SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. ____)
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Bandag, Incorporated
(Name of Registrant as Specified in its Charter)
Bandag, Incorporated
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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BANDAG, INCORPORATED
Bandag Headquarters
2905 North Highway 61
Muscatine, Iowa 52761-5886
April 6, 1998
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 5, 1998
To The Shareholders:
The Annual Meeting of the Shareholders of Bandag, Incorporated, an
Iowa corporation, will be held at the Holiday Inn, 2905 North Highway 61,
Muscatine, Iowa, on May 5, 1998, commencing at ten o'clock a.m., Central
Daylight Time, for the following purposes:
(1) To elect three directors for terms of three years and one
director for a term of two years.
(2) To act upon a proposal to approve and adopt the Bandag,
Incorporated Employee Stock Purchase Plan.
(3) To ratify the selection of Ernst & Young LLP as independent
auditors of the Corporation for the fiscal year ending December
31, 1998.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed March 13, 1998 as the record date
for the determination of shareholders entitled to notice of and to vote at
the meeting.
You are invited to attend the meeting; however, if you do not expect
to attend in person, you are urged to sign, date and return immediately
the enclosed Proxy, which is solicited by the Board of Directors. You may
revoke your Proxy and vote in person should you attend the meeting.
By Order of the Board of Directors
WARREN W. HEIDBREDER, Secretary
BANDAG, INCORPORATED
Bandag Headquarters
2905 North Highway 61
Muscatine, Iowa 52761-5886
April 6, 1998
P R O X Y S T A T E M E N T
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bandag, Incorporated (the
"Corporation") to be voted at the Annual Meeting of the Shareholders of
the Corporation to be held on Tuesday, May 5, 1998, 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 13, 1998,
will be entitled to vote at the meeting or any adjournment thereof. At
the close of business on March 13, 1998, there were 9,754,548 outstanding
$1.00 par value shares of Common Stock and 2,048,132 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, 1997, this Proxy Statement and the enclosed form of proxy are
being mailed to shareholders on or about April 6, 1998.
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 13, 1998:
Percentage of
Aggregate
Percentage Voting Power
of Outstanding of Common
Amount Stock of Stock
Directors, Nominees and Beneficially Respective and Class B
Executive Officers Owned[1] Class [1] Common Stock**
Lucille A. Carver
Common Stock 2,615,685 27% 46%
Class A Common Stock 3,730,431 34%
Class B Common Stock 1,114,746 54%
Martin G. Carver [2] [3]
Common Stock 141,463 1% 17%
Class A Common Stock 575,740 5%
Class B Common Stock 502,622 25%
Roy J. Carver, Jr.
Common Stock -0- -0-
Class A Common Stock 195,000 2% 13%
Class B Common Stock 400,732 20%
Robert T. Blanchard
Common Stock 200 *
Class A Common Stock -0- 0 *
Class B Common Stock -0- 0
Gary E. Dewel
Common Stock -0- -0-
Class A Common Stock -0- -0- -0-
Class B Common Stock -0- -0-
James R. Everline
Common Stock 100 *
Class A Common Stock 450 * *
Class B Common Stock 350 *
Phillip J. Hanrahan
Common Stock -0- -0- *
Class A Common Stock 500 *
Class B Common Stock -0- -0-
Edgar D. Jannotta
Common Stock 7,000 * *
Class A Common Stock 7,000 *
Class B Common Stock -0- -0-
R. Stephen Newman
Common Stock 2,500 * *
Class A Common Stock 2,500 *
Class B Common Stock -0- -0-
Thomas E. Dvorchak [4]
Common Stock 9,238 * *
Class A Common Stock 4,825 *
Class B Common Stock -0- -0-
Sam Ferrise II
Common Stock 1,345 * *
Class A Common Stock 1,087 *
Class B Common Stock -0- -0-
Hong Yan Henry Li
Common Stock 842 * *
Class A Common Stock 842 *
Class B Common Stock -0- -0-
Patrick K. Robbins
Common Stock 890 * *
Class A Common Stock 897 *
Class B Common Stock -0- -0-
All Directors, Nominees
and Executive Officers
as a Group (17 Persons) 76%
Common Stock 2,789,355 29%
Class A Common Stock 4,528,154 41%
Class B Common Stock 2,018,683 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 is based on
the total number of shares of Common Stock outstanding as of March 13,
1998 (9,754,548 shares), and does not take into account shares of
Common Stock which may be issued upon conversion of the Class B Common
Stock.
[2] Mr. Carver disclaims beneficial ownership of 37,599 shares of Common
Stock, 5,300 shares of Class A Common Stock and 525 shares of Class B
Common Stock held by members of his family.
[3] Includes 80,000 shares of Common Stock and 80,000 shares of Class A
Common Stock which Mr. Carver has the right to acquire upon exercise
of stock options within 60 days after March 13, 1998.
[4] Mr. Dvorchak disclaims beneficial ownership of 3,750 shares of Class A
Common Stock held by a member of his family.
