April 6, 1994
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held at the Company's headquarters located at 422 Wards Corner
Road, Loveland, Ohio, at 11:00 a.m. on Tuesday, May 10, 1994. On the
following pages you will find the formal Notice of Annual Meeting and Proxy
Statement.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. ACCORDINGLY, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
I hope that you will attend the meeting and I look forward to seeing you
there.
Sincerely,
R. S. Harrison
-----------------------------
R. S. HARRISON
Chief Executive Officer
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 10, 1994
___________________
To the Stockholders of
Baldwin Piano & Organ Company:
The Annual Meeting of Stockholders of Baldwin Piano & Organ Company, a
Delaware corporation, will be held at the Company's headquarters located at
422 Wards Corner Road, Loveland, Ohio, 45140, on Tuesday, May 10, 1994, at
11:00 a.m., Cincinnati time, for the following purposes:
(1) To elect five directors for a one-year term ending in 1995;
(2) To adopt the Baldwin Piano & Organ Company 1994 Incentive Stock
Option Plan attached as Annex I to the accompanying Proxy Statement;
(3) To ratify the appointment of KPMG Peat Marwick as independent
auditors of the Company for the fiscal year ending December 31, 1994; and
(4) To act upon any other matter that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Thursday,
March 31, 1994, as the date for determining Stockholders of record entitled to
notice of and to vote at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement and 1993
Annual Report to Stockholders.
For the Board of Directors
R. S. HARRISON
-----------------------------
R. S. Harrison
Chief Executive Officer
April 6, 1994
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND
RETURN IT IN THE ACCOMPANYING POSTAGE PAID ENVELOPE, EVEN IF
YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY IN
WRITING OR AT THE ANNUAL MEETING IF YOU WISH TO VOTE IN PERSON.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
422 Wards Corner Road
Loveland, Ohio 45140-8390
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 10, 1994
______________________________
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Baldwin
Piano & Organ Company, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at 11:00 a.m., Cincinnati time,
Tuesday, May 10, 1994, at the Company's headquarters located at 422 Wards
Corner Road, Loveland, Ohio. The proxy is revocable at any time prior to its
exercise by written notice or in person at the Annual Meeting. The cost of
soliciting proxies will be borne by the Company. In addition to solicitation
by mail, proxies may be solicited by officers, directors, and regular
employees of the Company personally or by telephone or telegraph, and the
Company may reimburse brokers, custodians, nominees, and other fiduciaries for
their reasonable out-of-pocket expenses in forwarding proxy materials to their
principals.
Shares represented by proxy will be voted as directed on the proxy forms
and, if no direction is given, will be voted in the election of directors for
the persons nominated by the Board of Directors and for the proposals
described herein. Any proxy given by a Stockholder may be revoked at any time
prior to its use by execution of a later-dated proxy, by a personal vote at
the Annual Meeting, or by written notice to the Company's Secretary.
This proxy material is being sent to Stockholders on or about April 6,
1994, together with the Company's 1993 Annual Report, which includes certified
financial statements for the fiscal year ended December 31, 1993.
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders of record at the close of business on Thursday, March 31,
1994 are entitled to notice of and to vote at the meeting. As of the close of
business on that date, there were outstanding and entitled to vote 3,416,144
shares of Common Stock, $.01 par value (the "Common Stock"), each of which is
entitled to one vote. No cumulative voting rights exist under the Company's
Certificate of Incorporation. For information regarding the ownership of the
Company's Common Stock by holders of more than five percent of the outstanding
shares and by the management of the Company, see "Security Ownership of
Certain Beneficial Owners and Management."
<PAGE>
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of a single class. Each
year the directors are elected to serve for a term of one year. The Board of
Directors currently consists of six members, but will be reduced to five
members effective as of the date of the Annual Meeting. One of the Company's
directors, Cecil R. Burnham, informed the Company that he did not desire to
stand for re-election at the Annual Meeting consistent with his intent to
retire from the Board of Directors. Pursuant to the Company's Bylaws, the
Board of Directors has voted to reduce the size of the Board of Directors
rather than to fill the vacancy that would have otherwise arisen upon Mr.
Burnham's retirement. The Stockholders will vote at the Annual Meeting for
the election of all five directors who will constitute the Company's Board of
Directors for the one-year term expiring at the Annual Meeting of Stockholders
in 1995.
The persons named in the enclosed proxy will vote for the election of
the nominees named below unless authority to vote is withheld. All nominees
have consented to serve if elected. In the event that any of the nominees
should be unable to serve, the persons named in the proxy will vote for such
substitute nominee or nominees as they, in their discretion, shall determine.
The Board of Directors has no reason to believe that any nominee named herein
will be unable to serve.
Directors will be elected by a majority of the votes cast at the Annual
Meeting upon the presence of a quorum. Any shares not voted in the election
of directors (whether by abstention, broker non-vote or otherwise) have no
impact on the vote. The following material contains information concerning
the nominees for election as directors.
Nominees for Directors
GEORGE E. CASTRUCCI, age 56, has served as a director of the Company
since May, 1987, and was appointed Chairman of the Board in August, 1993. Mr.
Castrucci is currently employed as an independent management consultant.
Prior to March, 1992, he served as Chairman and Chief Executive Officer of
Great American Broadcasting Company, a Cincinnati-based broadcast company, and
as President and Chief Operating Officer of its parent company, Great American
Communications Company. Mr. Castrucci also currently serves as a director of
BMF Savings Bank, The Ohio National Fund, Inc., and ONE Fund, Inc.
R. S. HARRISON, age 62, has been the Chief Executive Officer and a
director of the Company since its inception in November, 1983. He also served
as the Company's Chairman of the Board from its formation until August, 1993,
when he assumed the responsibilities as the Company's President. Prior to
November, 1983, Mr. Harrison served the Company's predecessor (the old Baldwin
Piano & Organ Company which sold all of its music-related assets to the
Company in June, 1984) as a director since June, 1983, as its chief executive
officer and president since 1974, and in other capacities since 1955.
JOSEPH H. HEAD, JR., age 61, has been a director of the Company since
May, 1987 and was previously a director from November, 1983 until June 6,
1986. He also served as Secretary of the Company from its formation until
May, 1989. Mr. Head is Chairman, Chief Executive Officer and a director of
Atkins & Pearce, Inc., a manufacturer of industrial textiles. Mr. Head is
also a former partner in the law firm Graydon, Head & Ritchey, Cincinnati,
Ohio where he practiced law from 1959 through 1993. He has also served as a
director of Fifth Third Bancorp since 1987.
<PAGE>
ROGER L. HOWE, age 59, has been a director of the Company since August,
1993. Mr. Howe is currently employed as the Chairman of the Board of U.S.
Precision Lens, Inc., a manufacturer of optical components used in industrial
and consumer products, where he has been employed since 1970. He also
currently serves as a director of Cintas Corporation, Eagle-Picher Industries,
Inc., Star Banc Corporation, and The United States Shoe Corporation.
HARRY A. SHAW III, age 56, has been a director of the Company since
August, 1993. Mr. Shaw has been Chairman of the Board of Huffy Corporation, a
consumer products and retail services company, since 1986. He also served as
Chief Executive Officer of Huffy Corporation from 1982 until April, 1993, was
its President from 1982 to 1986, and joined Huffy Corporation in 1969. He
also currently serves as a director of Society Corporation, GenCorp, Inc.,
Duriron Company, Inc., and Outboard Marine Corporation.
There are no family relationships among any of the above-named nominees
for director nor among any of the nominees and any executive officers of the
Company.
Board Meetings -- Committees of the Board
The Board of Directors of the Company met thirteen times during the year
ended December 31, 1993. In 1993, all directors attended all Board of
Directors meetings except Mr. Shaw who due to illness attended fewer than 75
percent of all Board meetings after his election to the Board of Directors.
