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
September 30, 1995 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 November 1, 1995
is 3,415,196.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
September 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1995 and 1994
Notes to Condensed Consolidated Financial
Statements, September 30, 1995
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
September 30, 1995 and December 31, 1994
(in thousands of dollars)
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash ................................. $ 799 $ 344
Receivables, net ..................... 13,047 12,860
Inventories .......................... 47,606 47,036
Other current assets ................. 7,326 8,557
-------- -------
Total current assets ........... 68,778 68,797
-------- -------
Installment receivables,
less current portion ................. 9,911 8,621
Property, plant and equipment, net ...... 15,229 13,855
Other assets ............................ 6,650 6,187
-------- -------
Total assets ................... $100,568 $97,460
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .... $ 18,945 $16,746
Accounts payable ..................... 6,988 7,218
Income taxes payable ................. 1,634 1,522
Accrued liabilities .................. 7,206 6,871
-------- -------
Total current liabilities ...... 34,773 32,357
-------- -------
Long-term debt, less current portion .... 4,475 5,000
Other liabilities ....................... 8,850 9,949
-------- -------
Total liabilities .............. 48,098 47,306
-------- -------
Shareholders' equity:
Common stock ......................... 41 41
Additional paid-in capital ........... 12,002 12,002
Retained earnings .................... 46,634 44,318
-------- -------
58,677 56,361
Less cost of treasury shares ......... (6,207) (6,207)
-------- -------
Total shareholders' equity ..... 52,470 50,154
________ _______
Total liabilities and
shareholders' equity ........... $100,568 $97,460
======== =======
<FN>
<F1> See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except net earnings per share)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ...................... $26,519 $30,570 $86,967 $84,218
Cost of goods sold ............. 21,209 24,031 68,800 64,755
------- ------- ------- -------
Gross profit .......... 5,310 6,539 18,167 19,463
Income on the sale of
installment receivables ..... 1,280 1,186 3,752 3,827
Interest income on
installment receivables ..... 157 116 459 387
Other operating income, net .... 735 739 2,222 2,264
------- ------- ------- -------
7,482 8,580 24,600 25,941
Operating expenses:
Selling, general
and administrative ....... 5,741 6,616 18,709 20,196
Provision for
doubtful accounts ........ 234 324 731 984
------- ------- ------- -------
Operating profit ...... 1,507 1,640 5,160 4,761
Interest expense ............... 465 583 1,490 1,442
------- ------- ------- -------
Earnings before
income taxes ....... 1,042 1,057 3,670 3,319
Income taxes 371 385 1,353 1,269
------- ------- ------- -------
Net earnings .......... $ 671 $ 672 $ 2,317 $ 2,050
======= ======= ======= =======
Net earnings per share ......... $.20 $.20 $.68 $.60
==== ==== ==== ====
Average number of common
shares outstanding .......... 3,415 3,415 3,415 3,415
===== ===== ===== =====
<FN>
<FN1> See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30, 1995 and 1994
(in thousands of dollars)
<CAPTION>
INCREASE (DECREASE) IN CASH 1995 1994
- --------------------------- -------- --------
<S> <C> <C>
Net cash provided by
(used in) operating activities .......... $ 3,442 $(11,465)
Net cash used in investing activities ...... (3,033) (2,000)
Cash flows from financing activities:
Installment contract
receivables written ................. (43,627) (37,487)
Installment receivables liquidated ..... 4,139 3,359
Proceeds from sale of
installment receivables ............. 37,861 32,814
Borrowing under long-term debt ......... 1,673 14,194
Other .................................. -- (82)
-------- --------
Net cash provided by
financing activities ........... 46 12,798
-------- --------
Net increase (decrease) in cash ........... 455 (667)
Cash at beginning of period ............... 344 1,203
-------- --------
Cash at end of period ..................... $ 799 $ 536
======== ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
------------------------
Cash paid during the period for:
Interest ............................... $ 1,562 $ 1,295
======== ========
Income taxes ........................... $ 1,282 $ 2,183
======== ========
<FN>
<FN1> See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
______________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(in thousands of dollars)
(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
regulations of the Securities and Exchange Commission. Certain informa-
tion 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 misleading. 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,
1994.