---------------------------------
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 13, 1998, other than the ownership of
Lucille A. Carver, Martin G. Carver and Roy J. Carver, Jr., which is
contained in the previous table:
Amount Percentage Percentage of
Beneficially of Outstanding Aggregate
Name and Address Owned Common Stock Voting Power
The Capital Group
Companies, Inc.(1)
333 South Hope Street
Los Angeles, CA 90071
Common Stock 849,100(1) 8.7% 2.8%
Barclays Global
Investors, N.A.(2)
45 Fremont Street
San Francisco, CA 94105
Common Stock 868,401(2) 8.9% 2.9%
* Shares beneficially owned constitute less than 1% of votes entitled
to be cast.
__________________________
(1) Information shown is based on a Schedule 13G filed with the
Securities and Exchange Commission by The Capital Group Companies,
Inc. and its wholly-owned subsidiary, Capital Guardian Trust Company.
Of the shares shown, The Capital Group Companies, Inc. has sole
voting power over 774,100 of such shares, shares voting power over
none of such shares and has sole power to dispose or direct the
disposition of all such shares.
(2) Information shown is based on a jointly filed Schedule 13G filed with
the Securities and Exchange Commission by Barclays Bank, PLC,
Barclays Global Investors, LTD, Barclays Trust and Banking Company
(Japan) Ltd., Barclays Global Investors, N.A. and Barclays Global
Fund Advisors. Of the shares shown, such parties have sole voting
power over 817,301 of such shares, share 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. The Board of Directors elected Gary E.
Dewel and Phillip J. Hanrahan on August 26, 1997 to serve in accordance
with the bylaws until the next annual meeting of shareholders. Mr.
Hanrahan was elected to fill the unexpired term of Robert K. Drummond, who
resigned on July 29, 1997 and whose term would have expired in 1998. Mr.
Dewel was elected to fill the vacancy caused by the resignation of Stephen
A. Keller on February 5, 1997. At the meeting, three nominees will be
elected for three-year terms expiring in 2001, and one nominee, Mr. Dewel,
will be elected for a two-year term expiring in 2000.
Proxies will be voted for the election of each of the nominees listed
below, unless the shareholder giving the proxy votes against, or abstains
from voting for, any nominee. If, as a result of unforeseen
circumstances, any such nominee shall be unable to serve as director,
proxies will be voted for the election of such person or persons as the
Board may select. Information about the nominees is set forth below:
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
ROY J. CARVER, JR., age 54, is Chairman of the Board of Directors and
Chief Executive Officer of Carver Pump Company, Muscatine, Iowa. During
1988, Mr. Carver acquired a chain of hardware stores and is President of
the Muscatine, Iowa based company, Carver Hardware and Real Estate. Mr.
Carver is President of Carver Aero, Inc., which operates fixed base
operations at airports in Muscatine, Iowa; Davenport, Iowa and Clinton,
Iowa; President of Carver Hotel Enterprises, Inc., a Muscatine, Iowa based
hotel and restaurant operation; and President of Harrington Signal, Inc.,
an electronic signal panel manufacturing company located in Moline,
Illinois. Mr. Carver holds directorships in Catalyst, Inc., Iowa First
Bancshares Corp. and Met-Coil Systems Corporation. He is a member of the
Contributions Committee, Management Continuity and Compensation Committee,
Nominating Committee and the Strategic Planning Committee. Mr. Carver has
been a Director since 1982.
GARY E. DEWEL, age 55, since August 1997 has been Vice President,
Supply Chain for Solutia Inc., St. Louis, Missouri, a spinoff of the
chemical businesses of Monsanto Company. Prior to joining Solutia Inc.,
Mr. Dewel was Vice President, Supply Chain of Monsanto Company
(1994-August 1997) and held several Vice President positions with Navistar
International Corporation (1979-1993). Mr. Dewel is a member of the Audit
Committee, Stock Option Committee and Strategic Planning Committee. Mr.
Dewel has been a Director since August 1997.
JAMES R. EVERLINE, age 56, is President of Everline & Co., a mergers
and acquisitions/management consulting company. Previously, Mr. Everline
was President, Investment Banking Division, of Henry & Company (1990-
December 1991). Henry & Company is engaged in the venture capital and
investment banking business. Prior to Mr. Everline's employment by Henry
& Company, he was a Partner of Founders Court Investors Inc. (1988-1989)
and served as Vice President, Capital Markets Group, Bank of America
(1981-1988). He is a member of the Audit Committee, Executive Committee,
Management Continuity and Compensation Committee, Nominating Committee and
Stock Option Committee. Mr. Everline has been a Director since 1982.
PHILLIP J. HANRAHAN, age 58, has been for more than five years a
partner in the Milwaukee law firm of Foley & Lardner. In 1997, 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 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 Management Continuity
and Compensation Committee. Mr. Hanrahan has been a Director since August
1997.
DIRECTORS CONTINUING IN OFFICE
LUCILLE A. CARVER, age 80, has for more than five years served as
Treasurer of the Corporation. She is a member of the Contributions
Committee and the Nominating Committee. Mrs. Carver has been a Director
since 1957. Her term expires in 1999.
MARTIN G. CARVER, age 49, was elected Chairman of the Board effective
June 23, 1981, Chief Executive Officer effective May 18, 1982, and
President effective May 25, 1983. Mr. Carver was also Vice Chairman of
the Board from January 5, 1981 to June 23, 1981. He is a member of the
Executive Committee, Management Continuity and Compensation Committee,
Nominating Committee and the Strategic Planning Committee. Mr. Carver has
been a Director since 1978. His term expires in 1999.