The Board of Directors has an Executive Compensation Committee and an
Audit Committee. The Executive Compensation Committee reviews the salaries
and compensation levels of the Company's executive management and the Audit
Committee reviews the Company's accounting practices and controls. In 1993,
the Executive Compensation Committee consisted of Messrs. Burnham and
Castrucci through August 11, 1993, and of Messrs. Burnham, Head and Howe
thereafter. In 1993, the Audit Committee was comprised of Messrs. Castrucci
and Head through August 11, 1993, and of Messrs. Castrucci and Shaw
thereafter. The Executive Compensation Committee and the Audit Committee each
met two times in 1993.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Holders of More than Five Percent Beneficial Ownership
The following table sets forth information regarding all persons known
to the Company to be the beneficial owners of more than five percent of the
Company's Common Stock as of March 31, 1994.
Shares Percent of
Owned Outstanding
Name(1) Beneficially Shares
------- ------------ -----------
R. S. Harrison and 377,267(2)(3) 11.0%
John J. Kropp, Trustee
David L. Babson & Company, Inc. 304,100(4) 8.9%
State of Wisconsin Investment Board 275,000(5) 8.1%
FMR Corp. 274,300(6) 8.0%
Oppenheimer Management Corporation 256,000(7) 7.5%
SoGen International Fund, Inc. 215,000(8) 6.3%
Columbia Management Co. 193,000(9) 5.7%
_____________
(1) The address of R. S. Harrison is 422 Wards Corner Road, Loveland, Ohio
45140. The address of John J. Kropp is 1900 Fifth Third Center,
Cincinnati, Ohio 45202. The address of David L. Babson & Company, Inc.
is One Memorial Drive, Cambridge, Massachusetts 02142. The address of
State of Wisconsin Investment Board is P.O. Box 7842, Madison, Wisconsin
53707. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. The address of Oppenheimer Management Corporation
is Two World Trade Center, Suite 3400, New York, New York 10048. The
address of SoGen International Fund, Inc. is 50 Rockefeller Plaza, New
York, New York 10020. The address of Columbia Management Co. is 1300
S.W. Sixth Avenue, Portland, Oregon 97207.
(2) Of the shares listed, 8,750 are owned directly by Mr. Harrison, and
18,000 are owned beneficially subject to his right to exercise
outstanding stock options.
<PAGE>
249,505 shares are held, and also beneficially owned, by John J. Kropp,
Trustee (the "Trustee"), under an Irrevocable Trust Agreement with Anne
W. Harrison, Mr. Harrison's spouse, as grantor (the "Anne W. Harrison
Trust"). Mr Harrison is entitled to the entire net income of the Anne
W. Harrison Trust for his life and the Trustee may make discretionary
distributions of principal to Mr. Harrison. Additionally, the grantor
may, during her lifetime, appoint the principal of the Anne W. Harrison
Trust to Mr. Harrison. The Trustee is required to propose all changes
in investments of trust assets to an investment advisor and is obligated
to follow the instructions of that advisor with respect to the
investment of trust assets. The initial investment advisor is R. S.
Harrison. R. S. Harrison may remove the Trustee at any time and appoint
a substitute Trustee. The Trustee has sole voting power, but is
required to follow the directions of the investment advisor. Because of
these rights, Mr. Harrison is considered the beneficial owner of the
shares held in the Anne W. Harrison Trust.
In addition to the Trust Agreement described above, Mr. Kropp is Trustee
of four trusts (the "Trusts") for the benefit of the four adult children
of R. S. Harrison, which Trusts hold 101,012 shares of Common Stock.
The terms of all Trusts are substantially identical and provide that the
beneficiary of each Trust is entitled to the entire trust income during
his or her lifetime. The Trustee may also make discretionary
distributions of principal to the beneficiary. Pursuant to the Trusts,
the Trustee must vote all Common Stock owned by the Trusts in accordance
with the direction of the Special Advisor. If the Special Advisor does
not give any direction to the Trustee, the Trustee may vote such shares
in his best judgment. The Special Advisor is Mr. C. L. Harrison III, R.
S. Harrison's brother. In certain circumstances, Priscilla Harrison
Connell, R. S. Harrison's sister, may appoint a substitute Special
Advisor. Except for transfers to R. S. Harrison or his spouse, the
Trustee may not transfer any shares unless directed by the Special
Advisor. Because of their authority to dispose of or vote the shares or
to control the person who votes or disposes of any shares acquired by
the Trusts, John J. Kropp, C. L. Harrison, III and Priscilla Harrison
Connell are considered the beneficial owners of any shares held by the
Trusts.
Pursuant to the terms of the Trusts, Anne W. Harrison, the spouse of R.
S. Harrison, has an option to purchase any part or all of the shares
owned by the Trusts and may be deemed a beneficial owner thereof. In
addition, she may be deemed the beneficial owner of the shares
beneficially owned by R. S. Harrison. In the event that she is not
married to R. S. Harrison, her option rights terminate. If she
predeceases R. S. Harrison, he is granted the right to exercise the
option. Because of his right to acquire shares from the Trusts, R. S.
Harrison is deemed to be a beneficial owner of such shares, but he
disclaims any beneficial ownership of such shares in his own right.
(3) Of the 377,267 shares beneficially owned by Messrs. Harrison and Kropp,
377,267 are beneficially owned by Mr. Harrison and 350,517 are
beneficially owned by Mr. Kropp.
(4) David L. Babson & Company, Inc. last informed the Company that it is an
investment adviser that may be deemed the beneficial owner of 304,100
shares of Common Stock. David L. Babson & Company, Inc. has sole
dispositive power over all 304,100 shares, sole voting power of 273,300
shares and shared voting power of 30,800 shares.
<PAGE>
(5) State of Wisconsin Investment Board last informed the Company that it is
a government agency which manages public pension funds and that it may
be deemed the beneficial owner of 275,000 shares of Common Stock. State
of Wisconsin Investment Board has sole dispositive power and sole voting
power over all 275,000 shares.
(6) FMR Corp. last informed the Company that it is the parent holding
company of Fidelity Management & Research Company, the investment
adviser to Fidelity Low-Priced Stock Fund, a registered investment
company which owns 274,300 shares of Common Stock. FMR Corp., through
its control of Fidelity Management & Research Company, and the Fund each
has sole dispositive power over all 274,300 shares. Neither FMR Corp.
nor its chairman has sole power to vote or direct the voting of the
shares owned by the Fund, which power resides with the Fund's Board of
Trustees.
(7) Oppenheimer Management Corporation last informed the Company that it is
the investment adviser to, and owner of a 5% or greater interest in,
Oppenheimer Total Return Fund, Inc., a registered investment company
which has sole voting power over 256,000 shares. Oppenheimer Management
Corporation and Oppenheimer Total Return Fund, Inc. share dispositive
power over all 256,000 shares.
(8) SoGen International Fund, Inc. last informed the Company that it is a
registered investment company and that, with its investment adviser
Societe Generale Asset Management Corp., is the beneficial owner of
215,000 shares of Common Stock. SoGen International and its investment
adviser share voting and dispositive power over all 215,000 shares.
(9) Columbia Management Co. last informed the Company that it is the
investment adviser to both CMC Small Cap Fund, a portfolio of CMC Fund
Trust, a registered investment company, and Columbia Trust Company, the
trustee for collective investment funds, and that Columbia Management
Co. may therefore be deemed the beneficial owner of 193,000 shares. CMC
Small Cap Fund has sole voting power over 155,800 shares and it shares
dispositive power over such shares with Columbia Management Co.
