FORM OF THE KEY EXECUTIVE
EMPLOYMENT AND SEVERANCE AGREEMENT
THIS KEY
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT (this
“Agreement”) is made and entered into as of the ___day
of
, 20___, by and between Badger Meter, Inc., a Wisconsin corporation
(hereinafter referred to as the “Company”), and
(hereinafter referred to as the
“Executive”).
WHEREAS ,
the Executive is employed by the Company and/or a subsidiary of the
Company in a key executive capacity, and the Executive’s
services are valuable to the conduct of the business of the
Company;
WHEREAS ,
the Board of Directors of the Company (the “Board”)
recognizes that circumstances may arise in which a change in
control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty about the Executive’s future
employment with the Company and/or any such subsidiary without
regard to the Executive’s competence or past contributions,
which uncertainty may result in the loss of valuable services of
the Executive to the detriment of the Company and its shareholders,
and the Company and the Executive wish to provide reasonable
security to the Executive against changes in the Executive’s
relationship with the Company in the event of any such change in
control;
WHEREAS ,
the Company and the Executive desire that any proposal for a change
in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests
of the Company and its shareholders;
WHEREAS ,
the Executive will be in a better position to consider the
Company’s best interests if the Executive is afforded
reasonable security, as provided in this Agreement, against altered
conditions of employment which could result from any such change in
control or acquisition; and
WHEREAS ,
if the Executive and the Company have previously entered into a
similar agreement, this Agreement supersedes all prior agreements
between the Executive and the Company with respect to its subject
matter and constitutes a complete and exclusive statement of the
terms of the agreement between the Executive and the Company with
respect to its subject matter.
NOW,
THEREFORE , in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
1.
Definitions . The following terms are used in this Agreement
as defined in Exhibit A :
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Covered
Termination
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Effective
Date
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Employer
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Good
Reason
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Normal
Retirement
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Notice of
Termination
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Person
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Termination
Date
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2.
Termination or Cancellation Prior to the Effective Date .
The Employer shall retain the right to terminate the employment of
the Executive at any time prior to the Effective Date. If the
Executive’s employment is terminated prior to the Effective
Date, then this Agreement shall be terminated and cancelled and of
no further force or effect and any and all rights and obligations
of the parties hereunder shall cease. In addition, this Agreement
shall terminate upon the Executive ceasing to be an officer of the
Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under
circumstances described in clause (iii)(B)(1) or (iii)(B)(2) of the
definition of “Effective Date” in Exhibit A
.
3.
Employment Period . If the Executive is employed by the
Employer on the Effective Date, then the Company will, or will
cause the Employer to, continue thereafter to employ the Executive
during the Employment Period (as hereinafter defined), and the
Executive will remain in the employ of the Employer, in accordance
with and subject to the terms and provisions of this Agreement. For
purposes of this Agreement, the term “Employment
Period” means a period (i) commencing on the Effective Date,
and (ii) ending at 11:59 p.m. Milwaukee Time on the
second anniversary [or third anniversary for the CEO] of such
date.
4.
Duties . During the Employment Period, the Executive shall
devote the Executive’s best efforts and all of the
Executive’s business time, attention and skill to the
business and affairs of the Employer, as such business and affairs
now exist and as they may hereafter be conducted.
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5.
Compensation . During the Employment Period, the Executive
shall be compensated as follows:
(a) The
Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an
annual base salary in cash equivalent of not less than twelve times
the Executive’s highest monthly base salary for the
twelve-month period immediately preceding the month in which the
Effective Date occurs or, if higher, annual base salary at the rate
in effect immediately prior to the Effective Date (which base
salary shall, unless otherwise agreed in writing by the Executive,
include the current receipt by the Executive of any amounts which,
prior to the Effective Date, the Executive had elected to defer,
whether such compensation is deferred under Section 401(k) of the
Code or otherwise), subject to upward adjustment as provided in
Section 6 (such salary amount as adjusted upward from time
to time is hereafter referred to as the “Annual Base
Salary”).