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 nine month periods ended September 30, 1995 and 1994.
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>
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
FIFO cost:
Raw material .................... $ 13,019 $ 11,790
Work-in-process ................. 7,456 7,465
Finished goods .................. 38,525 38,325
-------- --------
59,000 57,580
Excess of FIFO cost
over LIFO inventory value ....... (11,394) (10,544)
-------- --------
Net inventories ............ $ 47,606 $ 47,036
======== ========
</TABLE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
1995 COMPARED TO 1994
Net earnings and net earnings per share of $.7 million and $.20,
respectively, for the three month period ended September 30, 1995 were the
same as the corresponding period in 1994. Net sales were down 13% for the
quarter compared to last year, $26.5 million from $30.6 million. Despite
lower sales, net earnings were comparable to 1994, primarily as a result
of reductions in selling, general and administrative expenses.
The majority of the sales decline in the third quarter of 1995 is a
result of the consolidation of Baldwin and Wurlitzer dealer networks. As
of June 1, 1995, discontinued dealers were notified that they had ninety
days to complete their termination with Baldwin. During this time, fewer
units were sold to these discontinued dealers while newly assigned dealers
were prohibited contractually from selling Wurlitzer products. In
addition, beginning September 1, Baldwin began shipping all Wurlitzer
products under its consignment program. Under this program, sales are
reported when the Company receives payment from a dealer rather than, as
Wurlitzer did, when the instruments were shipped to a dealer. The result
is a reduction in the sales reported in the current quarter compared to
the same quarter last year.
Net earnings for the first nine months of 1995 increased 13% to $2.3
million ($.68 per share) from $2.1 million ($.60 per share) in 1994. The
increase in net earnings was a result of reductions in selling, general
and administrative expenses, partially offset by higher production costs
in the keyboard instrument business and an increased percentage of sales
coming from furniture and music contracting businesses which carry a lower
margin. Net sales for the first nine months of 1995 increased 3% to $87.0
million from $84.2 million in 1994, reflecting increases in contract
electronics, contract music and furniture, and church organs.
Gross profit for the three months ended September 30, 1995, declined
from the comparable period in 1994 primarily as a result of the decline in
sales. The decline in gross profit for the first nine months of 1995 is
a result of higher production costs in the keyboard instrument business
and an increased percentage of sales coming from furniture and music
contracting businesses which carry a lower margin.
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 nine months ended September 30, 1995 is $.3 million and $.9 million
less than the amounts that would have been presented had the first-in,
first-out (FIFO) method been used.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
Income on the sale of installment receivables generated by the
Company's financing operation for the three months ended September 30,
1995, increased 8% over the previous year due to a higher receivable
portfolio, more than offsetting the effects of higher interest costs.
Income on the sale of installment receivables for the nine months ended
September 30, 1995, was slightly lower than the previous year due to
higher interest costs.
Selling, general and administrative expenses decreased $.9 million
and $1.5 million for the three months and nine months ended September 30,
1995, respectively, from the comparable periods in 1994. The reductions
for the three months ended September 30, 1995, relate primarily to closing
Baldwin's retail locations in Chicago and the consolidation of the Baldwin
and Wurlitzer dealer networks.
The provision for doubtful accounts declined $.1 million and $.3
million for the three months and nine months ended September 30, 1995,
respectively, from the comparable periods in 1994. This decline is due to
continued reductions in losses experienced.
Interest expense for the third quarter ended September 30, 1995,
decreased $.1 million from the comparable period in 1994 due to reduced
average borrowing.
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
efficiencies.
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 material. 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.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
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 earns interest on the outstanding principal balance of the
contracts based upon a floating interest rate provision.