Columbia Trust Company has sole voting power over 37,200 shares and it
shares dispositive power over such shares with Columbia Management Co.
<PAGE>
Beneficial Ownership of Management and Nominees
The following table sets fo2th information regarding the ownership of
Common Stock of the Company for each director, each nominee, each named
executive and all officers and directors as a group as of March 31, 1994.
Percent of
Shares Owned Outstanding
Name Beneficially Shares
____ ____________ ___________
Current Directors and Nominees
R. S. Harrison ............... 377,267(1)(4) 11.0%
Joseph H. Head, Jr............ 24,000(2) .7%
Cecil R. Burnham ............. 14,948(2) .4%
George E. Castrucci .......... 16,000(2) .5%
Roger L. Howe ................ 7,000(2) .2%
Harry A. Shaw III ............ 4,000(2) .1%
Executive Officers
Harry F. Forbes, Jr........... 38,222(3)(4) 1.1%
Kenen M. Edgington ........... 34,056(4) 1.0%
Jimmie H. Smith .............. 13,669(4)(5) .4%
Charles R. Juengling ......... 13,000(4) .4%
All officers and directors as a
group (20 persons) ........ 621,268(2)(4) 17.5%
___________
(1) See notes (2) and (3) under "Security Ownership of Certain Beneficial
Owners and Management -- Holders of More than Five Percent Beneficial
Ownership."
(2) Includes shares owned beneficially subject to the holder's right to
exercise outstanding non-qualified stock options: 14,000 shares for each
of Messrs. Burnham, Head and Castrucci, and 2,000 shares for each of
Messrs. Howe and Shaw.
(3) Includes shares jointly owned with spouse.
(4) Includes shares owned beneficially subject to the holder's right to
exercise outstanding stock options: 18,000 shares for Mr. Harrison,
9,000 shares for Mr. Edgington, 3,000 shares for Mr. Forbes, 10,000
shares for Mr. Smith, 12,000 shares for Mr. Juengling, and 37,500 shares
in the aggregate for the Company's other executive officers.
(5) Includes 3,669 shares owned by Mr. Smith's minor son. Mr. Smith
hereby disclaims beneficial ownership of all such shares.
<PAGE>
No agreements, formal or informal, exist among the various officers and
directors to vote their shares collectively.
To the best of the Company's knowledge, all except one of the Company's
directors, officers and 10% or more shareholders have timely filed with the
Securities and Exchange Commission all reports required to be so filed
pursuant to Section 16 of the Securities Exchange Act of 1934 for the Company's
1993 fiscal year. One of the Company's directors, Joseph H. Head, Jr., filed
one report approximately three weeks late in January, 1994 relating to two
December, 1993 transactions in the Company's Common Stock whereby shares held
in his individual retirement account were transferred into his individual
name.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and each of the Company's other four most highly compensated executive
officers (the "named executives") during each of the last three fiscal years.
Harold S. Smith is also included in the following table because he would have
been considered a named executive if he had not retired as an executive
officer of the Company prior to the end of 1993.
<TABLE>
<CAPTION>
Long
Term
Compen-
sation
Annual Compensation --------- All Other
------------------- Stock Compen-
Name and Principal Salary Bonus Options sation
Position Year (1)($) (1)(2)($) (# shares) (3)($)
- ------------------ ---- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
R. S. Harrison 1993 355,700 106,710 -- 45,093
Chief Executive Officer 1992 348,629 106,710 3,000 45,820
and President 1991 332,009 101,619 3,000 48,699
Kenen M. Edgington 1993 141,929 40,111 -- 10,673
Executive Vice 1992 133,899 15,721 2,000 11,452
President 1991 123,432 38,488 2,000 9,637
Harry F. Forbes, Jr. 1993 123,400 37,020 -- 10,717
Vice President, 1992 117,500 35,250 1,000 10,160
Treasurer and 1991 112,000 33,600 1,000 9,486
Secretary
Jimmie H. Smith 1993 118,152 35,446 -- 12,371
Vice President/ 1992 108,307 35,446 2,000 11,808
Manufacturing 1991 98,458 32,224 2,000 8,401
<PAGE>
Charles R. Juengling 1993 111,300 33,390 -- 9,662
Vice President and 1992 106,000 31,800 2,000 9,161
Chief Financial Officer 1991 101,000 30,300 2,000 8,648
Harold S. Smith 1993 234,853 62,248 -- 329,691
Former President and 1992 348,629 106,710 3,000 238,122
Chief Operating Officer 1991 332,009 101,619 3,000 238,070
______________
<FN>
(1) Includes amounts contributed by the following named executives to the
Baldwin Piano & Organ Company Retirement Plan for Salaried Employees as
elective salary reduction contributions.
1993 1992 1991
---- ---- ----
R. S. Harrison ........... $69,361 $67,537 $64,318
Kenen M. Edgington ....... 15,765 11,722 8,765
Harry F. Forbes, Jr. ..... 23,797 10,577 10,087
Jimmie H. Smith .......... 23,039 21,080 19,163
Charles R. Juengling ..... 8,586 8,178 7,797
Harold S. Smith .......... 18,852 27,015 25,727
(2) The bonuses are shown for the years earned, but they were paid in the
following year.
(3) "All Other Compensation" includes, as shown below, amounts contributed
by the Company under the Baldwin Piano & Organ Company Retirement Plan
for Salaried Employees; group term life insurance premiums paid by the
Company on policies obtained by the Company for all employees; the value
of personal use of Company automobiles; employment agreement payments
(see "Employment Agreements"); and life insurance premiums paid by the
Company for $1,000,000 of executive life insurance on the life of Mr.
Harrison. The net proceeds of this executive life policy are payable to
the estate of Mr. Harrison after reimbursement to the Company of all
premiums paid by the Company on his behalf.
1993 1992 1991
____ ____ ____
R. S. Harrison
Retirement Plan .......... $ 27,445 $ 27,015 $ 25,727
Executive Insurance ...... 12,937 14,747 17,743
Group Life Insurance ..... 1,932 1,764 1,827
Automobile (Personal Use). 2,779 2,294 3,402
-------- -------- --------
$ 45,093 $ 45,820 $ 48,699
======== ======== ========
<PAGE>
Kenen M. Edgington
Retirement Plan .......... $ 9,459 $ 10,343 $ 8,765
Group Life Insurance ..... 1,214 1,109 872
-------- -------- --------
$ 10,673 $ 11,452 $ 9,637
======== ======== ========
Harry F. Forbes, Jr.
Retirement Plan .......... $ 9,519 $ 9,066 $ 8,646
Group Life Insurance ..... 1,198 1,094 840
-------- -------- --------
$ 10,717 $ 10,160 $ 9,486
======== ======== ========
Jimmie H. Smith
Retirement Plan .......... $ 9,216 $ 8,432 $ 7,665
Group Life Insurance ..... 1,060 968 736
Automobile (Personal Use). 2,095 2,408 ---
-------- -------- --------
$ 12,371 $ 11,808 $ 8,401
======== ======== ========
Charles R. Juengling
Retirement Plan .......... $ 8,586 $ 8,178 $ 7,797
Group Life Insurance ..... 1,076 983 851
-------- -------- --------
$ 9,662 $ 9,161 $ 8,648
======== ======== ========
Harold S. Smith
Retirement Plan .......... $ 18,852 $ 38,682 $ 37,395
Group Life Insurance ..... 1,127 1,764 1,827
Automobile (Personal Use). 1,420 3,219 4,391
Employment Agreement ..... 194,457 194,457 194,457
Consulting Agreement ..... 113,835 -- --
-------- -------- --------
$329,691 $238,122 $238,070
======== ======== ========
</TABLE>
Employment Agreements
During 1993, the Company had Employment Agreements with R.