EDGAR D. JANNOTTA, age 66. On January 2, 1997, William Blair &
Company converted from a partnership to a limited liability company, at
which time Mr. Jannotta became Senior Director of William Blair & Company,
L.L.C. From January 1, 1995 to January 2, 1997 Mr. Jannotta was Senior
Director of William Blair & Company, after having served as Managing
Partner for more than five years. He holds directorships in AAR Corp.,
Aon Corporation, Molex Incorporated, Oil-Dri Corporation of America,
Safety-Kleen Corp. and Unicom Corporation. William Blair & Company,
L.L.C. provided investment banking services to the Corporation in 1997 and
the Corporation anticipates that services may be provided to the
Corporation in the current fiscal year. He is a member of the Audit
Committee, Management Continuity and Compensation Committee and the
Nominating Committee. Mr. Jannotta has been a Director since 1973. His
term expires in 1999.
ROBERT T. BLANCHARD, age 53, since 1992 has been President of the
North American Beauty Care Sector of The Procter & Gamble Company, a
consumer products company. He also serves as Global Executive of several
Procter & Gamble beauty care categories. Mr. Blanchard joined The Procter
& Gamble Company in 1967 and has held numerous positions, including 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 is a
member of the Audit Committee, Management Continuity and Compensation
Committee, Stock Option Committee and Strategic Planning Committee. Mr.
Blanchard has been a Director since May 1996. His term expires in 2000.
R. STEPHEN NEWMAN, age 54, is President and Chief Executive Officer
of Bacon's Information, Inc., and President and Chief Executive Officer of
Nelson Information, Inc., operating units of Primedia Corporation
(Formerly K-III Communications). Mr. Newman has been President of Bacon's
Information, Inc., a media information provider, since August 1990. He
has been President of Nelson Information, Inc., an investment management
information provider, since December 1997. From 1982 to 1990, he was
President of MGI Corporation, a computer services company. Mr. Newman is
a member of the Audit Committee, Management Continuity and Compensation
Committee, Stock Option Committee and Strategic Planning Committee. Mr.
Newman has been a Director since 1983. His term expires in 2000.
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 six times in 1997.
The Audit Committee met three times in 1997; its functions are to
review major accounting decisions with management and the independent
auditors, to confer with such auditors with respect to the scope and
results of the annual audit, to review the annual audit and evaluate the
auditors' performance, to recommend to the Board of Directors annually the
selection of independent auditors for the ensuing year, to recommend the
scope and format of financial information to be submitted to the Board of
Directors, to review the scope of financial information included in the
Annual Report to Shareholders, to review the program of internal audit for
the year, to review the financial data included in all required
governmental reports, and to review the audits of all pension, profit
sharing and other trust funds held for the benefit of employees of the
Corporation. The Committee also reviews various insurance coverages of the
Corporation and the Corporation's compliance with the Foreign Corrupt
Practices Act.
The Management Continuity and Compensation Committee met four times
in 1997; its functions are to review, evaluate and determine executive
level compensation and to recommend to the Board of Directors the election
of corporate officers.
The Nominating Committee met three times in 1997; its duties relate
to the evaluation and recommendation to the Board of Directors of
prospective candidates for election as directors of the Corporation. The
Nominating Committee will consider recommended nominations for the
position of director which are submitted in writing by the shareholders
and addressed to the Committee in care of the Corporation at Muscatine,
Iowa.
The Stock Option Committee met two times in 1997; its function is to
select key employees and to award options and restricted stock grants to
those key employees whose judgment, initiative and efforts contribute
materially to the successful performance of the Corporation.
The Strategic Planning Committee met two times in 1997; its function
is to participate in the creation of the Corporation's business
objectives, strategies and action plans; and to review their perspectives
on them with the full Board. This participation is purely advisory and
the Committee has no formal approval role.
In 1997, Lucille A. Carver attended 69% of the aggregate of all
meetings of the Board of Directors and meetings of the Committees on which
she served.
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 five other most highly compensated executive
officers as of December 31, 1997 whose total cash compensation exceeded
$100,000 in fiscal 1997. 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
Compensation Stock All Other
Name and Principal Position Year Salary Bonus [1] Award(s)[2] Compensation [3]
Martin G. Carver 1997 $345,942 $0 $124,947 $152,171 $ 13,722
Chairman of the Board, 1996 332,424 0 124,707 151,876 13,181
Chief Executive Officer 1995 321,340 0 91,264 111,417 20,255
and President
Thomas E. Dvorchak 1997 $344,409 $0 $ 5,006 $ -0- $ 39,398
Senior Vice President 1996 321,860 0 27,870 28,126 25,573
1995 309,127 0 24,813 27,102 26,203
Hong Yan Henry Li 1997 $285,477 $0 $31,581 $40,514 $221,370
Vice President, Asian 1996 113,077 0 29,875 40,312 124,044
Operations 1995 -0- 0 -0- -0- -0-
Sam Ferrise II 1997 $283,140 $0 $33,663 $ 40,514 $ 13,722
Vice President, Sales and 1996 219,126 0 35,213 40,312 13,181
Marketing 1995 171,896 0 8,998 12,045 15,855
Patrick K. Robbins 1997 $277,487 $0 $23,839 $40,514 $85,019
Vice President and 1996 157,252 0 47,958 18,750 50,765
General Manager, 1995 119,995 0 33,112 6,023 56,486
Eastern Hemisphere
Retread Division (EHRD)
and Southern Division
[1] Amounts shown represent the tax reimbursement or "gross up" with respect to restricted stock awards and certain other
fringe benefits and, in Mr. Li's and Mr. Robbin's cases, includes tax "gross up" in connection with foreign service
assignments.