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. In December 1994, the Company
entered into a two year interest rate modification agreement to reduce the
potential impact of increases in interest rates on $40.0 million of
floating-rate long-term debt. The agreement entitles the Company to
receive from the counterparty, on a monthly basis, interest income to the
extent the one-month commercial paper rate exceeds 12%. The Company is
exposed to credit losses in the event of non-performance by the counter-
party to its interest rate cap, but has no off-balance sheet credit risk
of accounting loss. The Company anticipates, however, that the counter-
party will be able to fully satisfy their obligations under the contract.
The Company does not obtain collateral or other security to support
financial instruments subject to credit risk but monitors the credit
standing of the counterparty.
Effective February 15, 1994, the annual rate of interest under the
revolving line of credit (Revolver) is 150 basis points plus the greater
of the LIBOR on three month deposits or the rate on 60 day high grade
commercial paper. As of September 30, 1995, the interest rate was 7.47%.
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 to its 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 its 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.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
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 September 30, 1995, the Company had
approximately $21.6 million of additional borrowing available under this
line of credit.
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 September 30,
1995, approximately $16.6 million 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 is in
compliance with these covenants.
In December 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 $82.0 million from $72.0
million. 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. In February 1994, Finance entered into a five
year interest rate modification agreement on $20.0 million 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%. Finance is exposed to credit
losses in the event of non-performance by the counterparty to its interest
rate swap, but has no off-balance sheet credit risk of accounting loss.
Finance anticipates, however, that the counterparty will be able to fully
satisfy their obligations under the contract. Finance does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of the counterparty.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------------------------------
Proceeds from sale of installment receivables amounted to $37.9
million for the first nine months of 1995 compared to $32.8 million for
the same period of 1994.
Under the sale agreements, Finance is required to repurchase accounts
that become more than 120 days past due or accounts that are deemed
uncollectible. 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 approximate-
ly $68.7 million of installment receivables as of September 30, 1995. The
Company believes the financial statements contain adequate reserves for
any uncollectible installment receivables.
Certain former Wurlitzer dealers financed their inventory with floor
plan loans from an independent bank. Those dealers were permitted to
borrow money from the bank based upon the value of the inventory purchased
from Wurlitzer, with the keyboard instruments pledged as collateral. The
dealers had $4.6 million outstanding under this floor plan arrangement, as
of September 30, 1995. 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 the Company to
repurchase notes due from delinquent dealers. The Company believes the
financial statements contain adequate provisions for any loss that may be
incurred as a result of this commitment.
In the third quarter of 1995, the Company consolidated its indepen-
dent Baldwin and Wurlitzer sales organizations into one, representing both
brands to the dealers. In parallel, the Baldwin and Wurlitzer dealer
networks were combined, reducing the overall number of dealers carrying
the Baldwin and Wurlitzer brands. The effect of these changes reduced
overall overhead.
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 $12.4 million in dollar value. From the date the plan was
adopted in November 1987 through November 1, 1995, the Company has
repurchased 701,300 shares of its common stock at an aggregate purchase
price of $5.7 million under the plan.
Capital expenditures amounted to $3.0 million in the first nine
months of 1995 and $2.0 million in the comparable period of 1994. At
September 30, 1995, 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
shareholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not in default nor has it defaulted on any indebted-
ness. The Company is not obligated to pay any dividends or other payment
to any of its shareholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during
the third quarter of 1995.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Distribution Agreement between Baldwin Piano & Organ
Company and GeneralMusic S.p.A. dated as of
July 1, 1995.
19.1 1995 Third Quarter Report to Shareholders of the
Company.
27.1 Financial Data Schedule.
99.1 Press Release dated October 20, 1995.
------------------------------
Index to Exhibits appears on sequentially numbered page 14.
(b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the third
quarter of 1995.