(b) The
Executive shall receive fringe benefits at least equal in value to
those provided for the Executive at any time during the 180-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time
after the Effective Date to any executives of the Company and its
Affiliates of comparable status and position to the Executive. The
Executive shall be reimbursed, at such intervals and in accordance
with such standard policies that are most favorable to the
Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to any executives of the Company and its Affiliates
of comparable status and position to the Executive, for any and all
monies advanced in connection with the Executive’s employment
for reasonable and necessary expenses incurred by the Executive on
behalf of the Company and its Affiliates, including travel
expenses.
(c) The
Executive and/or the Executive’s family, as the case may be,
shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive’s
salary grade or on any other requirement that excludes executives
of the Company and its Affiliates of comparable status and position
to the Executive unless such exclusion was in effect for such plan
or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices,
policies and programs providing benefits for the Company’s
salaried employees in general or, if more favorable to the
Executive, to any executives of the Company and its Affiliates of
comparable status and position to the Executive, including but not
limited to group life insurance, hospitalization, medical and
dental plans; provided , that , in no event shall the
aggregate level of benefits under such plans, practices, policies
and programs in which the Executive is included be less than the
greater of: (i) the aggregate level of benefits under plans,
practices, policies and programs of the type referred to in this
Section 5(c) in which the Executive was participating at any
time during the 180-day period immediately preceding the Effective
Date and (ii) the aggregate level of benefits under plans,
practices, policies and programs of the type referred to in this
Section 5(c) provided at any time after the Effective
Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive.
(d) The
Executive shall annually be entitled to not less than the amount of
paid vacation and not fewer than the number of paid holidays to
which the Executive was entitled annually at any time during the
180-day period immediately preceding the Effective Date or such
greater amount of paid vacation and number of paid holidays as may
be made available annually to any other executive of the Company
and its Affiliates of comparable status and position to the
Executive at any time after the Effective Date.
(e) The
Executive shall be included in all plans providing additional
benefits to any executives of the Company and its Affiliates of
comparable status and position to the Executive, including but not
limited to deferred compensation, split-dollar life insurance,
retirement, supplemental retirement, stock option, stock
appreciation, stock bonus and similar or comparable plans;
provided, that, in no event shall the aggregate level of benefits
under such plans be less than the greater of: (i) the
aggregate level of benefits under plans of the type referred to in
this Section 5(e) in which the Executive was
participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) the aggregate level of
benefits under plans of the type referred to in this
Section 5(e) provided at any time after the Effective
Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive. The
Company’s obligation to include the Executive in bonus or
incentive compensation plans shall be determined by
Section 5(f) .
(f) To
assure that the Executive will have an opportunity to earn
incentive compensation after the Effective Date, the Executive
shall be included in a bonus plan of the Company that shall satisfy
the standards described below (the “Bonus Plan”).
Bonuses under the Bonus Plan shall be payable with respect to
achieving such financial or other goals reasonably related to the
business of the Company, including the Employer, as the Company
shall establish (the “Goals”), all of which Goals shall
be attainable, prior to the end of the Employment Period, with
approximately the same degree of probability as the goals under the
Employer’s annual incentive plan currently in
effect,
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or the
successor to such plan, in the form most favorable to the Executive
that was in effect at any time during the 180-day period prior to
the Effective Date (the “Existing Plan”) and in view of
the Company’s existing and projected financial and business
circumstances applicable at the time. The amount of the bonus (the
“Bonus Amount”) that the Executive is eligible to earn
under the Bonus Plan shall be no less than the amount of the
Executive’s highest maximum potential award under the
Existing Plan at any time during the 180-day period prior to the
Effective Date or, if higher, any maximum potential award under the
Bonus Plan or any other bonus or incentive compensation plan in
effect after the Effective Date for the Executive or for any
executive of the Company and its Affiliates of comparable status
and position to the Executive (such bonus amount herein referred to
as the “Targeted Bonus”), and if the Goals are not
achieved (and, therefore, the entire Targeted Bonus is not
payable), then the Bonus Plan shall provide for a payment of a
Bonus Amount not less than a portion of the Targeted Bonus
reasonably related to that portion of the Goals that were achieved.
Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be
affected by any circumstance occurring subsequent to the end of the
Employment Period, including termination of the Executive’s
employment.
6.
