SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q
Quarterly Report Pursuant to section 13 or 15(d) of
the Securities and Exchange Act of 1934
____________________
For the Quarter ended Commission File Number
June 30, 1994 0-14903
Baldwin Piano & Organ Company
(Exact name of registrant as specified in its charter)
Delaware 31-1091812
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
422 Wards Corner Road
Loveland, Ohio 45140-8390
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (513) 576-4500
Indicate by check mark whether the registrant (1) has filed
all documents and reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares of the Common Stock outstanding of
Baldwin Piano & Organ Company ("Company"), as of August 1, 1994 is
3,415,196.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1994 and December 31, 1993
Condensed Consolidated Statements of Earnings
for the three months and six months ended
June 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows
for the six months ended
June 30, 1994 and 1993
Notes to Condensed Consolidated Financial
Statements, June 30, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote
of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1994 and December 31, 1993
<CAPTION>
June 30, December 31,
ASSETS 1994 1993
----------- ------------
<S> <C> <C>
Current assets:
Cash ................................. $ 491,204 $ 1,203,199
Receivables, net ..................... 10,396,481 10,162,811
Inventories .......................... 54,391,044 45,077,365
Other current assets ................. 5,690,449 6,461,892
----------- -----------
Total current assets ........... 70,969,178 62,905,267
----------- -----------
Installment receivables,
less current portion ................. 7,357,000 6,920,000
Property, plant and equipment, net ...... 13,753,836 13,664,099
Deferred income taxes ................... 443,681 813,681
Other assets ............................ 5,473,552 5,625,368
----------- -----------
Total assets ................... $97,997,247 $89,928,415
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .... $19,981,089 $11,299,100
Income taxes payable ................. 1,540,259 2,513,358
Other current liabilities ............ 12,037,279 13,151,821
----------- -----------
Total current liabilities ...... 33,558,627 26,964,279
----------- -----------
Long-term debt, less current portion .... 5,000,000 4,384,464
Other liabilities ....................... 8,251,118 8,687,949
----------- -----------
Total liabilities .............. 46,809,745 40,036,692
----------- -----------
Stockholders' equity:
Common stock ......................... 41,770 41,639
Additional paid-in capital ........... 12,206,232 12,068,613
Retained earnings .................... 45,350,932 43,972,787
----------- -----------
57,598,934 56,083,039
Less cost of treasury shares ......... (6,411,432) (6,191,316)
----------- -----------
Total stockholders' equity ..... 51,187,502 49,891,723
___________ ___________
Total liabilities and
stockholders' equity ........... $97,997,247 $89,928,415
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
_______________
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1994 1993 1994 1993
----------------------- -----------------------
<S> <C> <C> <C> <C>
Net sales ............... $28,075,659 $26,776,075 $53,647,559 $54,849,209
Cost of goods sold ...... 21,386,644 20,261,324 40,723,580 41,501,263
----------- ----------- ----------- -----------
Gross profit ...... 6,689,015 6,514,751 12,923,979 13,347,946
Income on the sale of
installment receivables 1,252,761 1,444,759 2,641,289 2,856,315
Interest income on
installment receivables 148,805 116,031 271,264 230,785
Other income, net ....... 748,745 1,135,995 1,525,189 2,010,217
----------- ----------- ----------- -----------
8,839,326 9,211,536 17,361,721 18,445,263
Operating expenses:
Selling, general
and administrative .... 6,958,665 6,374,501 13,579,566 12,662,012
Provision for
doubtful accounts ... 325,138 446,022 660,444 918,261
----------- ----------- ----------- -----------
Operating profit .. 1,555,523 2,391,013 3,121,711 4,864,990
Interest expense ........ 462,076 584,019 859,566 1,104,879
----------- ----------- ----------- -----------
Earnings before income
taxes and cumulative
effects of changes(1).. 1,093,447 1,806,994 2,262,145 3,760,111
Income taxes ............ 420,000 657,000 884,000 1,393,000
----------- ----------- ----------- -----------
Earnings before
cumulative effects
of changes(1) ......... 673,447 1,149,994 1,378,145 2,367,111
Cumulative effect of
changes(1) ............ -- -- -- (1,604,000)
----------- ----------- ----------- -----------
Net earnings ...... $ 673,447 $ 1,149,994 $ 1,378,145 $ 763,111
=========== =========== =========== ===========
<PAGE>
Earnings per share:
Before cumulative
effects of changes(1).. $.20 $.34 $.40 $.70
Cumulative effect
of changes(1) ......... -- -- -- (.47)
---- ---- ---- ----
Net earnings per share $.20 $.34 $.40 $.23
==== ==== ==== ====
Average number of common
shares outstanding 3,415,196 3,405,078 3,415,329 3,402,127
========= ========= ========= =========
<F1>
(1) Changes in accounting for postretirement and postemployment benefits.
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30, 1994 and 1993
<CAPTION>
INCREASE (DECREASE) IN CASH 1994 1993
- - --------------------------- ----------- -----------
<S> <C> <C>
Net cash used in operating activities ....... $(8,139,813) $(1,719,484)
Net cash used in investing activities ....... (1,282,995) (1,000,691)
Cash flows from financing activities:
Installment contract
receivables written ................... (22,194,998) (21,470,455)
Installment receivables liquidated ....... 2,666,163 2,529,760
Proceeds from sale of
installment receivables ............... 19,024,489 18,931,804
Borrowing under long-term debt, net ...... 9,297,525 2,218,076
Other .................................... (82,366) 159,638
----------- -----------
Net cash provided by
financing activities ................ 8,710,813 2,368,823
----------- -----------
Net decrease in cash ........................ (711,995) (351,352)
Cash at beginning of period ................. 1,203,199 1,037,372
----------- -----------
Cash at end of period ....................... $ 491,204 $ 686,020
=========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
------------------------
Cash paid during the period for:
Interest ................................. $ 794,710 $ 980,625
=========== ===========
Income taxes ............................. $ 1,500,709 $ 3,391,859
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(1) BASIS OF REPORTING FOR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and regula-
tions of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not mislead-
ing. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report and Form 10-K for the year ended December 31, 1993.