[2] At December 31, 1997 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, 9,830 shares Common Stock, value $525,291, and 5,970 shares Class A
Common Stock, value $285,814; Thomas E. Dvorchak, 1,820 shares Common Stock, value $97,256, and 1,020 shares Class A
Common Stock, value $48,833; Hong Yan Henry Li, 840 shares Common Stock, value $44,888, and 840 shares Class A Common
Stock, value $40,215; Sam Ferrise II, 1,010 shares Common Stock, value $53,972, and 1,010 shares Class A Common Stock,
value $48,354; and Patrick K. Robbins, 720 shares Common Stock, value $38,475, and 720 shares Class A Common Stock, value
$34,470. Dividends are paid on the shares of restricted stock prior to vesting.
[3] Of the amounts shown in this column for 1997 for each of the named executive officers, $13,722 is the Corporation's
contribution under its Salaried Profit Sharing, Retirement and Savings Plan for each of such individuals (of which,
because of limitations under the Internal Revenue Code of 1986, as amended, $8,722 was paid into such Plan and the
balance to be paid by the Corporation outside such Plan). The remainder of the amounts shown for Mr. Dvorchak, Mr. Li
and Mr. Robbins in 1997 is $25,676, $207,648 and $71,297, respectively, representing cash paid in lieu of vacation to Mr.
Dvorchak and allowances for foreign service assignment to Messrs. Li and Robbins, respectively.
Stock Options
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:
Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End[2]
Shares Acquired Value
Name on Exercise Realized Exercisable Exercisable
Martin G. Carver 40,000 $1,065,000 160,000[1] $4,405,000
[1] Comprised of 80,000 shares of Common Stock and 80,000 shares of Class A Common Stock. The options were granted in 1987
at an exercise price equal to the closing price of the Corporation's Common Stock on the New York Stock Exchange on the
date of grant.
[2] The dollar values are calculated by determining the difference between the fair market value of the underlying Common
Stock and Class A Common Stock, respectively, at fiscal year-end and the exercise price of the options.
Pension Plan Benefits. The following table sets forth annual normal
retirement age pension benefits under the Bandag Salaried Pension Plan at
the specified remuneration and years-of-service classifications. The
table assumes retirement in 1998. 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 $ 3,125 $ 6,250 $ 9,375 $12,000 $14,500 $16,500 $17,750
$100,000 $ 7,188 $14,375 $21,563 $27,000 $32,000 $36,000 $38,500
$200,000 $15,313 $30,625 $45,938 $57,000 $67,000 $75,000 $80,000
$250,000 $19,375 $38,750 $58,125 $72,000 $84,500 $94,500 $100,750
$300,000 $19,575 $39,149 $58,724 $72,737 $85,360 $95,458 $101,769
$350,000 $19,575 $39,149 $58,724 $72,737 $85,360 $95,458 $101,769
$400,000 $19,575 $39,149 $58,724 $72,737 $85,360 $95,458 $101,769
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 officers are set forth in the Summary
Compensation Table under "Salary." As of March 13, 1998, Messrs. Carver,
Dvorchak, Li, Ferrise and Robbins had completed approximately 19, 27, 2,
17 and 7 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, each named executive officer also has a "Bandag Security
Program" benefit under the Bandag Salaried Pension Plan. The annual
defined benefit payable at age 62 for each of the named executive officers
is fixed and is as follows: Martin G. Carver, $700; Thomas E. Dvorchak,
$1,124; Hong Yan Henry Li, $-0-; Sam Ferrise II, $611; and Patrick K.
Robbins, $89.
Report of Management Continuity and Compensation Committee on Executive
Compensation
The seven member Management Continuity and Compensation Committee of
the Board of Directors (the "Compensation Committee") makes all decisions
regarding compensation of the Corporation's executive officers, except for
the awarding of stock options and restricted stock, which are made by the
Stock Option Committee. Set forth below is a report submitted by the
Compensation Committee addressing the Corporation's compensation policies
for 1997 applicable to the Corporation's executive officers, including the
executive officers named in the Summary Compensation Table.
Consistent with the Corporation's commitment to adopt a world-class
approach to improving total quality, in 1992 the Corporation adopted a new
approach to the compensation of executive officers and other salaried
employees. As the Corporation learned more about total quality systems,
their fairness to people and their necessity in achieving the
Corporation's long-term objectives, it became apparent that the then
existing compensation system was not designed with these objectives in
mind. In that spirit, a Midpoint Compensation System (the "System") was
approved by the Compensation Committee in 1992.