<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: November 6, 1995 BY: KAREN L. HENDRICKS
------------------------- ------------------------------
Karen L. Hendricks, Chief
Executive Officer and
President
DATE: November 6, 1995 BY: CHARLES R. JUENGLING
------------------------- ------------------------------
Charles R. Juengling, Vice
President/Treasurer/Secretary
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
10.1 Distribution Agreement between
Baldwin Piano & Organ Company
and GeneralMusic S.p.A. dated
as of July 1, 1995.
19.1 1995 Third Quarter Report to
Shareholders of the Company.
99.1 Press Release dated
October 20, 1995.
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 798,599
<SECURITIES> 0
<RECEIVABLES> 17,389,596
<ALLOWANCES> 4,342,157
<INVENTORY> 47,606,205
<CURRENT-ASSETS> 68,778,376
<PP&E> 30,761,751
<DEPRECIATION> 15,533,179
<TOTAL-ASSETS> 100,568,489
<CURRENT-LIABILITIES> 34,773,250
<BONDS> 5,000,000
<COMMON> 41,649
0
0
<OTHER-SE> 52,428,220
<TOTAL-LIABILITY-AND-EQUITY> 100,568,489
<SALES> 86,966,711
<TOTAL-REVENUES> 93,399,524
<CGS> 68,800,289
<TOTAL-COSTS> 68,800,289
<OTHER-EXPENSES> 18,708,922
<LOSS-PROVISION> 731,173
<INTEREST-EXPENSE> 1,490,335
<INCOME-PRETAX> 3,668,805
<INCOME-TAX> 1,353,000
<INCOME-CONTINUING> 2,315,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,315,805
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
BALDWIN
THIRD QUARTER REPORT 1995
TO OUR SHAREHOLDERS
November 1, 1995
Third quarter net earnings of $.7 million were the same as third quarter
1994. Net sales were down 13% for the quarter compared to last year, $26.5
million from $30.6 million. Despite lower sales, Baldwin achieved third
quarter earnings comparable to 1994, primarily as a result of reductions in
selling, general and administrative expenses.
The majority of the sales decline in the third quarter of 1995 is a result
of the consolidation of Baldwin and Wurlitzer dealer networks. As of June 1,
discontinued dealers were notified that they had ninety days to complete their
termination with Baldwin. During this time, fewer units were sold to these
discontinued dealers while newly assigned dealers were prohibited
contractually from selling Wurlitzer products. In addition, beginning
September 1, Baldwin began shipping all Wurlitzer products under its
consignment program. Under this program, sales are reported when the Company
receives payment from a dealer rather than, as Wurlitzer did, when the
instruments were shipped to a dealer. The result is a reduction in the sales
reported in the current quarter compared to the same quarter last year.
Net earnings for the first nine months of 1995 increased 13% to $2.3 million
from $2.1 million in 1994. The increase in net earnings is a result of
reductions in selling, general and administrative expenses, partially offset
by higher production costs in the keyboard instrument business and an
increased percentage of sales coming from furniture and music contracting
businesses which carry a lower margin. Net sales for the first nine months
of 1995 increased 3% to $87.0 million from $84.2 million in 1994, reflecting
increases in contract electronics, contract music and furniture, and church
organs.
We're encouraged by our improvements in cost control. However, we recognize
the importance of profitable sales growth for our business success, a key
area of our focus.
