercisable
----------- -------------
Michael J. Bekes 10,000 -
James G. Davis 2,000 -
Robert A. Olah(1) - 100,000
William H. Peters 2,000 -
____________________________________
(1) 50 percent of the options vest and become exercisable on July 1, 2004, and
the remaining 50% percent vest and become exercisable on July 1, 2006.
Agreements with the Named Executive Officers
The Company has an Employment Agreement with Robert A. Olah, the Company's
Chairman of the Board, President and Chief Executive Officer, providing Mr. Olah
with an annual base salary of $250,000, an annual bonus based on the Company's
Pretax Income (as defined in the Employment Agreement) (three percent of the
first $1.0 million of Pretax Income; five percent of the next $2.0 million of
Pretax Income; and six percent of any Pretax Income above that level) and
customary fringe benefits. The term of this Employment Agreement extends to June
30, 2004, but will automatically extend for an additional two-year term unless
either party gives written notice of non-renewal at least six months prior to
the natural expiration of the initial term. Mr. Olah's Employment Agreement
entitles him to severance benefits equal to one year's base salary if his
employment is terminated (i) without cause or (ii) in the event of a change in
control. The Employment Agreement contains additional provisions dealing with
Mr. Olah's compensation in the event he remains as an employee of the
8
Company following a change in control. As part of this Employment Agreement, Mr.
Olah has agreed not to solicit certain Company customers after his termination
of employment with the Company for any reason for a period equal to his length
of service as an employee of the Company (but not to exceed two years in any
event).
Pursuant to agreements with the Company, Mr. Bekes received $114,600 in
severance payments from the Company during fiscal year 2002. In exchange for
such severance payments, Mr. Bekes agreed that, until November 6, 2004, he will
not disclose any of the Company's confidential information without the prior
written consent of an officer of the Company, and that he will give up any and
all claims that he has or may have against the Company under all applicable
laws.
Certain Relationships and Transactions
Mark D. Burish, a director of the Company, is a partner at Hurley, Burish &
Milliken, S.C., a law firm that the Company engaged in fiscal year 2002 to
provide general corporate legal services.
William A. Raaths, a director of the Company, is the Chief Executive
Officer of Great Northern Corporation, from which the Company purchased
packaging materials in 2002.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board's Compensation Committee is responsible for all compensation and
benefits provided to the Company's Chief Executive Officer, other executive
officers and key employees. The following report explains the rationale
underlying fundamental executive compensation decisions affecting the Company's
executive officers, including the named executive officers.
Overall Compensation Philosophy
The Company's program is designed to align compensation with Company
performance, business strategy, Company values and management initiatives. To
this end, the Company has developed an overall compensation strategy and
specific compensation plans that tie a significant portion of executive
compensation to the Company's success in meeting specified financial goals and
the executive's success in meeting specific performance goals.
The Company's overall compensation objectives provide a competitive total
compensation program designed to: (1) attract and retain qualified executive
talent, (2) motivate these executives to achieve the goals inherent in the
Company's business strategy and (3) maintain a performance oriented culture that
fosters increased shareholder value. As an executive's level of responsibility
increases, a greater portion of total compensation is based on performance-based
incentive compensation and less on salary and employee benefits, creating the
potential for greater variability in the individual's compensation level from
year to year.
9
The compensation policy is as follows:
o Base salaries are targeted at a level that allows the Company to
attract, retain and motivate executive talent, with the framework for
such decisions based on a review of the appropriate labor markets.
o Incentive plans will be used so that key employees participate based
on relevant Company and individual performance.
o All compensation programs will be designed to add shareholder value.
The Chief Executive Officer's compensation is determined pursuant to the
terms of his Employment Agreement. Pursuant to his Employment Agreement, Mr.
Olah's annual base salary is $250,000. He also receives an annual bonus based on
the Company's Pretax Income (as defined in the Agreement) (three percent of the
first $1.0 million of Pretax Income; five percent of the next $2.0 million of
Pretax Income and six percent of any Pretax Income above that level). For 2002,
Mr. Olah received a bonus of $129,673. The Compensation Committee sets the
policies for, reviews and approves the recommendations of management with
respect to the compensation awarded to other executive officers and key
employees.