S. Harrison and Harold S. Smith providing that Mr. Harrison would
be employed as Chairman and Chief Executive Officer and that Mr. Smith
would be President and Chief Operating Officer and that each would
receive such salary and benefits as the Board of Directors may
from time to time determine. Mr. Harrison has waived the requirement
that he be employed as Chairman. Mr. Smith's Employment Agreement
terminated effective as of May 19, 1993 pursuant to a Consulting
Agreement between the Company and Mr. Smith.
<PAGE>
Mr. Harrison's Employment Agreement provides that, in the
event of termination for other than good cause, the Company must
pay Mr. Harrison an amount equal to twice his annual compensation
for the calendar year preceding termination and for five years
provide him all other benefits normally provided to the Company's
highest ranking officers. Reducing Mr. Harrison's annual
compensation by more than 10%, not providing benefits equal to
those of its highest ranking officers, failing to elect Mr.
Harrison to the Board of Directors and relocation of Mr.
Harrison, among other things, constitute termination for other
than good cause. No such benefits are payable if Mr. Harrison is
terminated for good cause except that medical benefits are to be
paid for the balance of Mr. Harrison's life regardless of cause.
The Employment Agreement contains covenants by Mr. Harrison not
to compete with the Company after termination for good cause.
Having reached 62 years of age, Mr. Harrison is permitted
under his Employment Agreement to elect to work for the Company
part-time. If Mr. Harrison so elected, he would be entitled to
receive an amount equal to 50% of his compensation for the
calendar year preceding the year in which Mr. Harrison ceased to
be a full-time employee. Upon death, disability or attainment of
age 65, Mr. Harrison (or his designated beneficiary in the event
of his death) is entitled to receive for ten years, an amount
equal to 50% of his compensation for the calendar year preceding
such event, but not less than 50% of his compensation for the
calendar year preceding his sixty-second birthday. Mr. Harrison
may, with the Company's permission, remain in the employ of the
Company following his sixty-fifth birthday and receive any
additional compensation determined by the Board of Directors.
During 1993, the Company accrued on its books $232,102,
reflecting the increase in the Company's anticipated obligations
under the Employment Agreement resulting from the services of
Mr. Harrison during 1993.
In 1993, Mr. Smith received $194,457 due to him as deferred
compensation under his former Employment Agreement in addition to
his compensation as a full-time Company employee through August
1, 1993. Pursuant to his Consulting Agreement, Mr. Smith
continues to perform consulting services for the Company for a
three year period. The Consulting Agreement requires Mr. Smith
to perform work for the Company such that he would work
approximately 60% of a full-time work schedule in the first year,
40% in the second year and 20% in the third year. Mr. Smith's
compensation for consulting services will be $273,203, or 60% of
his 1992 salary and bonus, in the first year, $182,135, or 40%,
in the second year and $91,067, or 20%, in the third year.
Through the end of 1993, Mr. Smith received $113,835 pursuant to
this Consulting Agreement. In addition, in the years 1994
through 1999, Mr. Smith will continue to receive an annual
payment of $194,457 representing deferred compensation as
required by Mr. Smith's former Employment Agreement with the
Company, which payments are supported by a letter of credit
obtained by the Company in favor of Mr. Smith.
<PAGE>
Option Grants in Last Fiscal Year
The Company made no stock option grants to the named
executives in 1993.
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth certain information regarding
individual exercises of stock options during 1993 by each of the
named executives.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares 12/31/93 12/31/93
Acquired on Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
Name (#) ($) (1) (#) (2) (3) ($)
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
R. S. Harrison -0- -0- 15,000/ 65,362/
3,000 -0-
Kenen M. Edgington -0- -0- 7,000/ 35,875/
2,000 -0-
Harry F. Forbes, Jr. -0- -0- 2,000/ 10,125/
1,000 -0-
Jimmie H. Smith -0- -0- 8,000/ 42,250/
2,000 -0-
Charles R. Juengling -0- -0- 10,000/ 53,250/
2,000 -0-
Harold S. Smith(4) 15,000 102,862 -0- -0-
_____________
<FN>
(1) All stock options issued to the named executives under the Company's 1986
Incentive Stock Option Plan must be held for two years subsequent to the
date of the option grant before such options first become exercisable.
(2) The shares of the Company's Common Stock issuable upon the exercise of
outstanding stock options have not been registered under the Securities
Act of 1933. Generally, such shares may not be resold by the holder for
a minimum period of two years following exercise of the option.
(3) All unexercisable stock options have an exercise price of $15.75 per share,
except for unexercisable stock options held by Mr. Harrison which have an
exercise price of $17.325. Based upon the $15.00 per share market price
of the Common Stock at December 31, 1993, these unexercisable stock
options had no value because the exercise price exceeded the market price.
(4) Upon Mr. Smith's retirement, he surrendered unexercisable options to
acquire 3,000 shares of Common Stock.
<PAGE>
Compensation of Directors
In 1993, non-employee directors of the Company were compensated for
serving on the Board of Directors and the committees thereof, in the amount of
$6,000 per year, payable in quarterly installments, and received an additional
$750 for each Board of Directors meeting and each committee meeting attended
in person or by telephone until August 11, 1993, when the Board of Directors
approved increases in such fees to $10,000 and $900, respectively. Such
directors are reimbursed for all reasonable expenses incurred in connection
with their services and receive an annual grant of 2,000 non-qualified stock
options having an exercise price equal to the market price on the date of the
grant. The Company also paid an additional $4,000 to each of Messrs. Burnham,
Castrucci and Head in consideration of their extraordinary efforts on the
Company's behalf during 1993. Mr. Castrucci received compensation in the
amount of $16,667 for serving as Chairman of the Board from August 11, 1993
through December 31, 1993. Mr. Harrison receives no additional compensation
for serving on the Board of Directors.
Compensation Committee Interlocks and Insider Participation
From January 1, 1993 through August 11, 1993, Messrs. Burnham and
Castrucci comprised the Company's entire Executive Compensation Committee, and
were both non-employee directors of the Company. On August 11, 1993, Mr.
Castrucci became an officer of the Company upon his appointment as Chairman of
the Board and Messrs. Head and Howe, who are both non-employee directors of
the Company, replaced Mr. Castrucci on the Executive Compensation Committee.
No director or executive officer of the Company serves on any board of
directors or compensation committee of any entity which compensates Messrs.
Burnham, Head or Howe or which compensated Mr. Castrucci during his tenure on
the Executive Compensation Committee.
Report of Compensation Committee on Executive Compensation
For the Company's 1993 fiscal year, the Executive Compensation Committee
of the Board of Directors (the "Committee") was at all times comprised
entirely of independent non-employee directors. The Committee is charged
with responsibility for reviewing the performance and approving the
compensation of the Company's key executives on an annual basis. The
Committee believes that a significant portion of an executive officer's
compensation should be subject to the Company's annual performance, while at
the same time motivating long-term growth in stockholder value.
In 1993, the Company's compensation package for its executive officers
consisted primarily of salary and a cash bonus, as well as the opportunity to
receive grants of incentive stock options under the Company's 1986 Incentive
Stock Option Plan previously approved by the Company's Stockholders. The
Committee believes that the base salaries of its executive officers should
remain relatively stable from year to year so that the ability of executive
officers to increase their compensation is largely based upon incentives
related to Company and individual performance. The Committee further believes
that incentive compensation in the form of annual cash bonuses should be based
upon specified goals established early in the Company's fiscal year so that
the Company's executive officers will be motivated to reach specific annual
targets in order to increase their compensation.
<PAGE>
Consistent with this philosophy, the Committee approved modest increases
in the 1993 base salaries of the Company's executive officers. Salary
increases for those individuals averaged approximately 4.8%, including an
average salary increase of approximately 5.4% for the named executives.