This System eliminated arbitrary incentives which the Compensation
Committee believes are a major barrier to continuous improvement. As a
result of the adoption of the System, bonuses, country club memberships,
automobile allowances, split dollar life insurance and tax preparation
fees, which were perquisites of top executives and some other managers,
were eliminated. A portion of the dollar value of these perquisites was
rolled into the executives' base salaries. Salary survey information was
used to ensure that the salaries were fair and competitive with those of
other companies similar in size to the Corporation. Under the System,
bonuses and most traditional executive perquisites are no longer paid.
Rather, under the System, an executive officer, including the Chief
Executive Officer, receives an annual salary fixed by the Compensation
Committee, restricted stock awards determined by the Stock Option
Committee, tax "gross up" payments related to such awards and Corporation
contributions to the Corporation's Salaried Profit Sharing, Retirement and
Savings Plan as determined by the Compensation Committee.
Under the System, a salary "midpoint" for each executive officer,
including the Chief Executive Officer, is established through the use of
executive compensation salary surveys, financial performance of the
Corporation, national trends in compensation and the Corporation's
competitive need to retain and to recruit the very best and most capable
people. Such salary surveys encompass general manufacturing companies
with revenues from $500 million to $1 billion. In reviewing the
Corporation's financial performance, the Compensation Committee considered
the Corporation's revenues, net income and net income per share in light
of the competitive and economic conditions encountered by the Corporation
during the fiscal year, as well as the effect on the Corporation's
financial performance resulting from the Corporation's investment in
marketing programs, research and development, plant, machinery and
equipment and in personnel and related programs.
The salary "midpoints" represent the salary level in the 75th
percentile of the salary range for each executive officer position, based
on executive compensation salary surveys, as adjusted by the Compensation
Committee based on an evaluation of the importance of the particular
executive position to the Corporation. The salary "midpoints" are
adjusted by the Compensation Committee each year based on a review of the
factors outlined in the immediately preceding paragraph. These salary
"midpoints" are used to calculate the annual increase for each executive
officer, except the Chief Executive Officer, by multiplying the salary
"midpoint" (not the existing annual salary) by a percentage established by
the Compensation Committee. Multiplying the salary "midpoint" for a given
position by the annual percentage determined by the Compensation Committee
increases base salaries which are currently below the salary "midpoint" by
a greater amount than if base salaries were multiplied by the annual
percentage, while base salaries which are currently in excess of the
salary "midpoint" for a given position will receive a smaller increase
than would be the case if the base salaries were multiplied by such
percentage. For 1998, the percentage increase was fixed at 4.0% for all
salaried Corporation employees, including all executive officers, except
the Chief Executive Officer. Such increase in base salary took effect on
January 1, 1998 and does not affect 1997 compensation. In fixing the
percentage increase for 1998 base salary, the Compensation Committee
considered a variety of factors, including the inflation rate, the
Corporation's financial performance and trends in salaried employee
compensation increases, as disclosed by published salary forecasts.
Mr. Martin G. Carver, Chief Executive Officer, again declined to
receive a salary increase for 1998 based on a percentage of the salary
"midpoint" for his position. Instead, he again requested that his salary
increase for 1998 be increased by a percentage of his 1997 base salary,
which is substantially lower than his salary "midpoint." The salary
increase for Mr. Carver for 1998 was equal to 4.0% of his 1997 base salary
(not his salary "midpoint").
Although the Compensation Committee considers the Corporation's
financial performance in determining the total compensation for executive
officers, including the Chief Executive Officer, there is no specific
formula or target performance against which executive compensation is to
be compared or judged. Rather, the Corporation's performance is part of
the total mix of information which the Compensation Committee considers in
making its decisions on executive compensation.
Bandag, Incorporated Management
Continuity and Compensation Committee
Robert T. Blanchard Phillip J. Hanrahan
Roy J. Carver, Jr. Edgar D. Jannotta
Martin G. Carver R. Stephen Newman
James R. Everline
Report of Stock Option Committee on Executive Compensation
The Stock Option Committee of the Board of Directors (the "Stock
Option Committee"), which is composed of four non-employee directors,
makes all decisions regarding the granting of stock options and the grant
of restricted stock awards. No grants of stock options were made in 1997.
The purpose of the Corporation's Restricted Stock Grant Plan is to provide
long-term incentive compensation which will attract and retain superior
executive personnel. Under the Plan, the Stock Option Committee awards
stock to key executives each year. The shares are held by a custodian
until seven years have elapsed, when they are then transferred to the
executive. Dividends are paid to the recipient of the restricted stock
while the shares are held by the custodian. If an executive who has not
attained age 60 leaves the Corporation before the end of the seven-year
restriction period, the shares are forfeited, except in the case of death
or disability. An executive who has attained age 60 and who leaves the
Corporation prior to the end of the seven-year retention period does not
forfeit the shares.
During 1997 awards of restricted stock were made utilizing the
Corporation's System. Restricted stock awards were granted based on a
percentage of the salary "midpoint" established for each executive
position. The percentages were established taking into consideration
total compensation, as well as each executive's level of responsibility.