The key elements of the Company's executive compensation program consist of
base salary, annual bonus and long-term stock incentives. Senior executive
compensation packages are increasingly weighted toward programs contingent upon
the Company's performance. As a result, actual compensation levels of senior
executives in any particular year may vary within the range of compensation
levels consistent with the competitive marketplace based on the Company's actual
performance. The Committee believes in offering compensation opportunities
consistent with those in the Company's industry; however, the most important
considerations in determining annual compensation are the Company's performance
and individual contributions. A general description of the elements of the
Company's compensation package follows:
Base Salary
Base salaries are determined initially by evaluating the responsibilities
of the position, the experience of the individual and the salaries for
comparable positions in the competitive marketplace. The Compensation Committee
annually reviews each executive officer's base salary. In determining salary
adjustments for executive officers, the Committee considers various factors
including the individual's performance and contribution, the average
compensation level for similar positions and the Company's performance.
Bonus Program
The Compensation Committee recognizes the importance of aligning executive
compensation with the interests of the Company's shareholders. Accordingly, the
Company maintains an Executive Management and Officer Incentive Plan. The plan
provides the following measures to be used in determining bonuses:
10
o Company performance; and
o individual performance.
The use of Company performance as a measure of bonus determinations ensures
that such bonuses are paid only when the Company's performance objectives are
achieved. The use of individual performance as a measure for bonus
determinations allows for the establishment of goals that each participant can
best impact, which include, but are not limited to: profitability, sales growth,
operational efficiency, organizational development or new business
opportunities.
The Company's executive officers, other than Mr. Olah, are included in the
plan. Target bonuses equal to 30% of the executive's base salary are established
for each executive officer by the Compensation Committee at the beginning of the
year. The Company retains the final authority to approve individual bonuses.
Long-Term Stock Incentives
Long-term stock incentives are designed to encourage and create ownership
of Company Stock by key executives, thereby promoting a close identity of
interests between Company's management and its shareholders. Another objective
of long-term stock incentives is to encourage and reward executives for
long-term strategic management and the enhancement of shareholder value. The
Company currently is able to grant two forms of long-term stock incentives:
stock options or restricted stock.
Stock Options. Options under the Badger Paper Mills, Inc. 1998 Stock Option
Plan are granted at the discretion of the Committee, with the size of grants
varying based on several factors, including the executive's level of
responsibility. Stock options are granted with an exercise price determined by
the Committee, provided that the exercise price of incentive stock options may
not be less than 100% of the fair market value of a share of Common Stock on the
date of grant, as such fair market value is determined by such methods or
procedures established by the Board in accordance with the provisions of the
Badger Paper Mills, Inc. 1998 Stock Option. Vesting terms vary based on the size
of the award. The number of shares covered by grants generally reflects
competitive industry practices.
In April 2002, Mr. Davis received an option to purchase 2,000 shares at an
exercise price of $8.68 per share.
Restricted Stock. The Badger Paper Mills, Inc. 1998 Stock Option also
allows for the issuance of restricted stock. Under such Plan, grants are made to
officers and other key employees and are subject to such restrictions as the
Committee may impose, including any limitation on the right to vote such shares
or receive dividends thereon. The Badger Paper Mills, Inc. 1998 Stock Option
limits the total number of shares of restricted stock that may be awarded to any
individual participant in any fiscal year to 20,000 shares.
11
Compliance with Internal Revenue Code Section 162(m)
It is anticipated that all 2002 compensation paid to executives will be
fully deductible under Section 162(m) of the Internal Revenue Code. Accordingly,
the Compensation Committee has determined that a policy with respect to
qualifying the compensation paid to executive officers for deductibility is not
necessary.
BADGER PAPER MILLS, INC.
BOARD OF DIRECTORS
COMPENSATION COMMITTEE
Mark D. Burish, Chairman
Harold J. Bergman
L. Harvey Buek
William A. Raaths
12
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of six
independent directors. The Audit Committee operates under a written charter that
was adopted by the Board on May 19, 2000. The Audit Committee recommends to the
Board the selection of the Company's independent auditors.
The Company's management is responsible for the Company's financial
statements and reporting process, including the system of internal controls. The
Company's independent auditors are responsible for expressing an opinion on the
conformity of the Company's audited consolidated financial statements with
generally accepted accounting principles. The Audit Committee reviews the
Company's financial reporting process on behalf of the Board of Directors. In
fulfilling its responsibilities, the Audit Committee has reviewed and discussed
the audited consolidated financial statements contained in the Company's 2002
Annual Report on Form 10-K with the Company's management and independent
auditors.
The Audit Committee has discussed with the Company's independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61,
as amended. In addition, the Company's independent auditors have provided to the
Audit Committee the written disclosures and the letter required by Independence
Standards Board Standard No. 1, and the Audit Committee has discussed with the
Company's independent auditors their independence.