Annual Compensation Adjustments . During the Employment
Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually,
the contributions of the Executive to the Employer, and in
accordance with the Company’s practice prior to the Effective
Date, due consideration shall be given, at least annually, to the
upward adjustment of the Executive’s Annual Base Salary
(i) commensurate with increases generally given to other
executives of the Company and its Affiliates of comparable status
and position to the Executive, and (ii) as the scope of the
Company’s operations or the Executive’s duties
expand.
7.
Termination During Employment Period .
(a)
Right to Terminate . During the Employment Period,
(i) the Company shall be entitled to terminate the
Executive’s employment (A) for Cause, (B) by reason
of the Executive’s disability pursuant to
Section 11 , or (C) for any other reason, and
(ii) the Executive shall be entitled to terminate the
Executive’s employment for any reason. Any such termination
shall be subject to the procedures set forth in
Section 12 and shall be subject to any consequences of
such termination set forth in this Agreement. Any termination of
the Executive’s employment during the Employment Period by
the Employer shall be deemed a termination by the Company for
purposes of this Agreement.
(b)
Termination for Cause or Without Good Reason . If there is a
Covered Termination for Cause under the circumstances described in
clause (i)(B) of the definition of Cause, or due to the
Executive’s voluntarily terminating the Executive’s
employment other than for Good Reason, then the Executive shall be
entitled to receive only Accrued Benefits. If there is a Covered
Termination for Cause under the circumstances described in any of
clauses (i)(A), (i)(C), (i)(D) or (i)(E) of the definition of
Cause, then the Executive shall not be entitled to receive Accrued
Benefits or any other payment or benefit under this Agreement, and
shall only be entitled to receive payments or benefits to which the
Executive is entitled under applicable law.
(c)
Termination Giving Rise to a Termination Payment . If there
is a Covered Termination by the Executive for Good Reason, or by
the Company other than by reason of (i) death,
(ii) disability pursuant to Section 11 , or
(iii) Cause, then the Executive shall be entitled to receive,
and the Company shall pay, Accrued Benefits and, in lieu of further
base salary for periods following the Termination Date, as
liquidated damages and additional severance pay and in
consideration of the covenant of the Executive set forth in
Section 13(a) , the Termination Payment pursuant to
Section 8(a) .
8.
Payments Upon Termination .
(a)
Termination Payment .
(i) Subject
to the limits set forth in Section 8(a)(ii) , for
purposes of this Agreement, the “Termination Payment”
shall be an amount equal to the Annual Cash Compensation multiplied
by the number of years or fractional portion thereof remaining in
the Employment Period determined as of the Termination Date, except
that the Termination Payment shall not be less than the amount of
Annual Cash Compensation. The Termination Payment shall be paid to
the Executive in cash not later than ten business days after the
Termination Date. The Executive shall not be required to mitigate
the amount of the Termination Payment by securing other employment
or otherwise, nor will such Termination Payment be reduced by
reason of the Executive securing other employment or for any other
reason.
(ii) Notwithstanding
any other provision of this Agreement, if any portion of the
Termination Payment or any other payment under this Agreement, or
under any other agreement with or plan of the
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Company or the
Employer (in the aggregate “Total Payments”), would
constitute an “excess parachute payment,” then the
Total Payments to be made to the Executive shall be reduced such
that the value of the aggregate Total Payments that the Executive
is entitled to receive shall be One Dollar ($1) less than the
maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code (or any
successor provision) or which the Company may pay without loss of
deduction under Section 280G(a) of the Code (or any successor
provision). For purposes of this Agreement, the terms “excess
parachute payment” and “parachute payments” shall
have the meanings assigned to them in Section 280G of the Code
(or any successor provision), and such “parachute
payments” shall be valued as provided therein. Present value
for purposes of this Agreement shall be calculated in accordance
with Section 1274(b)(2) of the Code (or any successor
provision). Within sixty days following delivery of the Notice of
Termination or notice by the Company to the Executive of its belief
that there is a payment or benefit due the Executive which will
result in an excess parachute payment as defined in
Section 280G of the Code (or any successor provision), the
Executive and the Company, at the Company’s expense, shall
obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company’s independent
auditors and acceptable to the Executive in the Executive’s
sole discretion, which sets forth (A) the amount of the Base
Period Income, (B) the amount and present value of Total
Payments and (C) the amount and present value of any excess
parachute payments without regard to the limitations of this