For 1993, as in past years, the Committee continued to approve the grant
of cash bonuses to the Company's executive officers pursuant to the Company's
management incentive plan. Such bonuses are computed as a percentage of the
participant's annualized salary based upon the participant's ability to meet
individual performance targets as well as the Company's ability to meet
overall performance targets. The percentage bonus awarded to a participant
depends upon the participant's actual performance in relation to those
targets. The percentage bonus is further subject to the Company's overall
performance. If the Company does not attain at least 90% of its performance
goals, then no bonus is paid to any participant in the incentive plan, and if
only 90% to 100% of the Company goals are attained, any bonuses are
proportionately reduced. The bonuses granted to the named executive officers
pursuant to such formulas in 1993 represented approximately 30% of their
overall cash compensation.
The Committee made no stock option grants to any executive officers or
other key employees in 1993. Normally, the Committee determines stock option
awards during the second quarter of the Company's fiscal year in order to
motivate improved performance in the year in which the grant is made.
However, due to the unusual events which occurred during the Company's 1993
fiscal year relating to changes in the Company's executive management team and
to consideration of a proposed sale of the Company, the Committee did not deem
it appropriate to consider option grants until such matters were resolved.
When the Committee met following the resolution of those matters, the
Committee determined no grants were appropriate in 1993 because such grants
would have been made too late to influence the Company's 1993 results.
The Committee followed these principles in establishing 1993
compensation levels for Mr. Harrison, the Company's Chief Executive Officer.
Notwithstanding that the Company's 1993 net sales and net earnings before the
cumulative effects of changes in accounting principles increased by 10% and
4%, respectively, compared to 1992, the Committee increased Mr. Harrison's
base salary by only approximately 2.5% and awarded no new option grants. Mr.
Harrison's annual bonus was determined pursuant to the formulas contained in
the Company's management incentive plan discussed above and equalled his 1992
bonus. Although the Committee recognized that Mr. Harrison substantially
contributed to the Company's improving performance, the Committee believed
that maintaining Mr. Harrison's 1993 compensation near 1992 levels was
appropriate until the Company's management transition became more established
and until the Company's short-term and long-term goals could be re-evaluated
by the Company's full Board of Directors.
The Committee has been informed that the Company is evaluating the
possible impact, if any, on the Company of the new $1,000,000 compensation
deduction cap imposed by Section 162(m) of the Internal Revenue Code and that
the Company intends to take any necessary steps to conform its compensation
practices to comply with those tax provisions.
<PAGE>
The Executive Compensation Committee
Cecil R. Burnham Joseph H. Head, Jr. Roger L. Howe
Common Stock Performance
The following performance graph compares the Company's cumulative
shareholder return over a five year period, assuming $100 invested at December
31, 1988, respectively, in Baldwin Piano common stock, the Russell 2000 index
and in an industry group index of eleven other household furnishing related
products. Total shareholder return is based on the increase in the price of
the stock and assumes the reinvestment of all dividends.
The Russell 2000 index consists of the smallest 2,000 companies in the
Russell 3000 index (comprised of 3,000 large U.S. companies representing
approximately 98% of the investable U.S. equity market). The Russell 2000
index represents approximately 7% of the Russell 3000 total market
capitalization. The Russell 2000 index is a small cap index where the average
market capitalization of the companies represented (as of May 31, 1993) is
$205 million. The Company selected the Russell 2000 index as an appropriate
index for comparison based upon the Company's similar size to the companies
represented in the index.
The industry household furnishing group is comprised of: Flexsteel
Industries, La-Z-Boy Chair Co., Ladd Furniture, Mr. Coffee, Inc., Pulaski
Furniture, Aaron Rents, Inc., Basset Furniture Industries, Chromcraft
Revington, Inc., Crown Crafts, Inc., Baldwin Piano & Organ Company, and
Zenith Electronics Corp. The Company selected this industry group index on
the basis that Baldwin Piano is included by Russell as part of this industry
index and due to the fact that inadequate information is available regarding
the Company's direct competitors in the music industry because many of such
direct competitors are not public companies and/or are foreign companies.
[A paper copy of the performance graph has been filed with the
Commission under cover of Form SE on or prior to the date of the
electronic submission of this filing in accordance with Rule
304(d) of Regulation S-T.]
Other Securities Filings
The information contained in this Proxy Statement under the headings
"Executive Compensation--Report of Compensation Committee on Executive
Compensation" and "--Common Stock Performance" are not, and should not be
deemed to be, incorporated by reference into any filings by the Company under
the Securities Act of 1933 or the Securities Exchange Act of 1934 that purport
to incorporate other Securities and Exchange Commission filings made by the
Company, or portions thereof, by reference (including this Proxy Statement).
<PAGE>
PROPOSAL TO ADOPT 1994 INCENTIVE STOCK OPTION PLAN
The Board of Directors has adopted the 1994 Incentive Stock Option Plan
(the "1994 Plan"), subject to and effective upon approval of the Company's
Stockholders. In the opinion of the Board of Directors, stock option plans
are successful in encouraging ownership of the Common Stock by corporate
officers and key managerial personnel of the Company. Stock option plans
provide additional incentives for these employees to contribute to the success
of the Company and to assist the Company in attracting and retaining the
services of outstanding employees.
Material Features of the 1994 Plan
The complete text of the 1994 Plan is attached as Annex I to this Proxy
Statement. The following summary of the 1994 Plan does not purport to be
complete and is qualified in its entirety by reference to Annex I.
The 1994 Plan provides for the granting of incentive stock options to
corporate officers and key managerial personnel of the Company for the
purchase of a maximum of 300,000 shares of the Company's Common Stock.
The maximum annual individual award of options under the 1994 Plan will be
for the purchase of a maximum of 10,000 shares of the Company's Common
Stock. Such maximums are subject to adjustment upon the occurrence of
contingencies set forth in Section 12 of the 1994 Plan. Directors of the
Company who are not also employees are not eligible to participate in the
1994 Plan.
The 1994 Plan will be administered by the Executive Compensation
Committee of the Board of Directors. No member of the Committee is eligible
to receive options under the 1994 Plan. Grants of options under the 1994 Plan
may be awarded by the Committee to the key employees whose responsibilities
and performance merit special recognition based upon such criteria as the
Committee may apply from time to time. Subject to the provisions of the 1994
Plan, the Committee will have other general supervisory and interpretative
authority and will determine the dates of grants, the number of shares to be
granted under the options, and the terms of exercise of the options.
The Committee anticipates that it will establish target awards for
specified levels of management personnel eligible to participate in the 1994
Plan based upon financial and other performance criteria established by the
Committee for both the Company and the individual participants. The target
awards will serve as guidelines in making the actual awards based upon the
degree to which the Company and the participants achieve the performance
goals. Depending upon a participant's individual performance, any actual
award may be more or less (including no award) than the target award set for
employees in the participant's management level. In all events, the Committee
has discretion as to the actual number of options granted and the grantees in
each year.
Options granted under the 1994 Plan will be exercisable for up to ten
years from the date of grant, except that options granted to any individual
who owns more than 10% of the value of the total outstanding stock of the
Company must be exercised within five years after the date of grant. The
exercise price for options granted under the 1994 Plan will be not less than
100% of the fair market value of the Company's Common Stock on the date of
grant, except that in the case of options granted to employees who own more
than 10% of the voting shares of the Company, the exercise price will be not
less than 110% of the fair market value of the Company's Common Stock on the
date of grant.
<PAGE>
The 1994 Plan permits payment of the option exercise price to be made by
delivering shares of the Company's Common Stock, including an exchange of
shares to be received on exercise of an option. The end result of such an
exchange would be that the exercising option holder would receive a net number
of shares from the option exercise equal to the difference between the total
number of shares for which exercise was requested and that number of shares
the fair market value of which is equal to the exercise price to paid by
delivery of shares.