The financial statements presented herewith reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three month and six month periods ended June 30, 1994 and 1993. Results of
operations for interim periods are not necessarily indicative of results to
be expected for an entire year.
<TABLE>
(2) INVENTORIES
Inventories consist of the following:
<CAPTION>
June 30, December 31,
1994 1993
----------- -----------
<S> <C> <C>
FIFO cost:
Raw material ......................... $12,222,000 $ 9,930,923
Work-in-process ...................... 6,870,433 7,081,883
Finished goods ....................... 44,283,861 36,149,809
----------- -----------
63,376,294 53,162,615
Excess of FIFO cost
over LIFO inventory value ............ (8,985,250) (8,085,250)
----------- -----------
Net inventories ................ $54,391,044 $45,077,365
=========== ===========
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(3) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company is contractually obligated to make health care benefits
available to a certain group of retired employees. Also, the Company
sponsors several postemployment plans for various groups of employees.
These plans' provisions include severance benefits in which the employees'
rights either vest or accumulate for each additional year of service
performed. The Company funds these postretirement and postemployment
benefits primarily on a pay-as-you-go basis.
In the fourth quarter of 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106 (FAS 106), "Employers'
Accounting for Postretirement Benefits other than Pensions;" and No. 112
(FAS 112), "Employers' Accounting for Postemployment Benefits." The Company
elected to recognize the combined benefit obligations of $2,673,000
retroactive to January 1, 1993 as accounting changes. On an after-tax
basis, this charge was $1,604,000 or $.47 per share. Previously reported
six months results in 1993 have been restated to reflect the adoption of FAS
106 and 112 as of January 1, 1993. The adoption of these standards had no
impact on consolidated cash flows. Prior to 1993, the cost of post-
retirement and postemployment benefits were recognized when incurred and
were not material.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1994
COMPARED TO THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1993
Net sales for the three months ended June 30, 1994 increased $1,300,000
or 5% over the comparable period in 1993. The components of this increase
in sales are as follows:
Piano $ 1,743,000
Organ (26,000)
Music product and
furniture contracting 1,100,000
Electronic contracting (1,475,000)
Clock (42,000)
-----------
$ 1,300,000
===========
The increase in piano sales is attributable to a 9% increase in the
number of units sold, as well as a 2% increase in the average unit selling
price. The decrease in organ sales is primarily related to the continued
decline in sales of home organs. The Company's sales of non-portable organs
for home use has declined steadily during the last decade, reflecting a
general decline in this market. Music product and furniture contracting
sales increased due to higher sales of piano cases to another piano manu-
facturer for use outside the United States as well as increased furniture
sales to principally two customers. Electronic contracting sales to a
single customer declined $2,572,000, partially offset by a 20% increase in
electronic contracting sales to other customers. The decrease in clock
sales results from lower unit sales of grandfather clocks.
Net sales for the six months ended June 30, 1994 decreased $1,201,000
or 2% from the comparable period in 1993. The components of this decrease
in sales are as follows:
Piano $(1,765,000)
Organ 16,000
Music product and
furniture contracting 2,132,000
Electronic contracting (1,469,000)
Clock (115,000)
-----------
$(1,201,000)
===========
<PAGE>
The decrease in piano sales is attributable to an 11% decrease in the
number of units sold, partially offset by a 6% increase in the average unit
selling price. The increase in the average unit selling price is primarily
due to higher sales of more expensive grand pianos and increased selling
prices for vertical pianos. The increase in organ sales is primarily
related to higher sales of church organs partially offset by the continued
decline in sales of home organs. The Company's sales of non-portable organs
for home use has declined steadily during the last decade, reflecting a
general decline in this market. Music product and furniture contracting
sales increased due to higher sales of piano cases to another piano
manufacturer for use outside the United States as well as increased
furniture sales to principally two customers. Electronic contracting sales
to a single customer declined $3,494,000, partially offset by an 18%
increase in electronic contracting sales to other customers. The decrease
in clock sales results from lower unit sales of grandfather clocks.
The Company values a substantial portion of its inventory on the last-
in, first-out (LIFO) method. The gross profit for the three months and six
months ended June 30, 1994 is $470,000 and $900,000, less than the amounts
that would have been presented had the first-in, first-out (FIFO) method
been used.
Income on the sale of installment receivables decreased $192,000 and
$215,000 for the three months and six months ended June 30, 1994, respec-
tively, from the comparable periods in 1993. This decrease is primarily the
result of higher interest costs as a result of an interest rate modification
agreement on $20,000,000. See "Liquidity and Capital Resources."
Other income decreased $387,000 and $485,000 for the three months and
six months ended June 30, 1994, respectively, from the comparable periods in
the prior year. The decline is primarily due to a non-reoccurring favorable
insurance settlement during the second quarter of 1993, partially offset by
expenses related to a proposed acquisition of Baldwin. These two items
added $300,000 to Baldwin's other income during the second quarter of 1993.
Selling, general and administrative expenses increased $585,000 and
$918,000 for the three months and six months ended June 30, 1994, respec-
tively, over the comparable periods in 1993. The increase is primarily
related to additional sales programs, including a new "factory direct" sales
concept started during the first quarter of 1994.
The provision for doubtful accounts declined $121,000 and $258,000 for
the three months and six months ended June 30, 1994, respectively, from the
comparable periods in 1993. This decline is due to continued reductions in
losses experienced.
Interest expense decreased $122,000 and $246,000 for the three months
and six months ended June 30, 1994, respectively, from the comparable
periods in 1993. This decrease is primarily due to reduced average
borrowing. Borrowing was reduced primarily as a result of net earnings
since June 30, 1993.
<PAGE>
In the fourth quarter of 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards No. 106 (FAS 106), "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and No. 112 (FAS
112), "Employers' Accounting for Postemployment Benefits." The Company
elected to recognize the combined benefit obligations of $2,673,000
retroactive to January 1, 1993 as accounting changes. On an after-tax
basis, this charge amounted to $1,604,000 or $.47 per share. Previously
reported six months results in 1993 have been restated to reflect the
adoption of FAS 106 and 112 as of January 1, 1993. The adoption of these
standards had no impact on consolidated cash flows. Prior to 1993, the cost
of postretirement and postemployment benefits were recognized when incurred
and were not material.