The Chief Executive Officer's percentage of "midpoint" is greater than the
other executive officers. In fixing a greater percentage of the Chief
Executive Officer's "midpoint," the Stock Option Committee took into
account that the Chief Executive Officer's base salary is substantially
below the salary "midpoint" for his position and that his increase in base
salary for 1998 is substantially less than he would have received had his
increase been based on his salary "midpoint." The number of restricted
shares granted was computed by multiplying the salary "midpoint" for an
executive officer, including the Chief Executive Officer, by the
percentage fixed by the Stock Option Committee and then dividing such
amount by the per share market value of the Corporation's Common Stock and
Class A Common Stock on the date of grant. In fixing the awards for all
executives, including the Chief Executive Officer, the Stock Option
Committee considered the Corporation's performance in the same manner as
the Compensation Committee did in fixing other components of executive
compensation. See "Report of Management Continuity and Compensation
Committee on Executive Compensation." The total amount of previous awards
made to individuals was not a factor in fixing the 1997 awards.
Bandag, Incorporated
Stock Option Committee
Robert T. Blanchard James R. Everline
Gary E. Dewel R. Stephen Newman
Compensation Committee Interlocks and Insider Participation
The Management Continuity and Compensation Committee (the
"Compensation Committee") consists of Messrs. Robert T. Blanchard, Martin
G. Carver, Roy J. Carver, Jr., James R. Everline, Phillip J. Hanrahan,
Edgar D. Jannotta and R. Stephen Newman. The Stock Option Committee
consists of Messrs. Robert T. Blanchard, Gary E. Dewel, James R. Everline
and R. Stephen Newman. Mr. Martin G. Carver is Chairman of the Board,
Chief Executive Officer and President of the Corporation. Mr. Roy J.
Carver owns Carver Aero, Inc., which sold $183,324.84 of aviation fuel and
charter services to the Corporation in 1997 (see "Transactions with
Management/Principal Shareholders" herein). Mr. Hanrahan is a partner of
the law firm of Foley & Lardner, Milwaukee, Wisconsin, which has served as
legal counsel to the Corporation for several years. Mr. Jannotta is
Senior Director of William Blair & Company, L.L.C., which provided
investment banking services to the Corporation in 1997.
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 - $37,500.
Other Directors - $35,500.
Board Meeting Attendance - $1,250 per meeting.
Committee Meeting Attendance - Chairman - $1,500 per meeting.
Other Directors - $1,250 per meeting.
Transactions with Management/Principal Shareholders. Roy J. Carver,
Jr., son of Lucille A. Carver and brother of Martin G. Carver, owns 100%
of Carver Aero, Inc., which operates fixed base operations at airports in
Muscatine, Iowa; Davenport, Iowa, and Clinton, Iowa. During 1997, it sold
$183,324.84 of aviation fuel and charter services to Bandag, Incorporated
at competitive prices based on volume purchased and services utilized.
SHAREHOLDER RETURN PERFORMANCE INFORMATION
Set forth on the following page 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 return of the Standard & Poor's 500 Stock (Index) and the Dow Jones
& Co., Inc. Automobile Parts & Equipment-All (Index).
Bandag, Incorporated
Stock Performance Chart
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Bandag, Incorporated, S&P 500 Stock (Index)
and the Dow Jones & Co., Inc. Automobile Parts & Equipment -
All (Index)
[GRAPH]
December 31
1992 1993 1994 1995 1996 1997
Bandag, Incorporated $100 $95 $102 $97 $86 $95
S&P 500 Stock (Index) $100 $110 $112 $153 $189 $252
Automobile Parts &
Equipment-All (Index) $100 $124 $106 $132 $148 $190
Assumes $100 Invested on December 31, 1992
in Bandag, Incorporated Common Stock and
Class A Common Stock, the S&P 500 Stock
(Index) and the Dow Jones & Co., Inc.
Automobile Parts & Equipment-All (Index)
Proposal No. 2-APPROVE AND ADOPT THE EMPLOYEE STOCK PURCHASE PLAN
General
On March 18, 1998, the Board of Directors adopted the Bandag,
Incorporated Employee Stock Purchase Plan (the "Stock Purchase Plan").
The Stock Purchase Plan provides employees (including executive officers)
of the Corporation with the opportunity to purchase Class A Common Stock.
Shares of Class A Common Stock are identical in all respects to shares of
Common Stock, except that shares of Class A Common Stock have no voting
rights.
The purpose of the Stock Purchase Plan is to allow eligible employees
of the Corporation and its subsidiaries to purchase shares of Class A
Common Stock and thereby share in the ownership of the Corporation. It is
intended that the Stock Purchase Plan will qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
The text of the proposed Stock Purchase Plan is set forth as
Appendix A to this Proxy Statement. A description of the Stock Purchase
Plan is set forth below and is qualified in its entirety by reference to
the complete text of the Stock Purchase Plan.