Under the 1994 Plan the Company requires an exercising option holder to
make payment to the Company sufficient to cover applicable withholding taxes
on the option exercise transaction. The Company will retain from the total
number of shares for which exercise was requested that number of shares the
fair market value of which is equal to the amount of such taxes unless the
exercising option holder elects to make such payment to the Company in cash.
Options granted under the 1994 Plan are not transferable, except by will
or by the laws of descent or distribution. The options are exercisable only
by the option holder or the option holder's estate. Each option must be
exercised no later than three months after the termination of the option
holder's employment with the Company or a parent or subsidiary corporation of
the Company, except in cases where termination is due to death or permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code")).
The Company wishes to maintain an option holder's rights in the event of
a change in control of the Company (defined in the 1994 Plan as 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 as of the effective date of the
1994 Plan). Therefore, the 1994 Plan provides that any outstanding options
which have not fully vested as of the date of such change in control shall
automatically vest and become immediately exercisable unless the option holder
agrees otherwise.
The 1994 Plan will terminate no later than May 10, 2004. The Board of
Directors may amend the 1994 Plan, but no amendment may cause the 1994 Plan to
fail to qualify as a plan for the issuance of "incentive stock options" under
Section 422 of the Code. Also, the Board of Directors may not amend the 1994
Plan without the approval of a majority of the Company's Stockholders if such
approval is required by law. Any amendment of the 1994 Plan shall apply to
all options granted on or after the date of such amendment. If such amendment
were also applied to options granted prior to the date of the amendment and
would adversely affect the rights of such option holder, the amendment may be
made with regard to such prior options only with the consent of such option
holder.
<PAGE>
Federal Tax Consequences
Options granted under the 1994 Plan are intended to qualify as
"incentive stock options" under Section 422 of the Code and to receive the
favorable tax treatment afforded thereunder. If an option holder disposes of
shares received upon the exercise of an option after the later of two years
after the date of grant of the option or one year after the date of exercise,
and if the option holder is an employee of the Company (or a parent or
subsidiary corporation of the Company, or a corporation or parent or
subsidiary corporation of such corporation issuing or assuming the option in a
transaction to which Section 424(a) of the Code applies) or the disposition of
the shares occurs either within the three-month period immediately following
the termination of such employment for reasons other than death or permanent
disability or within the applicable period provided by the Code for
termination due to death or permanent disability, any gain or loss recognized
by the option holder upon disposition of such shares will be long-term capital
gain or loss. The option holder's basis in the shares for tax purposes (other
than for purposes of the alternative minimum tax) will be the amount of the
option holder's exercise price for such shares. The excess of the fair market
value of the option shares at the time of exercise over the exercise price
will be treated as an item of adjustment, however, and such excess may be
taxed in the year of exercise under the alternative minimum tax provisions as
a result of such treatment. The fair market value of the option shares at the
time of exercise of the option will be the option holder's basis in the shares
for the alternative minimum tax computation in the year of disposition.
Options for shares which are exercisable for the first time by any
option holder during any calendar year which have an aggregate fair market
value in excess of $100,000 shall be treated as options which are not
"incentive stock options," in accordance with Section 422(d)(1) of the Code.
The option holder will recognize ordinary income at the time of exercise of
the options exceeding the $100,000 threshold and the Company will receive a
corresponding deduction. The amount of ordinary income recognized will be
equal to the excess, if any, of the fair market value of the shares underlying
such options on the exercise date over the exercise price for the shares.
Except as described below, the Company will not be allowed a deduction
for federal income tax purposes upon the grant or exercise of options under
the 1994 Plan or upon the sale of shares received upon exercise thereof. If
an option holder disposes of the shares purchased upon the exercise of an
option before the later of two years after the date of grant of the option or
one year after the exercise, the option holder will recognize ordinary income
at the time of disposition of the shares acquired on exercise. The amount of
ordinary income recognized will be equal to the excess, if any, of the fair
market value of the shares on the exercise date or the amount realized, if
less, over the exercise price for the shares. The Company may deduct an
amount equal to the taxable income so recognized by the option holder in the
taxable year the disposition occurred. Any excess amount realized will be
treated as gain from the sale of a capital asset under the rules described
above. If the holding period is met but the option holder was not an employee
of the Company at all times from the date of grant of the option until, in the
case of termination for reasons other than death or permanent disability, the
date three months prior to the date of exercise or, in the case of death or
permanent disability, the applicable date provided by the Code, the option
holder will recognize the excess of the fair market value of the shares over
the exercise price as ordinary income and the Company will receive a
corresponding deduction. The restrictions do not apply to the estate or heir
of a deceased option holder that exercises an option or holds shares acquired
upon exercise of an option.
<PAGE>
Options to be Granted under the 1994 Plan
Subject to Stockholder approval of the 1994 Plan, the Committee has
conditionally approved option grants thereunder for an aggregate of 40,000
shares of Common Stock to certain named executives and other key employees.
The terms of these new options will provide for vesting of 20% on each
anniversary of the grant date. The initial exercise price of the options will
be the closing sale price of the Company's Common Stock as reported on The
Nasdaq National Market on the date of the Annual Meeting in accordance with
the terms of the 1994 Plan. The last reported sale price of the Company's
Common Stock on The Nasdaq National Market through March 31, 1994, was
$[15.75].
The following table sets forth the number of new options conditionally
granted under the 1994 Plan to the named executives, all executive officers of
the Company as a group, and all employees other than executive officers as a
group. The Committee has not authorized any conditional option grants to Mr.
Harrison, but may consider granting options to Mr. Harrison later in 1994
subsequent to Stockholder approval of the 1994 Plan. Pursuant to the terms of
the 1994 Plan, the participants in the 1994 Plan and the number of options
granted thereto are subject to change in the discretion of the Committee.
Non-employee directors are not eligible to participate in the 1994 Plan.
NEW PLAN BENEFITS
Baldwin Piano & Organ Company
1994 Incentive Stock Option Plan
_________________________________________________________________
Number of
Name and Position Options to be Granted
_________________________________________________________________
Kenen M. Edgington 3,000
Executive Vice President
Harry F. Forbes, Jr. 3,000
Vice President, Treasurer and Secretary
Jimmie H. Smith 3,000
Vice President/Manufacturing
Charles R. Juengling 3,000
Vice President and Chief Financial Officer
Executive Group 29,000
(15 persons, including those named above)
Non-Executive Officer Employee Group 11,000
(8 persons)
The affirmative vote of a majority of the Company's outstanding Common
Stock is required to adopt the 1994 Plan. Any shares not voted (whether by
abstention, broker non-vote or otherwise) have the effect of a negative vote.
The Board of Directors recommends that Stockholders vote FOR the approval of
the Baldwin Piano & Organ Company 1994 Incentive Stock Option Plan.
<PAGE>
CERTAIN TRANSACTIONS AND PROCEEDINGS
Transactions with Trustmark National Bank
The Company currently maintains in its ordinary course of business a
banking relationship with Trustmark National Bank of Greenwood, Mississippi,
involving letters of credit and certain payroll processing. Cecil R. Burnham,
a current director of the Company during 1993, is the President of Trustmark
National Bank.
Business Relationships with Management
Joseph H. Head, Jr., a director of the Company, is a former partner in
the law firm of Graydon, Head & Ritchey, Cincinnati, Ohio. John J. Kropp, a
person deemed to be a beneficial owner of more than five percent of the
Company's Common Stock, is presently a partner in Graydon, Head & Ritchey.