During the fiscal year ended December 31, 2002, the Company's independent
auditors provided various audit and non-audit services to the Company and billed
the Company as follows:
Audit Fees. Aggregate fees billed by the independent auditors to the
Company for professional services rendered in connection with the audit of the
Company's annual consolidated financial statements for the fiscal year ended
December 31, 2002, and the reviews of the Company's consolidated financial
statements included in its quarterly reports on Form 10-Q for the fiscal year
ended December 31, 2002 totaled approximately $72,425.
Financial Information Systems Design and Implementation Fees. The Company's
independent auditors did not render any services to the Company related to
financial information systems design and implementation during the fiscal year
ended December 31, 2002.
All Other Fees. Aggregate fees billed to the Company by the independent
auditors for audit services rendered in connection with the audit of the
Company's profit sharing plans during the fiscal year ended December 31, 2002
totaled approximately $10,000. Aggregate fees billed to the Company by the
independent auditors for non-audit tax related services rendered during the
fiscal year ended December 31, 2002 totaled approximately $8,700.
The Audit Committee has considered whether the provision by the Company's
independent auditors to the Company of the non-audit services referenced above
is compatible with maintaining the independent auditors' independence, and
determined that the provision of such services by the Company's independent
auditors is compatible with maintaining the independent auditors' independence.
All hours expended on the independent auditors'
13
engagement to audit the Company's consolidated financial statements for the
fiscal year ended December 31, 2002 were expended by the independent auditors'
employees.
The Audit Committee met with the independent auditors, with and without the
Company's management present, to discuss the results of their audit, including
their evaluation of the Company's internal controls and the overall quality of
the Company's financial reporting.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, for filing with the Securities and
Exchange Commission.
BADGER PAPER MILLS, INC.
BOARD OF DIRECTORS
AUDIT COMMITTEE
James L. Kemerling, Chairman
Harold J. Bergman
L. Harvey Buek
Mark D. Burish
John T. Paprocki
William A. Raaths
14
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis changes during the past
five years in (a) the total shareholder return on the Common Stock with (b) the
total return on the Standard & Poor's 500 Stock Index (the "Standard & Poor's
Index") and (c) the total return on the S&P Paper Products Index (the "Paper
Products Index"). Such changes have been measured by dividing (a) the sum of (i)
the amount of dividends for the measurement period, assuming dividend
reinvestment, and (ii) the difference between the price per share at the end of
and the beginning of the measurement period, by (b) the price per share at the
beginning of the measurement period. The graph assumes $100 was invested on
December 31, 1997 in Common Stock, the Standard & Poor's Index and the Paper
Products Index.
[GRAPH OMITTED]
Company / Index Dec97 Dec98 Dec99 Dec00 Dec01 Dec02
- --------------------------------------------------------------------------------
BADGER PAPER MILLS INC 100 103.23 67.74 31.45 54.84 93.41
S&P 500 INDEX 100 128.58 155.63 141.46 124.65 97.10
S&P 500 PAPER PRODUCTS 100 101.14 137.05 123.69 124.75 103.24
15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors and executive officers to file
reports concerning their ownership of Company equity securities with the
Securities and Exchange Commission and the Company. Based solely upon
information provided to the Company by individual directors and executive
officers, the Company believes that during the fiscal year ended December 31,
2002, all its directors and executive officers complied with the Section 16(a)
filing requirements except as follows: Mr. Davis failed to file a Form 5 for one
transaction in 2002; Mr. Olah failed to file a Form 5 for one transaction in
2001; Mr. Peters failed to file a Form 5 for one transaction in 2001; Mr. Buek
failed to file a Form 5 for one transaction in 1998; and Mr. Bekes failed to
file a Form 5 for one transaction in 1998. As appropriate, the Company will take
steps to bring the filings up to date.
MISCELLANEOUS
Independent Auditors
Grant Thornton LLP ("Grant Thornton") served as the Company's independent
auditors in 2002. Representatives of Grant Thornton are expected to be present
at the Annual Meeting with the opportunity to make a statement if they so
desire. Such representatives are also expected to be available to respond to
appropriate questions.
Shareholder Proposals
Proposals which shareholders of the Company intend to present at and have
included in the Company's proxy statement for the 2004 Annual Meeting pursuant
to Rule 14a-8 under the Exchange Act, as amended ("Rule 14a-8"), must be
received by the Company no later than December 13, 2003. If the Company receives
notice of a shareholder proposal that is submitted other than pursuant to Rule
14a-8 (i.e., proposals shareholders intend to raise at the 2004 annual meeting
of shareholders but do not intend to have included in the Company's proxy
statement for such meeting) after February 26, 2004, the persons named in
proxies solicited by the Board for the 2003 annual meeting of shareholders may
exercise discretionary voting power with respect to such shareholder proposal.