Effective January 1, 1993, the Company implemented the provisions of
Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting
for Income Taxes." The adoption of FAS 109 had no effect on the financial
condition or results of operations of the Company. In the opinion of
management, no valuation allowance related to deferred tax assets was
required at December 31, 1993. Based on the Company's historical and
current pre-tax earnings, management believes it is more likely than not
that the Company will realize the benefit of recorded deferred tax assets.
There can be no assurance, however, that the Company will generate any
earnings or any specific level of continuing earnings.
INFLATION, OPERATIONS AND INTEREST RATES
The impact of inflation on manufacturing and operating costs can affect
the Company's results. However, the Company has generally been able to
offset the effects of inflation by price increases and operating efficien-
cies.
The operations of the Company and its predecessors are subject to
federal, state and local laws regulating the discharge of materials into the
environment. Although on several occasions the Company has been the subject
of inquiries from government agencies and/or persons who may be held
responsible for environmental liabilities relating to the sites in question,
the Company has been made a party to actual proceedings on only one occasion
to date. The Company's actual liability in such matter was not significant.
The Company does not anticipate that any environmental matters currently
known to the Company will result in additional proceedings against the
Company or in any material liability.
The Company and its subsidiaries' operating results are sensitive to
changes in interest rates primarily because of fixed interest rates on
installment receivables and floating interest rates on a substantial portion
of indebtedness. Additionally, the buyer of the installment receivables is
entitled to earn interest on the outstanding principal balance of the
contracts based upon a floating interest rate provision.
<PAGE>
The Company can partially offset the effect of interest rate changes by
adjusting display fees on its consigned inventory and interest rates on its
new installment receivable contracts. The Company has an interest rate
modification agreement which ensures, through October 1994, that with
respect to $25,000,000, the Company will receive interest income to the
extent the one-month commercial paper rate reported on the Federal Reserve
statistical release H15(519), converted to a money market yield, exceeds
12%.
In 1993, the annual rate of interest under the revolving line of credit
(Revolver) was the prime lending rate plus 1/2%. Effective February 15,
1994, the annual rate of interest is 150 basis points plus the greater of
the LIBOR on three month deposits or the rate on 60 day high grade
commercial paper.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its wholly-owned finance subsidiary (Finance) require
significant working capital to support their operations. Working capital
requirements fluctuate throughout the year.
The Company ships musical instruments and clocks to its Baldwin dealer
network on a consignment basis. Management believes the consignment program
creates a competitive advantage for its dealers. Dealers are able to
display a larger and more comprehensive product line than they may otherwise
be able to without the Company's financial support. Also the consignment
program is advantageous to the Company for income tax purposes, and
management believes the consignment method minimizes losses from dealers.
Because the Company finances inventory on consignment to Baldwin
dealers, the Company's borrowing is higher than comparable companies not
operating on the consignment basis. Management believes the advantages of
the consignment program are greater than the risks associated with the
higher leverage.
In February 1994, the Company reduced the Revolver from $60,000,000 to
$40,000,000 and extended the due date from December 31, 1994 to February 15,
1999. The Revolver is renewable for three consecutive one-year periods
beyond February 15, 1999. Amounts outstanding under the Revolver are due
one year after demand. However, the lender retains absolute discretion
regarding further advances, even if no event of default then exists.
Under the Revolver, the lender will make available a line of credit
based upon certain percentages of the value of the Company's inventories and
trade accounts receivable. At June 30, 1994, the Company had approximately
$20,445,000 of additional borrowing available under the $40,000,000
Revolver.
<PAGE>
The Company's debt agreements contain covenants that restrict, among
other things, the payment of dividends, the repurchase of the Company's
common stock and the Company's ability to incur new indebtedness and to
enter new businesses. Such agreements permit the payment of dividends or
repurchase of the Company's common stock equal to the lesser of (i) 50% of
the Company's cumulative net earnings since January 1, 1986 or (ii) the
amount of unused borrowing available under the Company's Revolver, reduced
by the unpaid portion of the term loan. Accordingly, at June 30, 1994,
approximately $15,445,000 is available for the payment of dividends or the
repurchase of the Company's common stock. The Company's debt agreements
contain provisions by which a default under one agreement constitutes a
default under the other agreements. The Company has been in compliance with
these covenants.
In February 1994, Finance amended its agreements with an independent
entity to sell substantially all of its installment receivable contracts up
to a maximum outstanding principal amount of $72,000,000. Certain
installment receivables are not eligible for sale and are retained by
Finance. Finance continues to service all installment receivables sold.
At the time of each installment receivable sale, Finance receives cash
equal to the unpaid principal balance of the contracts, less a holdback of
10% of the principal balance of the contracts sold.
The buyer of the installment receivables earns interest on the
outstanding principal balance of the contracts based upon a floating
interest rate provision. Over the life of the contracts, the difference
between the actual yield on the installment contracts sold, using the
interest method, and the amount retained by the buyer, is remitted to
Finance as a service fee. Finance's performance under this agreement is
guaranteed by a third party lender for which Finance pays a fee of 1% of the
outstanding balance. In February 1994, Finance entered into a five year
interest rate modification agreement on $20,000,000 whereby, Finance will
receive interest income to the extent the floating rate retained by the
buyer exceeds 6% or will pay interest expense to the extent the floating
rate is less than 6%.
Proceeds from the sale of installment receivables amounted to
$19,024,000 for the six months ended June 30, 1994 compared to $18,932,000
for the same period of 1993.
Under the sale agreements, Finance is required to repurchase accounts
that become more than 120 days past due or accounts that are deemed
uncollectable. The repurchase price is equal to the remaining unpaid
principal balance of the contract on the date repurchased, less the related
10% holdback. Finance remains contingently liable on approximately
$56,611,000 of installment receivables. Management believes an adequate
allowance has been provided for any uncollectable receivables.