During the year ended December 31, 1993, Graydon, Head & Ritchey provided
legal services to the Company. The fees paid by the Company to Graydon, Head
& Ritchey in 1993 did not exceed five percent of that firm's gross revenues
for its last full fiscal year. The Company anticipates that Graydon, Head &
Ritchey will continue to serve as its legal counsel in the future.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick to be the
independent auditors of the Company for the year ending December 31, 1994.
This selection will be submitted for ratification at the Annual Meeting.
Representatives of KPMG Peat Marwick are expected to be present at the Annual
Meeting. They will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
Ratification of the selection of auditors requires a majority of the
votes cast at the Annual Meeting. Any shares not voted (whether by
abstention, broker non-vote or otherwise) have no impact on the vote. The
Board of Directors recommends that Stockholders vote FOR ratification.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any Stockholder proposal intended for inclusion in the proxy material
for the 1995 Annual Meeting must be received in writing by the Company on or
before January 1, 1995. The inclusion of any proposal will be subject to
applicable rules of the Securities and Exchange Commission.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1993, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL
BE MAILED WITHOUT CHARGE TO STOCKHOLDERS UPON REQUEST. REQUESTS SHOULD BE
ADDRESSED TO THE COMPANY, 422 WARDS CORNER ROAD, LOVELAND, OHIO 45140-8390,
ATTENTION: MR. HARRY F. FORBES, JR., VICE PRESIDENT AND TREASURER. THE FORM
10-K INCLUDES CERTAIN EXHIBITS, WHICH WILL BE PROVIDED ONLY UPON PAYMENT OF A
FEE COVERING THE COMPANY'S REASONABLE EXPENSES.
<PAGE>
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
to come before the meeting. If any other matters should come before the
meeting, the persons named in the enclosed proxy intend to vote the proxy
according to their best judgment.
You are urged to complete, sign, date and return your proxy to make
certain your shares will be voted at the 1994 Annual Meeting. For your
convenience in returning the proxy, an addressed envelope is enclosed,
requiring no additional postage if mailed in the United States.
For the Board of Directors,
R. S. Harrison
---------------------------
R. S. HARRISON
Chief Executive Officer
</TABLE>
ANNEX I
BALDWIN PIANO & ORGAN COMPANY
1994 INCENTIVE STOCK OPTION PLAN
1. Effective Date.
This Plan known as the Baldwin Piano & Organ Company 1994
Incentive Stock Option Plan (the "1994 Plan") shall become effective May 10,
1994, the date fixed by the Board of Directors (the "Board") of Baldwin Piano
& Organ Company (the "Company"), subject to approval, on or before May 9,
1995, by the stockholders of the Company.
2. Purpose.
This 1994 Plan is to afford an incentive to corporate officers and
key managerial personnel of the Company and of any subsidiaries of the Company
to acquire a proprietary interest in the Company and to enable the Company and
its subsidiaries to attract and retain such officers and key managerial
personnel.
3. 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) "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.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
Any specific provisions of the Code referenced herein shall be
deemed to refer to corresponding provisions of any amendment,
revision, or successor of the Code or such provisions adopted in
lieu of the referenced provisions.
(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 1994
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.
<PAGE>
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder. Any specific provisions of the Exchange Act
referenced herein shall be deemed to refer to corresponding
provisions of any amendment, revision, or successor of the
Exchange Act or such provisions adopted in lieu of the referenced
provisions.
(f) "Exercise Date" shall mean the date that the Secretary of
the Company receives written notice from an option grantee that
the option grantee is exercising his or her right to purchase
shares of Common Stock underlying an option granted under this
1994 Plan.
(g) "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.
(h) "Grant Date" shall mean the date that the Committee approves
the granting of an option under this 1994 Plan.
(i) "Incentive Stock Option" shall mean an option which
qualifies as an incentive stock option under Section 422 of the
Code.
(j) "Parent Corporation" shall have the definition provided in
Section 424 of the Code.
(k) "Subsidiary Corporation" shall have the definition provided
in Section 424 of the Code.
4. Shares Available for Option Grants.
The shares of the Company's stock which may be optioned and sold
under this 1994 Plan shall not exceed 300,000 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. If for any reason an option under this 1994 Plan expires in
whole or in part prior to exercise, shares subject to such expired option may
again be subjected to an option under this 1994 Plan. The maximum annual
individual award of options is for the purchase of 10,000 shares of
Common Stock.
<PAGE>
5. Eligibility.
Options shall be granted only to key persons who on the Grant Date
are corporate officers or key managerial personnel of the Company or of any
Parent Corporation or Subsidiary Corporation of the Company, and who are
eligible under the Code to receive an Incentive Stock Option. The Committee
will determine the employees to whom options are to be granted and the number
of shares subject to each option. Participation in this 1994 Plan and the
exercise or non-exercise of any option granted are entirely voluntary on the
part of each employee to whom the option is offered.
Under the terms of Section 422 of the Code, an option may be
granted at any time prior to May 10, 2004; and an option may be exercised at
any time within ten years after the Grant Date of such option, except that an
option granted to any individual who owns more than ten percent of the value
of the total outstanding stock of the Company or of any Parent Corporation or
Subsidiary Corporation of the Company must be exercised within five years
after the Grant Date of such option. In determining stock ownership under
this Section 5 and under Section 6, the attribution rules of Section 424(d) of
the Code shall apply.
6. Exercise Price.
The price at which shares of Common Stock may be purchased under
the stock options granted hereunder shall be fixed by the Committee and shall
not be less than the following:
(a) 110% of the Fair Market Value on the Grant Date (but not less
than par value), with respect to an option granted to an
individual who owns more than ten percent of the value of the
total outstanding stock of the Company or of any Parent
Corporation or Subsidiary Corporation of the Company; or
(b) the Fair Market Value on the Grant Date (but not less than
par value), with respect to an option granted to individuals other
than those described in subsection (a).
7. Exercise of Option.
Options may be exercised from time to time by delivering to the
Secretary of the Company written notice of exercise stating the number of
shares of Common Stock with respect to which an option is being exercised.
Upon exercise, the exercise price shall be paid in full by (a) cash or check
payable to the Company, (b) delivery of shares of Common Stock, or (c) a
combination of both. The option grantee shall have the sole discretion as to
which of the foregoing payment methods shall be utilized in connection with
any exercise of an option. Payment by delivery of shares of Common Stock may
be made by (i) the delivery of Common Stock already owned by the option
grantee, or (ii) the exchange, in successive steps, of Common Stock to be
received from the exercise of the option, with the result that the option
grantee will receive from the exercise a net number of shares of Common Stock
represented by the difference between the total number of shares with respect
to which the option is being exercised and that number of shares the Fair
Market Value (determined as of the Exercise Date) of which is equal to that
portion of the price being paid by the delivery of shares of Common Stock.
<PAGE>
8. Withholding Taxes.
The Company or a Parent Corporation or Subsidiary Corporation of
the Company shall require a payment from an option grantee to cover applicable
withholding taxes. Upon the issuance of shares of Common Stock following an
option exercise, the Company shall retain or sell without notice the number of
shares of Common Stock otherwise to be issued to the option grantee which
shares have an aggregate Fair Market Value (determined by the Company as of
the Exercise 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
option grantee; provided, however, that upon providing written notice to the
Company no later than the Exercise Date, the option grantee 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. Time of Grant, Period of Options, and Right to Exercise.
Subject to the provisions and limitations of this 1994 Plan,
options may be granted by the Company at such time or times as may be
determined by the Committee during the period this 1994 Plan is in effect.
The time or times when options granted hereunder or portions thereof shall
become exercisable, the expiration dates of the options, the manner of their
exercise, and the terms of payment of the exercise price shall be as
determined by the Committee at or prior to the respective Grant Dates of the
options.