Delivery of Proxy Material to Households
Pursuant to, and in accordance with, the rules of the Securities and
Exchange Commission, services that deliver the Company's communications to
shareholders that hold their stock through a bank, broker or other holder of
record may deliver to multiple shareholders sharing the same address, unless the
Company has received contrary instructions from one or more of the shareholders,
a single copy of the Company's annual report to shareholders and this proxy
statement. Upon oral or written request, the Company will promptly deliver a
separate
16
copy of the annual report to shareholders and/or this proxy statement to any
shareholder at a shared address to which a single copy of each document was
delivered. If you are a shareholder residing at a shared address and you would
like to request an additional copy of the Company's annual report to
shareholders and/or this proxy statement (or to request to receive only one copy
of the annual report to shareholders and proxy statement if you are currently
receiving multiple copies) then you may notify the Company by calling (715)
582-4551 or sending a written request addressed to Secretary, Badger Paper
Mills, Inc. 200 West Front Street, P.O. Box 149, Peshtigo, Wisconsin 54157-0149.
Other Matters
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting proxies by mail, proxies may be solicited personally and by telephone
by certain officers and regular employees of the Company. The Company will
reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold Common Stock.
Additional Information
The Company maintains a website with the address www.badgerpaper.com.
Additional information regarding the Company can be found on this website. The
Company is not including the information contained in the Company's website as a
part of, or incorporating it by reference into, this proxy statement.
The Company has filed with the Securities and Exchange Commission an Annual
Report on Form 10-K for its fiscal year ended December 31, 2002. The Company
will provide a copy of its Form 10-K (without exhibits) without charge to each
person who is a record or beneficial holder of shares of Common Stock on the
Record Date and who submits a written request for it. Requests for copies of the
Form 10-K should be addressed to Secretary, Badger Paper Mills, Inc. 200 West
Front Street, P.O. Box 149, Peshtigo, Wisconsin 54157-0149.
By Order of the Board
BADGER PAPER MILLS, INC.
/s/ William H. Peters
William H. Peters
Secretary
April 11, 2003
17
- --------------------------------------------------------------------------------
Proxy - BADGER PAPER MILLS, INC.
- --------------------------------------------------------------------------------
Solicited on Behalf of the Board of Directors for the Annual Meeting of
Shareholders to be Held May 13, 2003
The undersigned shareholder of Badger Paper Mills, Inc. hereby appoints Mark D.
Burish and James L. Kemerling, and each of them, as the true and lawful proxies
of the undersigned, each with power of substitution, to vote as designated on
the reverse side hereof, all shares of Badger Paper Mills, Inc. that the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Badger
Paper Mills, Inc., to be held at the Best Western Riverfront Inn, 1821 Riverside
Avenue, Marinette, Wisconsin, on Tuesday, May 13, 2003, at 10:00 a.m., local
time, and at any adjournment or postponement thereof.
The undersigned hereby revokes any other proxy heretofore executed by the
undersigned for the Annual Meeting of Shareholders and acknowledges receipt of
Notice of the Annual Meeting and the Proxy Statement.
The Board of Directors favors a vote FOR all of the persons nominated by the
Board for election as Directors.
The shares represented by this Proxy will be voted as directed on the reverse
side hereof, but where no direction is indicated, the shares will be voted FOR
all of the persons nominated by the Board in Item A.
(Continued and to be signed on reverse side hereof.)
Badger Paper Mills, Inc. 000000 0000000000 0 0000
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1
ADD 2 Holder Account Number
ADD 3
ADD 4 C 1234567890 J N T
ADD 5
ADD 6
[ ] Mark this box with an "X" if
you have made changes to your
name or address details above.
- --------------------------------------------------------------------------------
Annual Meeting Proxy Card
- --------------------------------------------------------------------------------
INDICATE YOUR VOTE BY MARKING AN "X" IN THE APPROPRIATE BOX USING DARK INK ONLY.
-------------------
A. Election of Directors
For Withhold
01 - L. Harvey Buek [ ] [ ]
02 - Robert A. Olah [ ] [ ]
03 - William A. Raaths [ ] [ ]
B. In the discretion of the proxies upon all such other business as may
properly come before the meeting.
C. Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
IMPORTANT: Please sign your name exactly as it appears on this proxy. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. If a
corporation, please sign full corporate name by a duly authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Signature 1 - Signature 2 -
Please keep signature Please keep signature
within the box within the box Date (dd/mm/yyyy)
[ ] [ ] [ / / ]