<PAGE>
Certain Wurlitzer dealers finance their inventory with floor plan loans
from an independent bank. Dealers can borrow money from the bank based upon
the value of the inventory purchased from Wurlitzer, with the keyboard
instruments pledged as collateral. The dealers are required to pay the bank
monthly interest payments and pay principal balance after inventory is sold
or held longer than twelve months. The bank may request Wurlitzer to
repurchase notes due from delinquent dealers. If Wurlitzer does not
repurchase such notes, the bank can terminate the floor plan agreement with
the dealers and require Wurlitzer to repurchase up to $2,200,000 of the
outstanding dealer notes. The Company believes the financial statements
contain adequate provisions for any loss that may be incurred as a result of
the repurchase.
Baldwin's Stock Repurchase Plan permits the Company to purchase an
amount of the Company's common stock not to exceed the lesser of 1,033,000
shares or $12,416,000 in dollar value. From the date the plan was adopted
in November 1987 through August 1, 1994, the Company has repurchased 701,300
shares of its common stock at an aggregate purchase price of $5,655,000
under the plan.
Capital expenditures amounted to $1,283,000 in the six months ended
June 30, 1994 and $1,001,000 in the comparable period of 1993. At June 30,
1994, the Company had no significant outstanding capital commitments.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in its normal course of
business. The Company does not believe that any existing claim or suit will
have a material adverse effect on the business or financial condition of the
Company.
ITEM 2. CHANGES IN SECURITIES
No changes have been made to the instruments defining the right of the
holders of the Company's common stock or to the rights of such stockholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not in default nor has it defaulted on any indebtedness.
The Company is not obligated to pay any dividends or other payment to any of
its stockholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during the
second quarter of 1994, other than matters arising in connection with the
annual meeting of the Company's stockholders held on May 10, 1994. At that
meeting, the only matters submitted to a vote of the stockholders were the
election of directors, the adoption of the Company's 1994 Incentive Stock
Option Plan and the approval of the appointment of the Company's auditors.
All of the Company's existing directors were elected to serve as directors
until the 1995 annual stockholders meeting by the following vote of the
Company's stockholders:
Votes
----------------------
For Withheld
--------- --------
R. S. Harrison 2,899,405 10,700
George E. Castrucci 2,899,405 10,700
Joseph H. Head, Jr. 2,899,305 10,800
Roger L. Howe 2,899,405 10,700
Harry A. Shaw, III 2,899,405 10,700
The Baldwin Piano & Organ Company 1994 Incentive Stock Option Plan was
approved and adopted with 2,739,432 votes cast "For", 65,700 votes "Against"
and 46,316 votes "Abstained."
KPMG Peat Marwick was approved as the Company's auditors for 1994 with
2,909,805 votes cast "For", 200 votes "Against" and 100 votes "Abstained."
ITEM 5. OTHER INFORMATION
Not applicable.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Baldwin Piano & Organ Company 1994 Incentive Stock
Option Plan.*
10.2 Baldwin Piano & Organ Company 1994 Management Incentive
Plan.
10.3 Baldwin Piano & Organ Company 1994 Long Term Incentive
Plan.
19.1 1994 Second Quarter Report to Stockholders of the
Company.
_______________________________
*Incorporated by reference from the Company's proxy statement
relating to its May 10, 1994 Annual Meeting of Stockholders.
Index to Exhibits appears on sequentially numbered page 17.
(b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the second
quarter of 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALDWIN PIANO & ORGAN COMPANY
DATE: August 10, 1994 BY: R. S. HARRISON
--------------------- -----------------------------------
R. S. Harrison, President
and Chief Executive Officer
DATE: August 10, 1994 BY: CHARLES R. JUENGLING
--------------------- ------------------------------------
Charles R. Juengling, Vice President
(Chief Financial Officer and
Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- - -------------- -------
10.1 Baldwin Piano & Organ Company
1994 Incentive Stock Option Plan.*
10.2 Baldwin Piano & Organ Company
1994 Management Incentive Plan.
10.3 Baldwin Piano & Organ Company
1994 Long Term Incentive Plan.
19.1 1994 Second Quarter Report to
Stockholders of the Company.
_______________________________
*Incorporated by reference from the Company's proxy statement relating
to its May 10, 1994 Annual Meeting of Stockholders.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
SECOND QUARTER REPORT - 1994
<PAGE>
TO OUR STOCKHOLDERS
August 1, 1994
Net sales for the three months ended June 30, 1994, increased 5% to
$28,076,000 from $26,776,000 in the corresponding period in 1993.
Piano and wood product sales increased $2,800,000, partially offset by
lower electronic contract manufacturing sales. Net earnings for the
three months ended June 30, 1994, decreased 41% to $673,000 from
$1,150,000 for the three months ended June 30, 1993. Net earnings per
share for the three months ended June 30, 1994, decreased 41% to $.20
from $.34 for the second quarter of 1993. The decrease in Baldwin's
second quarter 1994 net earnings and net earnings per share was a result
of reduced electronic contract manufacturing sales and a reduction,
during 1994, in the gross margin in this segment of the Company's
operation. Additionally, the second quarter of 1993 includes net
earnings of $180,000 ($.05 per share) related to an insurance settlement
partially offset by expenses related to a proposed acquisition of Baldwin.
As of January 1, 1993, the Company adopted the provisions of Statements
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and No. 112, "Employers'
Accounting for Postemployment Benefits," resulting in a decrease in net
earnings of $1,604,000 and a decrease in net earnings per share of $.47
for the six months ended June 30, 1993.
For the six months ended June 30, 1994, net sales decreased 2% to
$53,648,000 from $54,849,000 last year. Net earnings before cumulative
effects of changes in accounting principles decreased 42% to $1,378,000
for the six months ended June 30, 1994 from $2,367,000 for the six
months ended June 30, 1993. Net earnings per share before cumulative
effects of changes in accounting principles decreased 43% to $.40 from
$.70 for the first six months of 1993. The decrease in Baldwin's net
earnings and net earnings per share, before cumulative effects of changes
in accounting principles, for the six months ended June 30, 1994, was
primarily a result of reduced piano and electronic contracting sales and
lower gross margin on electronic contracting sales during 1994.