Administration
The Stock Purchase Plan is administered by the Stock Option Committee
(the "Committee") of the Board of Directors (the "Board"). The Committee
has full authority and discretion, subject to the express provisions of
the Stock Purchase Plan, to (a) construe and interpret the Stock Purchase
Plan, (b) establish, amend and revoke such terms and conditions for the
grant of options under the Stock Purchase Plan as the Committee may deem
necessary or advisable, (c) adopt such rules and regulations which may
become necessary or advisable for the operation of the Stock Purchase Plan
and (d) make such determinations, and take such other actions, as are
expressly authorized or contemplated in the Stock Purchase Plan or as may
be required for the proper administration of the Stock Purchase Plan. The
Committee's discretion as to the interpretation and operation of the Stock
Purchase Plan shall be final and conclusive.
Eligibility
Any employee of the Corporation and of such subsidiaries as may be
designated by the Committee for participation in the Stock Purchase Plan
is eligible to participate in the Stock Purchase Plan. However, employees
whose customary employment is for not more than five (5) months in any
calendar year or whose customary employment is twenty (20) hours or less
per week are not eligible to participate in the Stock Purchase Plan. The
Stock Purchase Plan provides that no employee may be granted options to
purchase shares of Class A Common Stock under the Stock Purchase Plan that
could result in such employee (a) owning, and/or holding options or rights
to purchase, 5% or more of the total combined voting power or value of all
classes of stock of the Corporation, or any subsidiary, or (b) having
rights to purchase stock under all employee stock purchase plans of the
Corporation that accrue at a rate which exceeds $25,000 in fair market
value of the Class A Common Stock for each calendar year in which such
purchase rights are outstanding. It is anticipated that approximately
1,700 persons will be initially eligible to participate in the Stock
Purchase Plan.
Shares Subject to the Stock Purchase Plan
The maximum number of shares of Class A Common Stock which may be
sold under the Stock Purchase Plan is 500,000, subject to adjustment in
order to prevent dilution in certain cases as described below. Any shares
not purchased under an option granted under the Stock Purchase Plan shall
again become available for sale under the Stock Purchase Plan. Under the
Stock Purchase Plan, the Corporation may make offerings granting eligible
employees the option to purchase shares of Class A Common Stock. The
Committee, in its discretion, will determine when and for what period an
offering will be made (the "Purchase Period"), provided that no Purchase
Period shall exceed twenty-seven (27) months. The Committee shall also
determine the number of shares to be offered during each Purchase Period.
Payroll Deductions; Withdrawal from the Stock Purchase Plan
Employees may participate in the Stock Purchase Plan only through a
system of regular payroll deductions. Eligible employees will be entitled
to apply a portion of their compensation through a system of regular
payroll deductions, to the purchase of Class A Common Stock at a price
equal to the lesser of 85% of the fair market value of the stock at the
beginning of any Purchase Period or 85% of the fair market value of the
stock at the end of such Purchase Period. The amount withheld from an
employee's compensation during a Purchase Period for the purchase of Class
A Common Stock will be held until the end of the period, at which time it
will be applied automatically to the purchase of shares. So long as an
employee gives notice of withdrawal at least fifteen (15) days prior to
the end of a Purchase Period, such employee will be entitled to withdraw
the entire accumulated balance in the payroll deduction account at any
time before the end of the Purchase Period, but the employee may not
participate in the Stock Purchase Plan during the balance of that Purchase
Period. Such withdrawal does not affect the ability of the employee to
participate in any subsequent offering under the Stock Purchase Plan. The
accumulated balance of an employee's account will also be automatically
returned to the employee in the event of a termination of employment for
any reason, including the death of the employee. At the sole discretion
of the Committee with respect to any offering, interest may be paid by the
Corporation on the accumulated balance in the account regardless of the
ultimate disposition of the funds in the account.
Nontransferability of Options
An employee's right to exercise options under the Plan (a) may not be
transferred, pledged, assigned or otherwise alienated or hypothecated by
the employee, except by will or the laws of descent and distribution and
(b) may be exercised only by the employee, other than by will or the laws
of descent and distribution.
Capital Adjustments
To prevent the dilution or enlargement of purchase rights, in the
event of any change in corporate capitalization such as a stock dividend,
stock split, reorganization, recapitalization, merger, consolidation, or
other change in the Corporation's capitalization, the Committee may
adjust, among other things, the number of shares of Class A Common Stock
subject to the Stock Purchase Plan and the number of shares and the
purchase price under each outstanding option as the Committee deems
appropriate.
Amendment and Termination
The Board may at any time amend or terminate the Stock Purchase Plan.
The Board may make such changes in the Stock Purchase Plan as may be
necessary or desirable, in the opinion of counsel for the Corporation, to
comply with the rules or regulations of any governmental authority, or to
be eligible for tax benefits under the Code or the laws of any state or
foreign government, or for any other reason.
Certain Federal Income Tax Consequences
Participating employees will not recognize taxable income on the
grant or exercise of the options issued pursuant to the Stock Purchase
Plan. Shares received upon exercise of an option will have an initial tax
basis equal to the option exercise price. Although participating
employees will not recognize any taxable income when they purchase shares,
they will recognize ordinary income and/or gain or loss when the shares
acquired under the Stock Purchase Plan are sold, exchanged or otherwise
disposed of.