Section 8(a)(ii) . As used in this
Section 8(a)(ii) , the term “Base Period
Income” means an amount equal to the Executive’s
“annualized includable compensation for the base
period” as defined in Section 280G(d)(1) of the Code (or
any successor provision). For purposes of such opinion, the value
of any noncash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in
accordance with the principles of Sections 280G(d)(3) and
(4) of the Code (or any successor provisions), which
determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. Such opinion shall be
dated as of the Termination Date and addressed to the Company and
the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any
other payment determined by such counsel to be includable in Total
Payments shall be reduced or eliminated as specified by the
Executive in writing delivered to the Company within thirty days of
the Executive’s receipt of such opinion or, if the Executive
fails to so notify the Company, then as the Company shall
reasonably determine, so that under the bases of calculations set
forth in such opinion there will be no excess parachute payment. If
such counsel so requests in connection with the opinion required by
this Section, the Executive and the Company shall obtain, at the
Company’s expense, and the counsel may rely on in providing
the opinion, the advice of a firm of recognized executive
compensation consultants as to the reasonableness of any item of
compensation to be received by the Executive. Notwithstanding the
foregoing, the provisions of this Section 8(a)(ii) ,
including the calculations, notices and opinions provided for
herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits
provided for in Section 5 and (2) any other
compensation, including but not limited to the Accrued Benefits,
earned prior to the Termination Date by the Executive pursuant to
the Company’s compensation programs if such payments would
have been made in the future in any event, even though the timing
of such payment is triggered by the Change in Control or the
Termination Date. If the provisions of Sections 280G and 4999
of the Code (or any successor provisions) are repealed without
succession, then this Section 8(a)(ii) shall be of no
further force or effect.
(b)
Additional Benefits . If there is a Covered Termination and
the Executive is entitled to Accrued Benefits and the Termination
Payment, then the Executive shall be entitled to the following
additional benefits:
(i) The
Executive will be entitled to pension benefits in addition to the
most favorable benefits provided for the Executive under any
version of the Badger Meter Pension Plan and the Badger Meter, Inc.
Executive Supplemental Plan (or any successors to such plans) in
effect at any time during the 180-day period prior to the Effective
Date (the “Retirement Plans”). The amount of additional
pension benefits will be equal to the difference between the amount
the Executive (or in the event of the Executive’s death, the
Executive’s surviving spouse or other beneficiary) would be
actually entitled to receive upon “retirement” under
the terms and conditions of the Retirement Plans and the amount the
Executive (or such surviving spouse or beneficiary) would have been
entitled to receive under such terms and conditions if the
Executive’s benefits under the Retirement Plans had been
fully vested on the Termination Date and the Executive had
continued to work for the remainder of the Employment Period at a
salary rate equal to the Executive’s Annual Base Salary;
provided , however , that in no event will the
assumed period of continued employment extend beyond the date on
which the Executive elects to begin receiving the additional
pension benefits. The Executive shall receive the Executive’s
additional pension benefits in cash not later than ten
(10) business days after the Termination Date. The amount of
such payment shall be calculated in the same manner as a lump sum
payment of accrued benefits is calculated under the Badger Meter
Pension Plan.
(ii) Until
the earlier of the end of the Employment Period or such time as the
Executive has obtained new employment and is covered by benefits
which in the aggregate are at least equal in value to the following
benefits, the Executive shall continue to be covered, at the
expense of the Company, by the most favorable
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life insurance,
hospitalization, medical and dental coverage and other welfare
benefits provided to the Executive and the Executive’s family
during the 180-day period immediately preceding the Effective Date
or at any time thereafter or, if more favorable to the Executive,
coverage as was required hereunder with respect to the Executive
immediately prior to the date Notice of Termination is given;
provided , however , that if the Executive is
otherwise entitled to receive hospitalization and/or medical
coverage under a plan or plans for early retirees sponsored by the
Company or a subsidiary thereof, then the Executive shall not be
eligible for such hospitalization or medical coverage under this
Section 8(b)(ii) . If the Executive is eligible for
Medicare, the Executive shall be obligated to apply for coverage
thereunder at the earliest opportunity and the Company will
reimburse the Executive for the Part B premium
cost.