R.S. HARRISON, Chief Executive Officer and President
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY OF EARNINGS (Unaudited)
(in thousands, except earnings per share)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------ ------------------ ------------------
1994 1993 1994 1993 1994 1993
- - --------------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 28,076 $ 26,776 $ 53,648 $ 54,849 $119,456 $112,523
Cost of goods sold 21,387 20,261 40,724 41,501 89,194 82,725
- - --------------------------------------------- ------------------ ------------------ ------------------
Gross profit 6,689 6,515 12,924 13,348 30,262 29,798
Income on the sale of installment receivables 1,252 1,445 2,641 2,856 5,531 5,459
Interest income on installment receivables 149 116 271 231 483 401
Other operating income 749 1,136 1,525 2,010 3,046 3,816
Selling, general and administrative expenses (7,284) (6,821) (14,240) (13,580) (28,550) (27,210)
Interest expense (462) (584) (859) (1,105) (1,986) (2,416)
- - --------------------------------------------- ------------------ ------------------ ------------------
Earnings before income taxes and
cumulative effects of changes in
accounting principles 1,093 1,807 2,262 3,760 8,786 9,848
Income taxes 420 657 884 1,393 3,611 3,827
- - --------------------------------------------- ------------------ ------------------ ------------------
Earnings before cumulative effects of
changes in accounting principles 673 1,150 1,378 2,367 5,175 6,021
Cumulative effects of changes in accounting
for postretirement and postemployment
benefits - - - (1,604) - (1,604)
- - --------------------------------------------- ------------------ ------------------ ------------------
Net earnings $ 673 $ 1,150 $ 1,378 $ 763 $ 5,175 $ 4,417
============================================= ================== ================== ==================
Earnings per share:
Before cumulative effects of changes in
accounting principles $ .20 $ .34 $ .40 $ .70 $ 1.52 $ 1.77
Cumulative effects of changes in
accounting for postretirement and
postemployment benefits - - - (.47) - (.47)
- - --------------------------------------------- ------------------ ------------------ ------------------
Net earnings per share $ .20 $ .34 $ .40 $ .23 $ 1.52 $ 1.30
============================================= ================== ================== ==================
Average number of shares outstanding (000) 3,415 3,405 3,415 3,402 3,415 3,401
============================================= ================== ================== ==================
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited)
(in thousands)
<CAPTION>
June 30,
--------------------
1994 1993
- - -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Trade receivables, net $ 5,687 $ 6,855
Installment receivables, net 4,709 1,355
Inventories 54,391 50,267
Other current assets 6,182 7,681
- - -----------------------------------------------------------------------------
Total current assets 70,969 66,158
Installment receivables, less current portion 7,357 6,930
Property, plant and equipment, net 13,754 13,751
Other assets 5,917 7,091
- - -----------------------------------------------------------------------------
TOTAL ASSETS $ 97,997 $ 93,930
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 19,981 $ 28,510
Other current liabilities 13,578 9,695
- - -----------------------------------------------------------------------------
Total current liabilities 33,559 38,205
Long-term debt, less current portion 5,000 235
Other liabilities 8,250 7,801
Stockholders' equity 51,188 47,689
- - -----------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 97,997 $ 93,930
=============================================================================
</TABLE>
<PAGE>
BUSINESSES
- - ----------
MANUFACTURING
Pianos and electronic keyboards
Actions, cabinets, pinblocks, bridges, cables, keys, etc. for piano
and organ industry
Printed circuit boards and electro-mechanical assemblies
for manufacturers outside music industry
Grandfather Clocks
- - -----------------------------------------------------------------------
RETAILING
Company owned outlets in Atlanta, Chicago, Cincinnati, Indianapolis,
Lexington and Louisville
Independent keyboard dealers (1,100)
- - -----------------------------------------------------------------------
FINANCING
Consumer installment financing and dealer consignment
- - -----------------------------------------------------------------------
HOME OFFICE
422 Wards Corner Road, Loveland, OH 45140, (513)576-4500
- - -----------------------------------------------------------------------
MANUFACTURING LOCATIONS
Conway, Fayetteville and Trumann, Arkansas
Greenwood, Mississippi
Juarez, Mexico
- - -----------------------------------------------------------------------
REGISTRAR AND TRANSFER AGENT
The Provident Bank, One East Fourth Street
Cincinnati, OH 45202
Baldwin Piano & Organ Company common stock is traded on
The Nasdaq National Market; Symbol: BPAO
<PHOTO>
Baldwin Artist Grand
<PAGE>
EXHIBIT 10.2
BALDWIN PIANO & ORGAN COMPANY
1994 MANAGEMENT INCENTIVE PLAN
1. Purpose. This Plan shall be known as the Baldwin Piano & Organ
Company 1994 Management Incentive Plan (the "Plan"). The purpose of this Plan
is to set forth the components of the executive compensation package that
Baldwin Piano & Organ Company (the "Company") may offer from time to time to
its executive officers and certain other key management personnel. Such
compensation shall directly relate to the performance of the Company and of
the participant's individual performance and is designed to enhance both the
short term and long term profitability of the Company. The Plan also is
intended to provide incentives to those participants and to enable the Company
and the Company's subsidiaries to attract and retain executive officers and
key managerial personnel.
2. Eligibility. Participation in this Plan shall be limited to
the Company's executive officers and other key managerial personnel of the
Company or of the Company's subsidiaries. The Company's Executive
Compensation Committee (the "Committee") will from time to time determine the
employees who may participate in this Plan and the extent to which such
persons may participate.
3. Compensation that may be awarded under the Plan. In the
Committee's discretion and in addition to any other benefits that the Company
may offer to its employees (e.g. benefits relating to health care, vacation,
deferred compensation, retirement, etc.), the compensation that may be awarded
to eligible employees pursuant to this Plan may consist of any one or more of
the following elements: (a) base salary, (b) annual cash bonus, (c) stock
options and (d) restricted shares of the Company's common stock.
4. Base Salary. Subject to approval by the Committee, the Company
shall establish an annual base salary for each participant in the Plan. In
the discretion of the Company, such annual salary may, but need not, be
increased or decreased each year depending primarily on the participant's
individual performance and secondarily upon the Company's performance. The
Company and the Committee may consider any and all such factors as it or they
deem relevant in adjusting each individual's base salary.
