<PAGE>

                                                                     Exhibit 4.2

    LOAN AGREEMENT DATED MAY 20, 2005 BETWEEN BADGER METER, INC. AND THE M&I
     MARSHALL & ILSLEY BANK RELATING TO BADGER METER, INC.'S BUSINESS NOTE.

M&I MARSHALL & ILSLEY BANK

                                PROMISSORY NOTE

<TABLE>
<CAPTION>
   PRINCIPAL    LOAN DATE    MATURITY      LOAN NO.      CALL / COLL    ACCOUNT     OFFICER  INITIALS
--------------  ----------  ----------  --------------   -----------  -----------   -------  --------
<S>             <C>         <C>         <C>              <C>          <C>           <C>      <C>
$10,000,000.00  05-20-2005  05-20-2010                    M100 / A4                  12191
--------------  ----------  ----------  --------------   -----------  -----------   -------  --------
</TABLE>

References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing "***" has been omitted due to text length limitations.

<TABLE>
<S>         <C>                          <C>      <C>
BORROWER:   Badger Meter, Inc.           LENDER:  M&I Marshall & Ilsley Bank
            4545 W. Brown Deer Rd.                SE Wisconsin Region Commercial Lending
            Milwaukee, WI  53223-2413             770 North Water Street
                                                  Milwaukee, WI  53202
</TABLE>

<TABLE>
<S>                                   <C>                     <C>
Principal Amount: $10,000,000.00      Initial Rate: 5.590%    Date of Note: May 20, 2005
</TABLE>

PROMISE TO PAY. Badger Meter, Inc. ("Borrower") promises to pay to M&I Marshall
& Ilsley Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Ten Million & 00/100 Dollars ($10,000,000.00)
together with interest at the rate of 5.590% per annum on the unpaid principal
balance from May 20, 2005, until paid in full.

PAYMENT. Borrower will pay this loan in 59 regular payments of $191,500.00 each
and one irregular last payment estimated at $213,952.49. Borrower's first
payment is due June 20, 2005, and all subsequent payments are due on the same
day of each month after that. Borrower's final payment will be due on May 20,
2010, and will be for all principal and all accrued interest not yet paid.
Payments include principal and interest. Unless otherwise agreed or required by
applicable law, payments will be applied to Accrued Interest, Credit Life
Premiums, Principal, Late Charges, and Escrow. The annual interest rate for this
Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing.

PREPAYMENT PENALTY. Upon prepayment of this Note, Lender is entitled to the
following prepayment penalty: The Yield Maintenance Fee, as hereinafter
provided, shall be immediately due and payable by Maker upon a full or partial
prepayment of this Note at any time prior to the final scheduled payment due
date on the Note.

Yield Maintenance Fee: "Yield Maintenance Fee" means an amount equal to the
excess, if any, of the amount of:
(i) monthly interest which would otherwise be payable on the prepaid principal
amount of this Note from the date of prepayment through the final scheduled
payment due date on the Note, over the
(ii) monthly interest Lender would earn if the prepaid principal amount were
reinvested for the period from the date of prepayment through the final
scheduled payment due date on the Note, at the Reinvestment Rate (as hereinafter
defined) plus 1.35%,

Such difference shall be discounted to present value at the Reinvestment Rate.

Reinvestment Rate:

If the remaining term of the Note is less than one year, "Reinvestment Rate"
means: the yield in percent per annum on Eurodollar Deposits (London) as of the
Reinvestment Rate Determination Date (as hereinafter defined) which has a
maturity equal to the remaining term of the Note;

If the remaining term of the Note is one year or more, "Reinvestment Rate"
means: the yield in percent per annum on Interest Rate Swaps as of the
Reinvestment Rate Determination Date which has a maturity equal to the remaining
term of the Note; or,

In the event there is no rate available for a term that is equal to the
remaining term of the Note, "Reinvestment Rate" means: the linear interpolation
between the two rates (Eurodollar Deposits and/or Interest Rate Swaps, as
applicable), one for the closest maturity less than the remaining term of the
Note, and the other for the closest maturity greater than the remaining term of
the Note.

Reinvestment Rate Determination Date: "Reinvestment Rate Determination Date"
means the date which is five (5) banking days prior to the scheduled prepayment
date.

Published yields: Yields on Eurodollar Deposits (London) and Interest Rate Swaps
shall be the applicable rates available and published most recently by the Board
of Governors of the Federal Reserve System as of such Reinvestment Rate
Determination Date. (Release H.15, available a
www.federalreserve.gov/releases/h15/update)

Prepayment calculation notice to Borrower: Following the notice of prepayment
from the Maker described above, Lender shall promptly notify Borrower of the
amount and the basis of determination of the required Yield Maintenance Fee, and
such determination and amount shall be binding on both parties absent manifest
error. Except for the foregoing, Borrower may pay all or a portion of the amount
owed

                                       22
<PAGE>

earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule. Rater, early payments will reduce the principal
balance due and may result in Borrower's making fewer payments. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: M&I Marshall & Ilsley Bank,
P.O. 3114 Milwaukee, WI 53201-3114.

                                PROMISSORY NOTE
                                  (CONTINUED)

LOAN NO:                                                                  PAGE 2

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the interest rate on this Note 3.000 percentage points. The interest
rate will not exceed the maximum rate permitted by applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

      PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.

      OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

      DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay this
Note or perform Borrower's obligations under this Note or any of the related
documents.

      FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or the
related documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.

      INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.

      CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower or by any government agency
against any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

      EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness evidenced by this Note. In the event of a
death, Lender, at its option, may, but shall not be required to, permit the
guarantor's estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.

      CHANGE IN OWNERSHIP. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of this Note is impaired.

      INSECURITY. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

ATTORNEY'S FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorney's fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorney's fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

JURY WAIVER. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST
THE OTHER.

GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY FEDERAL LAW APPLICABLE TO LENDER
AND, TO THE EXTENT NOT PREEMPTED BY FEDERAL LAW, THE LAWS OF THE STATE OF
WISCONSIN WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. THIS NOTE HAS BEEN
ACCEPTED BY LENDER IN THE STATE OF WISCONSIN.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Milwaukee County, State of
Wisconsin.

                                       23
<PAGE>

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.

 RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt

                                PROMISSORY NOTE
                                  (CONTINUED)

LOAN NO:                                                                  PAGE 3

against any and all such accounts, and, at Lender's option, to administratively
freeze all such accounts to allow Lender to protect Lender's charge and setoff
rights provided in this paragraph.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. This Note benefits Lender and its successors and assigns,
and binds Borrower and Borrower's heirs, successors, assigns, and
representatives. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

BADGER METER, INC.

BY: /s/ Richard A. Meeusen
    ------------------------------------------
    Chairman, President and Chief Executive Officer

BY: /s/ Richard E. Johnson
    ------------------------------------------------
    Senior Vice President - Finance, Chief Financial Officer and Treasurer

                                       24