(iii) Until
the earlier of the end of the Employment Period or such time as the
Executive has obtained new employment, the Executive shall be
entitled to receive, at the expense of the Company, outplacement
services, on an individualized basis at a level of service
commensurate with the Executive’s most senior status with the
Company during the 180-day period prior to the Effective Date (or,
if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the
Company with the consent of the Executive, which consent will not
be unreasonably withheld; provided that the cost to the Company of
such services shall not exceed 15% of the Executive’s Annual
Base Salary.
(iv) The
Company shall bear up to $5,000 in the aggregate of fees and
expenses of consultants and/or legal or accounting advisors engaged
by the Executive to advise the Executive as to matters relating to
the computation of benefits due and payable under this
Section 8.
(a) In
the event of a Covered Termination due to the Executive’s
death, the Executive’s estate, heirs and beneficiaries shall
receive a payment of all the Executive’s Accrued Benefits
through the Termination Date in cash payable not later than ten
(10) business days after the Termination Date.
(b) If
the Executive dies after a Notice of Termination is given
(i) by the Company or (ii) by the Executive for Good
Reason, then the Executive’s estate, heirs and beneficiaries
shall be entitled to the benefits described in
Section 9(a) and, subject to the provisions of this
Agreement, to such Termination Payment to which the Executive would
have been entitled had the Executive lived. In such event, the
Termination Date shall be thirty days following the giving of the
Notice of Termination, subject to extension pursuant to the
definition of “Termination Date” in
Exhibit A .
10.
Retirement . If, during the Employment Period, the Executive
and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive
shall otherwise give notice that the Executive is voluntarily
choosing to retire early from the Employer, then the Executive
shall receive Accrued Benefits through the Termination Date;
provided , that if the Executive’s employment
is terminated by the Executive for Good Reason or by the Company
other than by reason of death, disability or Cause and the
Executive also, in connection with such termination, elects
voluntary early retirement, then the Executive shall also be
entitled to receive a Termination Payment pursuant to
Section 8(a) .
11.
Termination for Disability . If, during the Employment
Period, as a result of the Executive’s disability due to
physical or mental illness or injury (regardless of whether such
illness or injury is job-related), the Executive shall have been
absent from the Executive’s duties hereunder on a full-time
basis for a period of 182 days and, within thirty days after
the Company notifies the Executive in writing that it intends to
terminate the Executive’s employment (which notice shall not
constitute the Notice of Termination contemplated below), the
Executive shall not have returned to the performance of the
Executive’s duties hereunder on a full-time basis, then the
Company may terminate the Executive’s employment for purposes
of this Agreement pursuant to a Notice of Termination. If the
Executive’s employment is terminated on account of the
Executive’s disability in accordance with this Section, then
the Executive shall receive Accrued Benefits in accordance with
Section 8(a) and shall remain eligible for all benefits
provided by any disability programs of the Employer in effect with
respect to the Executive at the time the Company sends notice to
the Executive of its intent to terminate pursuant to this
Section.
12.
Termination Notice and Procedure . a. Any termination of the
Executive’s employment during the Employment Period by the
Company or the Executive (other than a termination of the
Executive’s employment referenced in the second sentence of
the definition of “Effective Date” in
Exhibit A ) shall be communicated by written Notice of
Termination to the Executive, if such Notice is given by the
Company, and to the Company, if such Notice is given by the
Executive, all in accordance with the following procedures and
those set forth in Section 22 :
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(i) If
such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such
termination.
(ii) Any
Notice of Termination by the Company shall have been approved,
prior to the giving thereof to the Executive, by a resolution duly
adopted by a majority of the directors of the Company (or any
successor corporation) then in office, a copy of which shall
accompany the Notice.
(iii) If
the Notice is given by the Executive for Good Reason, then the
Executive may cease performing the Executive’s duties
hereunder on or after the date 15 days after the delivery of
Notice of Termination (unless the Notice of Termination is based
upon clause (vii) of the definition of “Good
Reason” in Exhibit A , in which case the
Executive may cease performing his duties at the time the
Executive’s employment is terminated) and shall in any
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