5. Annual Cash Bonus.
(a) In the discretion of the Committee, a participant in the Plan
may be granted the right to receive an annual cash bonus based upon the
Company's performance (either as a whole, by subsidiary or division, or by
other business segment as the Committee deems appropriate) in accordance with
the terms and conditions set forth in this Plan. Such bonuses shall be
further linked to individual performance requirements established for each
participant and the participant's level of responsibilities within the
Company. To the extent practical, such performance targets shall be
established prior to the commencement of each calendar year unless otherwise
approved by the Committee.
<PAGE>
(b) On an annual basis, the Committee will establish (i) a
performance goal by which annual performance will be measured at the Company,
subsidiary, division and segment levels (sometimes referred to herein as a
"Company unit"), (ii) the minimum threshold, target and maximum levels that
the appropriate Company unit(s) must achieve in order for any participant to
receive a cash bonus with respect to that unit(s) for that year, (iii) the
various participation levels at which participants may be eligible to receive
a cash bonus, and (iv) the participants in this Plan who may receive cash
bonuses and their level of participation for that year. Subject to the
discretion of the Committee, the size of the cash bonus at each level will
increase depending upon whether the appropriate Company unit achieves the
threshold level, the target level or the maximum level and will be set at a
fixed percentage of the Plan Participant's base salary.
(c) Unless otherwise selected by the Committee, earnings before
income taxes will be the performance measure used to evaluate annual
performance at the Company, subsidiary, division and segment levels and
bonuses will be awarded relative to the ability of that particular Company
unit to achieve or exceed the profit goal for that year.
(d) Following a determination that an eligible employee will be
considered for a cash bonus in a given year, the Company's Secretary or other
designated officer shall inform the participant of the opportunity to receive
a cash bonus, the appropriate Company unit and individual performance levels
that must be achieved in order for a cash bonus to become payable and the
participant's participation level. Each bonus opportunity made available
pursuant to this Section 5 shall further contain such other provisions and
conditions in addition to those included in this Plan as the Committee shall
deem advisable, provided that no such additional provisions or conditions
shall be inconsistent with this Plan.
(e) The Committee may at any time adjust the way in which the
performance is measured, the performance levels and the participation levels
prerequisite to the payment of any cash bonus pursuant to this Plan. In
addition, the minimum threshold performance level must require that the
performance of the appropriate Company unit exceed the appropriate measurement
index and no cash bonus shall be payable under this Plan with respect to any
Company unit which does not at least achieve the minimum threshold level in a
given year.
(f) If any participant ceases to be an employee of the Company or
of the Company's subsidiaries for any reason during a year in which a bonus
opportunity is made available to such employee, the participant's right to
receive a cash bonus for such year shall automatically be forfeited and no
bonus shall be payable to such participant.
6. Incentive Stock Options. In the discretion of the Committee, a
participant in the Plan may be granted incentive stock options pursuant to the
Company's 1994 Incentive Stock Option Plan in accordance with the terms and
conditions set forth in that plan. Such grants shall be made no more
frequently than annually and will be based primarily upon the participant's
performance and level of responsibilities within the Company. The Committee
shall also consider the performance of the Company in determining whether
stock option grants should be awarded and the size of the awards.
<PAGE>
7. Awards of Restricted Shares of Common Stock. In the discretion
of the Committee, a participant in the Plan may be granted the right to
receive awards of restricted shares of the Company's Common Stock pursuant to
the Company's 1994 Long Term Incentive Plan in accordance with the terms and
conditions set forth in that plan. Such grants shall be made no more
frequently than once every three years to such plan participants and the
awards will be based upon the Company's total shareholder returns and the
participant's level of responsibilities within the Company.
8. Duration of Plan; Amendments. This Plan shall become effective
upon approval by the Company's Board of Directors and shall continue until
terminated by the Company's Board of Directors. Neither the expiration nor
the termination of this Plan shall affect any compensation award theretofore
made hereunder. The Board may from time to time amend this Plan and any
amendment of this Plan shall apply to all awards made on or after the date of
such amendment.
9. Effect on Employment. Nothing contained in this Plan or in any
other plan contemplated or referred to herein shall give, or be construed as
giving, to any participant the right to be retained in the employ of the
Company or of any of the Company's subsidiaries nor create any obligation on
the part of the Company to continue the employment of any participant.
10. Other Incentive Plans. The adoption of this Plan does not
preclude the adoption by appropriate means of any other incentive plan for
employees of the Company or its subsidiaries, whether or not such employees
are eligible to participate in this Plan.
11. No Rights Granted; Uniformity. No person shall have any claim
or right to any award under this Plan or in any other plan contemplated or
referred to herein. Neither the Company nor the Committee has any obligation
to treat all participants uniformly and awards may vary with respect to each
participant as the Company or the Committee deems appropriate in its sole
discretion.
12. Plan Administration. This Plan and all other plans
contemplated or referred to herein shall be administered by the Committee, or
if no Committee has been appointed by the Company's Board of Directors, shall
be administered by the Board. The Committee shall have full power to
administer and interpret this Plan and all other plans contemplated or
referred to herein. In making any compensation decisions, the Committee shall
be entitled to rely on opinions, reports, or statements of officers or
employees of the Company and its subsidiaries and of counsel, public
accountants and other professional or expert persons. Notwithstanding
anything in this Plan or in any other plan to the contrary, the Committee may
from time to time delegate authority to appropriate officers of the Company to
make compensation decisions and awards with respect to eligible employees
other than the Company's executive officers. All actions of the Committee
shall be subject to the approval of the Board.
13. Notices. All notices given, made, delivered, or transmitted to
a participant by the Company shall be deemed duly given when mailed first
class mail, postage prepaid, and addressed to the participant at the address
last appearing on the records of the Company. A participant may change the
address as shown on the records of the Company by giving written notice
thereof to the Company.
<PAGE>
14. Governing Law. This Plan and all other plans contemplated or
referred to herein, and the actions taken in connection thereto, shall be
governed and construed in accordance with the laws of the State of Ohio.