Providing that the participating employee has held the shares for at
least two years from the date the option was granted and one year after
the option is exercised, the lesser of (a) the fair market value of the
shares disposed of (at the time of such disposition), including shares
sold, exchanged, gifted, transferred at death, etc., over the amount paid
for such shares or (b) the fair market value of the shares at the time of
grant over the option price, will be included in the employee's taxable
income as additional ordinary compensation income on the date of
disposition or death. The basis of the shares will generally be increased
by the amount of compensation income recognized. The Corporation will not
be entitled to a deduction in this case. In addition, on such a sale (or
other taxable exchange or transfer) the amount of gain or loss recognized
by a participating employee will be the difference between the amount
which such employee received for his or her shares and the tax basis (as
adjusted) thereof. Such gain or loss will generally be a long-term
capital gain or loss.
If the participating employee disposes of his or her shares without
holding such shares for the two and one-year periods set forth above, then
such employee will recognize additional ordinary compensation income in an
amount equal to the difference between the fair market value of such
shares on exercise and their initial tax basis. The basis of the shares
will generally be increased by the amount of compensation income
recognized. The Corporation will be entitled to a deduction in the same
amount and at the same time as ordinary income is recognized by the
employee participant. The amount of gain or loss on such sale (or other
taxable exchange or transfer) will be the difference between the amount
which the participating employee received for his or her shares and the
tax basis (as adjusted) thereof. Such gain or loss will generally be a
capital gain or loss, long-term or short-term, depending upon such
employee's holding period.
Offerings
No offerings under the Stock Purchase Plan have been made and no
shares of Class A Common Stock have been sold under such Plan. The timing
and amount of future offerings are solely within the discretion of the
Committee.
Vote Required to Approve Stock Purchase Plan
The affirmative votes of shares of Common Stock and Class B Common
Stock representing a majority of the votes represented and voted at the
Annual Meeting with respect to the Stock Purchase Plan (assuming a quorum
is present) is required to approve such Plan. Any shares not voted at the
Annual Meeting with respect to the Stock Purchase Plan (whether as a
result of broker non-votes or otherwise, except abstentions) will have no
impact on the vote. Votes represented by shares of Common Stock and Class
B Common Stock as to which holders abstain from voting will be treated as
votes against the approval of the Stock Purchase Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE STOCK PURCHASE
PLAN.
Proposal No. 3-RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, based upon the recommendation of the Audit
Committee, which consists of Robert T. Blanchard, Gary E. Dewel, James R.
Everline, Edgar D. Jannotta and R. Stephen Newman, directors of the
Corporation, has appointed Ernst & Young LLP as the Corporation's
independent auditors for the fiscal year ending December 31, 1998.
Ernst & Young LLP served as the Corporation's independent auditors
for the fiscal year ended December 31, 1997. Representatives of Ernst &
Young LLP will be present at the Annual Meeting and will be available to
respond to any questions raised at the meeting and make any comments they
deem appropriate.
Although this appointment is not required by law to be submitted to a
vote by shareholders, the Board believes it appropriate, as a matter of
policy, to request that the shareholders ratify the appointment of Ernst &
Young LLP as independent auditors for 1998. If the shareholders should not
ratify, the Board will reconsider the appointment.
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.
1999 SHAREHOLDERS' PROPOSALS
The date by which proposals of shareholders intended to be presented
at the 1999 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 7, 1998.
MISCELLANEOUS
The expense of preparing, printing and mailing this proxy statement
and the proxies solicited hereby will be borne by the Corporation.
Some of the officers and regular employees of the Corporation may,
without extra remuneration, solicit proxies personally or by telephone,
telex or telefax. The Corporation will request brokerage houses, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial
owners of shares held of record and will reimburse such persons for their
expenses.
By Order of the Board of Directors
WARREN W. HEIDBREDER, Secretary
PROXY
BANDAG, INCORPORATED
Muscatine, Iowa
PROXY FOR ANNUAL MEETING - MAY 5, 1998
Lucille A. Carver and Martin G. Carver, or either of them each
with power of substitution, are authorized to vote all shares of
Common Stock (COM) and Class B Common Stock (CLB) which the
P undersigned is entitled to vote at the Annual Meeting of
Shareholders of Bandag, Incorporated to be held May 5, 1998 and at
R any adjournment thereof.
O This proxy is solicited on behalf of the Company's Board of
Directors. Every properly signed proxy will be voted as directed.
X The Board of Directors recommends a vote FOR the nominees in Item
(1) and FOR Items (2) and (3). Unless otherwise directed, proxies
Y will be voted in accordance with the foregoing sentence and in the
discretion of the Board of Directors 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 holders 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 hereby revokes all proxies heretofore given by the signer to
vote as said meeting or any adjournment thereof.
1. Election of Directors 2. Approval of Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Roy J. James R.
Carver [_] [_] [_] Everline [_] [_] [_] [_] [_] [_]
Jr.
3. The selection of Ernst & Young LLP as
independent auditors for the fiscal
year ending December 31, 1998.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Gary E. Phillip J.
Dewel [_] [_] [_] Hanrahan [_] [_] [_] [_] [_] [_]
4. In their discretion upon such other
matters as may property come before
the meeting.
MARK HERE MARK HERE
FOR COMMENTS/ [_] IF YOU PLAN [_]
ADDRESS CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
Signature:_______________ Date:______ Signature:______________ Date:______