Prior to the expiration of the option, each option granted
hereunder shall be exercisable (a) during the lifetime of the option grantee
only by the option grantee (except as provided in the following paragraph),
and (b) while the option grantee is an employee of either the Company, a
Parent Corporation or Subsidiary Corporation of the Company, or a corporation
or Parent Corporation or Subsidiary Corporation of such corporation issuing or
assuming the option in a transaction to which Section 424(a) of the Code
applies, or within the three (3) month period immediately following the
termination of such employment for reasons other than death or permanent
disability (as defined in Section 22(e)(3) of the Code) or within the
applicable period provided by the Code for termination due to death or
permanent disability.
In the event of the death of an option grantee at a time when the
option grantee is entitled to exercise an option or any part thereof, the
option grantee's estate, or any person who acquires the right to exercise the
option grantee's option by bequest or inheritance or by reason of the option
grantee's death, shall have such rights to exercise the option grantee's
option as provided in the grant of the option to the option grantee as shall
be permissible in the case of Incentive Stock Options under the Code.
<PAGE>
10. Limitation on Exercisability.
The aggregate Fair Market Value (determined as of the Grant Date)
of the shares of Common Stock issuable pursuant to the Incentive Stock Options
granted under this 1994 Plan and under any other plan of the Company and any
Parent Corporation and Subsidiary Corporation of the Company which are
exercisable for the first time by any option grantee during any calendar year
shall not exceed $100,000. Options for shares which are exercisable for the
first time by any option grantee during any calendar year in excess of
$100,000 shall be treated as options which are not Incentive Stock Options, in
accordance with Section 422(d)(1) of the Code.
11. Non-Transferability.
Options granted hereunder shall be personal to the option grantee,
and shall be non-assignable and non-transferable otherwise than by will and by
the law of descent and distribution.
12. 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
exercise price under any option outstanding hereunder and the number of
shares as to which such option is then exercisable shall be appropriately
adjusted by the Committee at the time of the event such that the option
grantee'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 the future
granting of options under this 1994 Plan. Any such adjustment made by the
Committee pursuant to this 1994 Plan shall be binding upon the holders of all
unexpired option rights outstanding hereunder. The Company shall give to
each option grantee appropriate information as to any such adjustments.
13. Change in Control.
If a Change in Control of the Company occurs, the Committee shall
make arrangements for the substitution of new options for the options, or for
the assumption of the options, provided that such arrangements shall meet the
requirements of Section 424(a) of the Code. Notwithstanding the foregoing,
any outstanding options subject to vesting which have not fully vested as of
the date of a Change in Control shall automatically vest and become
immediately exercisable unless the option grantee agrees otherwise.
14. Administration.
This 1994 Plan shall be administered by the Committee, or, if no
Committee has been appointed by the Board, shall be administered by the Board.
No option grantee hereunder shall be a member of such Committee. All actions
of the Committee shall be subject to the approval of the Board.
<PAGE>
15. Form of Option.
Each option granted hereunder shall contain such 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 1994 Plan or with the provisions of
the Code dealing with Incentive Stock Options.
16. Duration and Amendment.
This 1994 Plan shall expire, unless sooner terminated by the
Board, on May 10, 2004. This 1994 Plan may be terminated at any time as to
all shares not then subject to outstanding options, by a resolution duly
adopted by the Board. Neither the expiration nor the termination of this 1994
Plan shall affect any option theretofore granted hereunder.
The Board may from time to time amend this 1994 Plan, except that:
(a) the Board may not cause this 1994 Plan, as amended, to fail
to qualify as a plan for the issuance of Incentive Stock Options
or to be inconsistent with the provisions of the Code dealing with
Incentive Stock Options; and
(b) when required by tax, securities, or other laws, the Board
must obtain the approval of the stockholders before the Board may:
(i) increase the maximum number of shares for which options
may be granted under this 1994 Plan, except as set forth in
Section 12 above;
(ii) change the class of employees eligible to receive
options;
(iii) change the limitation with respect to the minimum
price at which shares may be optioned; or
(iv) take any other action for which the applicable law
requires the approval of the stockholders.
Any amendment of this 1994 Plan shall apply to all options granted
on or after the date of such amendment. If such amendment were also applied
to options granted prior to the date of the amendment and would adversely
affect the rights of such option grantee, the amendment may be made with
regard to such prior options only with the consent of such option grantee.
17. Registration of Shares.
Each option shall be subject to the requirement that, if at any
time the Committee shall determine, in its discretion, that the listing,
registration, or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
option or the issue or purchase of shares thereunder, such option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained.
<PAGE>
18. Rule 16b-3 Savings Clause.
To the extent that they apply to persons subject to Section 16 of
the Exchange Act, transactions under this 1994 Plan are intended to comply
with all applicable conditions of Rule 16b-3 of the General Rules and
Regulations of the Exchange Act. Any provision of this 1994 Plan or action by
the Committee or the Board shall be interpreted, wherever possible, to comply,
and to the extent that it does not comply, it shall be deemed to be null and
void, to the extent permitted by law and deemed advisable by the Committee.
19. Notices.
All notices given, made, delivered, or transmitted to an option
grantee by the Company shall be deemed duly given when mailed first class
mail, postage prepaid, and addressed to the option grantee at the address last
appearing on the records of the Company. An option grantee may change the
address as shown on the records of the Company by giving written notice
thereof to the Company.
PROXY
BALDWIN PIANO & ORGAN COMPANY THIS PROXY IS SOLICITED
422 Wards Corner Road ON BEHALF OF THE
Loveland, Ohio 45140-8390 BOARD OF DIRECTORS
The undersigned hereby appoints Harry F. Forbes, Jr., Charles R. Juengling
and Thomas W. Kahle, or any of them, each with power of substitution, as
Proxies of the undersigned to attend the Annual Meeting of Stockholders of
Baldwin Piano & Organ Company (the "Company") to be held on Tuesday, May 10,
1994, at 11:00 a.m., Cincinnati time, at the Company's headquarters located at
422 Wards Corner Road, Loveland, Ohio and any adjournment or adjournments
thereof, and to vote the number of shares of the Company's Common Stock (par
value $.01 per share) which the undersigned would be entitled to vote if
personally present on the following matters:
1. Election of Directors
Vote for Five (5) Nominees to Serve as Directors of the Company for
the one-year term ending at the 1995 Annual Meeting of Stockholders.
Withhold Authority
Nominee For to Vote
------- --- ------------------
_____ _____
George E. Castrucci |_____| |_____|
_____ _____
R. S. Harrison |_____| |_____|
_____ _____
Joseph H. Head, Jr. |_____| |_____|
_____ _____
Roger L. Howe |_____| |_____|
_____ _____
Harry A. Shaw III |_____| |_____|
2. Adoption of 1994 Incentive Stock Option Plan
__ __ __
For |__| Against |__| Abstain |__| the adoption of the 1994 Incentive
Stock Option Plan.
3. Ratification of Auditors
__ __ __
For |___| Against |__| Abstain |__| the ratification of the selection
by the Board of Directors of KPMG Peat Marwick as auditors for the Company for
the fiscal year ending December 31, 1994.
<PAGE>
[Reverse Side]
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL NOMINEES LISTED IN PROPOSAL 1, "FOR" PROPOSALS 2 AND 3
AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
Dated ......................, 1994
[Stockholder's Name and Address as on Record Books]
__________________________________
__________________________________
(Please sign exactly as your name or names appear hereon. When shares are
held by joint tenants, both should sign. If signing as an attorney, executor,
administrator, trustee or guardian, give your full title as such. If signing
on behalf of a corporation, the full name of the corporation should be set
forth accompanied by the signature on its behalf of a duly authorized
officer.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENVELOPE
PROVIDED.