EXHIBIT 10.3
BALDWIN PIANO & ORGAN COMPANY
1994 LONG TERM INCENTIVE PLAN
1. Purpose. This Plan shall be known as the Baldwin Piano & Organ
Company 1994 Long Term Incentive Plan (the "Restricted Stock Plan"). The
purpose of the Restricted Stock Plan is to enhance the prosperity and profits
of the Company on a long term basis by awarding bonuses, payable in restricted
shares of Common Stock, to executive officers and certain other key managerial
personnel of Baldwin Piano & Organ Company (the "Company") if the Company
achieves certain long term performance goals. The Restricted Stock Plan also
is intended to attract and retain managerial personnel for the Company and its
subsidiaries.
2. Definitions. The following terms, when capitalized, shall have
the designated meanings set forth below, unless a different meaning is plainly
required by the context.
(a) "Award Date" shall mean the first business day following the
end of any Three Year Cycle in which the Company attains the performance goals
established by the Committee for that Three Year Cycle, which date shall also
be the date that the Plan Participant is deemed to have actually received the
restricted shares of Common Stock due to him or her for such Three Year Cycle.
(b) "Change in Control" shall mean the consummation of any event or
transaction which constitutes a business combination as defined in Section
203(c)(3) of the Delaware General Corporation Law, as such section is in
effect on the effective date of this 1994 Plan, without regard as to whether
the Company's Certificate of Incorporation or Bylaws provide that Section 203
is applicable to the Company.
(c) "Committee" shall mean the Company's Executive Compensation
Committee which may be appointed from time to time by a resolution passed by a
majority of the whole Board.
(d) "Common Stock" shall mean the Company's common stock with a par
value of one cent per share as authorized by the Company's Certificate of
Incorporation as of the effective date of this Restricted Stock Plan and any
class of stock subsequently authorized by the Company and issued in
replacement of the then outstanding shares of the Company's common stock.
(e) "Fair Market Value" shall mean the closing sale price for a
share of Common Stock on the relevant date as reported by the National
Association of Securities Dealers Automated Quotation System, or such other
source for reports of trading of the Common Stock as the Committee may
reasonably select from time to time. If there are no reported trades of
Common Stock on the relevant date, then Fair Market Value shall be determined
as of the close of business on the next following business day on which there
is a reported trade. If this method is not available or does not accurately
reflect the fair market value of the Common Stock, then the Committee shall
make a good faith determination of the fair market value using any reasonable
method of valuation.
(f) "Grant Date" shall mean the date that the Committee grants an
individual the right to receive restricted shares of Common Stock pursuant to
this Restricted Stock Plan with respect to a Three Year Cycle.
<PAGE>
(g) "No Transfer Period" shall mean the three year period
immediately following an Award Date.
(h) "Plan Participant" shall mean an individual selected and
approved by the Committee for participation in a Three Year Cycle under this
Restricted Stock Plan.
(i) "Three Year Cycle" shall mean one or more three year
measurement periods commencing on a date established by the Committee and
concluding at the end of the third calendar year thereafter, by which the
Company's performance is to be measured for purposes of this Restricted Stock
Plan.
3. Eligibility. Executives and key management personnel of the
Company and the Company's subsidiaries are eligible to participate in this
Restricted Stock Plan. During any Three Year Cycle in which a Plan
Participant is participating, the Committee will not grant such Plan
Participant any right to receive any other restricted stock awards pursuant to
this Restricted Stock Plan until such Three Year Cycle is complete.
4. Shares Available to be Awarded. The shares of the Company's
Common Stock which may be awarded under this Restricted Stock Plan shall not
exceed 150,000 shares of Common Stock, which shares may be taken from the
unissued but authorized shares of Common Stock, from treasury shares, or from
Common Stock purchased by the Company from the open market; provided, however,
that the shares to be awarded under this Restricted Stock Plan shall not
exceed one percent of the then outstanding shares of the Company's Common
Stock without shareholder approval in accordance with the rules and
regulations promulgated from time to time by the National Association of
Securities Dealers, Inc. for securities listed on The Nasdaq National Market
or other exchange on which the Common Stock may then trade. If for any reason
a grant under this Restricted Stock Plan expires in whole or in part prior to
award, shares subject to such expired grant may again be subjected to a grant
under this Restricted Stock Plan.
5. Grant of Right to Receive Restricted Stock Award.
(a) From time to time, the Committee will establish (i) the
beginning and end dates for a Three Year Cycle, (ii) the appropriate
measurement index for comparison of the Company's Common Stock for such Three
Year Cycle, (iii) the minimum threshold, target and maximum levels that the
Company must achieve in order for any Plan Participant to receive an award for
such Three Year Cycle, (iv) the various participation levels at which Plan
Participants may be eligible to receive an award, and (v) the participants in
this Restricted Stock Plan and identify their level of participation as of the
Grant Date. Subject to the discretion of the Committee, the participation
level of each Plan Participant will depend upon the Plan Participant's level
within the Company's organization and the size of the restricted stock award
at each level will increase depending upon whether the Company achieves the
threshold level, the target level or the maximum level and will be set at a
fixed percentage of the Plan Participant's base salary.
<PAGE>
(b) Unless otherwise selected by the Committee, the appropriate
measurement index during any Three Year Cycle will be the Russell 2000 Index
and the performance of the Company will be determined by a comparison of the
Company's total shareholder return against the Russell 2000 Index over the
Three Year Cycle. The total shareholder return is based on the increase (or
decrease) in the price of the Company's stock over the Three Year Cycle and
assumes the reinvestment of all dividends. The Committee will compare the
total shareholder return for the Three Year Cycle against the Russell 2000
Index by assuming that on the Grant Date $100 was invested in Company Common
Stock and $100 was invested in the Russell 2000 Index. The Company will then
examine and compare the relative value of both investments as of the last day
of the Three Year Cycle.
(c) Following a grant to a Plan Participant, the Company's
Secretary or other designated officer shall inform the Plan Participant of the
making of the grant, the Company performance levels that must be achieved in
order for restricted shares to be awarded and the Plan Participant's
participation level. Each grant made hereunder shall further contain such
other provisions and conditions in addition to those included in this 1994
Plan as the Committee shall deem advisable, provided that no such additional
provisions or conditions shall be inconsistent with this Restricted Stock
Plan.
(d) The Committee may at any time adjust the measurement index, the
performance levels and the participation levels prerequisite to any award of
restricted shares pursuant to this Restricted Stock Plan. In addition, the
minimum threshold performance level must require that the Company's stock
performance exceed the appropriate measurement index and no restricted shares
shall be awarded whatsoever under this Restricted Stock Plan with respect to
any Three Year Cycle in which the Common Stock does not at least equal the
minimum threshold level.
6. Calculation of Award.
(a) All awards of restricted shares of Common Stock to be made
under this Restricted Stock Plan shall be based upon the Plan Participant's
actual salary during the third year of the Three Year Cycle.
(b) As of the Award Date, the Company will determine whether and to
what degree the Company achieved the threshold, target or maximum levels
required for the related Three Year Cycle. If an award is payable, the
Company will calculate the size of the Plan Participant's award by multiplying
his or her base salary as determined in Section 6(a) above by the appropriate
percentage for that Plan Participant's participation level. The number of
restricted shares awarded, if any, to a Plan Participant shall be based upon
100% of the Fair Market Value of the Company's Common Stock as of the Award
Date.
(c) If any Plan Participant ceases to be an employee of the Company
or of the Company's subsidiaries for any reason during a Three Year Cycle, the
Plan Participant's right to receive an award for such Three Year Cycle shall
automatically be forfeited and no award shall be payable to such Plan
Participant.
<PAGE>
7. Payment of Awards; Restrictions.
(a) Promptly following the calculation of an award under this
Restricted Stock Plan, the Company will issue in the name of the Plan
Participant that number of restricted shares earned by the Plan Participant
with respect to the Three Year Cycle subject to adjustment as provided in
Section 8 below.
(b) Each restricted share so awarded shall be subject to a complete
prohibition on transfer, whether by sale, gift or other disposition, during
the No Transfer Period. In the event of the Plan Participant's death, such
restricted shares may be transferred to the estate, heirs or assigns of the
Plan Participant, but such shares shall continue to be subject to this
restriction. All share certificates representing shares awarded under this
Restricted Stock Plan will contain a legend explaining the prohibitions on
transfer during the No Transfer Period.
(c) The Company shall hold all certificates representing the
restricted shares so awarded in custody for the Plan Participant's account
until the expiration of the No Transfer Period. With respect to all such
shares, the Plan Participant shall have all rights and privileges of a
stockholder as to such shares, including the right to vote the shares and the
right to receive dividends, except that none of the restricted shares may be
sold, transferred, assigned, pledged, or otherwise encumbered or disposed of
until the expiration of the No Transfer Period. All restricted shares awarded
pursuant to this Restricted Stock Plan shall further be subject to the
restrictions on transferability set forth in Section 9, both during the No
Sale Period and at all times thereafter.
8. Adjustments to Awards of Restricted Shares; Tax Withholding.
In the discretion of the Company, the Company may elect, in whole or in part,
to pay cash in lieu of restricted shares otherwise payable to a Plan
Participant pursuant to this Restricted Stock Plan. The Company shall further
require a payment from a Plan Participant to cover applicable withholding
taxes. Upon the issuance of shares of Common Stock following an Award Date,
the Company shall retain or sell without notice the number of shares of Common
Stock otherwise to be issued to the Plan Participant which shares have an
aggregate Fair Market Value (determined by the Company as of the Award Date)
sufficient to satisfy the amount of any tax required by any government to be
withheld or otherwise deducted and paid with respect to such payment,
remitting any cash balance relating to fractional shares to the Plan
Participant; provided, however, that upon providing written notice to the
Company no later than the Award Date, the Plan Participant shall have the
right to provide the Company with sufficient funds prior to the issuance of
the shares to enable the Company to pay such tax.
9. Non-Transferability. Grants of the right to receive restricted
shares hereunder shall be personal to the grantee, and shall be non-assignable
and non-transferable. Unless the Company in its sole discretion elects to
register the restricted shares, all of the restricted shares awarded hereunder
shall be legended to reflect that such shares have not been registered under
the federal and state securities laws and that any resale of such shares may
only be done so in compliance with any exemption from such registration
requirements.
<PAGE>
10. Adjustment of Shares. In the event there is any change in the
Common Stock by reason of a stock dividend paid in shares of Common Stock, a
recapitalization, a reclassification, a merger, a stock split, a split-up, a
split-off, a spin-off, or a combination of shares with respect to the Common
Stock, the restricted shares awarded hereunder shall be automatically adjusted
by the Committee at the time of the event such that the Plan Participant's
proportionate interest shall be maintained as before the occurrence of such
event; and in any such case, an appropriate adjustment shall also be made in
the total number of shares of Common Stock reserved for future awards under
this Restricted Stock Plan.
11. Change in Control. If a Change in Control of the Company
occurs, any outstanding restricted shares granted under this Restricted Stock
Plan which are then subject to the restrictions imposed during a No Transfer
Period as of the date of a Change in Control shall automatically no longer be
subject to the prohibition on transfer during the No Transfer Period
notwithstanding that the No Transfer Period may not have expired.
12. Administration. This Restricted Stock Plan shall be
administered by the Committee, or, if no Committee has been appointed by the
Board, shall be administered by the Board. No Plan Participant hereunder
shall be a member of such Committee. All actions of the Committee shall be
subject to the approval of the Board.
13. Duration and Amendment. This Restricted Stock Plan shall
become effective upon approval by the Company's Board of Directors and shall
continue until terminated by the Company's Board of Directors. This
Restricted Stock Plan may be terminated at any time as to all shares not then
subject to outstanding grants, by a resolution duly adopted by the Board.
Neither the expiration nor the termination of this Restricted Stock Plan shall
affect any grant theretofore made hereunder. The Board may from time to time
amend this Restricted Stock Plan. Any amendment of this Restricted Stock Plan
shall apply to all grants made on or after the date of such amendment.
14. Notices. All notices given, made, delivered, or transmitted to
a Plan Participant by the Company shall be deemed duly given when mailed first
class mail, postage prepaid, and addressed to the Plan Participant at the
address last appearing on the records of the Company. A Plan Participant may
change the address as shown on the records of the Company by giving written
notice thereof to the Company.