KAREN L. HENDRICKS
Chief Executive Officer and President
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY OF EARNINGS (unaudited)
(in thousands, except net earnings per share)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------ ------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 26,519 $ 30,570 $ 86,967 $ 84,218
Cost of goods sold 21,209 24,031 68,800 64,755
- ---------------------------------------------------------------------------------------------------------
Gross profit 5,310 6,539 18,167 19,463
Income on the sale of installment receivables 1,280 1,186 3,752 3,827
Interest income on installment receivables 157 116 459 387
Other operating income 735 739 2,222 2,264
Selling, general and administrative expenses (5,975) (6,940) (19,440) (21,180)
Interest expense (465) (583) (1,490) (1,442)
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,042 1,057 3,670 3,319
Income taxes 371 385 1,353 1,269
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 671 $ 672 $ 2,317 $ 2,050
=========================================================================================================
Net earnings per share $ .20 $ .20 $ .68 $ .60
=========================================================================================================
Average number of shares outstanding (000) 3,415 3,415 3,415 3,415
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS (unaudited)
(in thousands)
<CAPTION>
September 30,
------------
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Receivables, net $ 13,047 $ 12,168
Inventories 47,606 54,500
Other current assets 8,125 8,642
Total current assets 68,778 75,310
Installment receivables, less current portion 9,911 7,954
Property, plant and equipment, net 15,229 13,957
Other assets 6,650 5,947
- ----------------------------------------------------------------------------
Total assets $ 100,568 $ 103,168
============================================================================
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 18,945 $ 24,877
Other current liabilities 15,828 13,182
- ----------------------------------------------------------------------------
Total current liabilities 34,773 38,059
Long-term debt, less current portion 4,475 5,000
Other liabilities 8,850 8,249
Shareholders' equity 52,470 51,860
- ----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 100,568 $ 103,168
============================================================================
</TABLE>
<PAGE>
BUSINESSES
- ----------------------------------------------------------------------------
MANUFACTURING
Acoustic pianos and electronic keyboards
Actions, cabinets, pinblocks, bridges, cables, keys, etc. for piano industry
Printed circuit boards and electro-mechanical assemblies for manufacturers
outside music industry
Variety of wood products
RETAILING
Company owned outlets in Atlanta, Georgia; Cincinnati, Ohio;
Indianapolis, Indiana; Lexington and Louisville, Kentucky
Independent keyboard dealers (425)
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 of Piano with caption: Wurlitzer Console Piano
EXHIBIT 99.1
BALDWIN
Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, Ohio 45140-8390
(513) 576-4500
FOR IMMEDIATE RELEASE
- ---------------------
LOVELAND, OHIO, OCTOBER 20, 1995 - Baldwin Piano & Organ Company reports third
quarter net earnings of $.7 million ($.20 per share), the same as 1994 third
quarter. Net sales were down 13% for the quarter compared to last year, $26.5
million from $30.6 million. Despite lower sales, Baldwin achieved third
quarter earnings comparable to 1994, primarily as a result of reductions in
selling, general and administrative expenses.
The majority of the sales decline in the third quarter of 1995 is a result of
the consolidation of Baldwin and Wurlitzer dealer networks. As of June 1,
1995, discontinued dealers were notified that they had ninety days to complete
their termination with Baldwin. During this time, fewer units were sold to
these discontinued dealers while newly assigned dealers were prohibited
contractually from selling Wurlitzer products. In addition, beginning
September 1, Baldwin began shipping all Wurlitzer products under its
consignment program. Under this program, sales are reported when the Company
receives payment from a dealer rather than, as Wurlitzer did, when the
instruments were shipped to a dealer. The result is a reduction in the sales
reported in the current quarter compared to the same quarter last year.
Net earnings for the first nine months of 1995 increased 13% to $2.3 million
($.68 per share) from $2.1 million ($.60 per share) in 1994. The increase in
net earnings is a result of reductions in selling, general and administrative
expenses, partially offset by higher production costs in the keyboard
instrument business and an increased percentage of sales coming from furniture
and music contracting businesses which carry a lower margin. Net sales for
the first nine months of 1995 increased 3% to $87.0 million from $84.2 million
in 1994, primarily reflecting an increase in outside contracting businesses.
...Continued
<PAGE>
Page 2
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(in thousands, except September 30, September 30,
net earnings per share) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $26,519 $30,570 $86,967 $84,218
Cost of goods sold 21,209 24,031 68,800 64,755
------- ------- ------- -------
Gross profit 5,310 6,539 18,167 19,463
Income on the sale of
installment receivables 1,280 1,186 3,752 3,827
Interest income on
installment receivables 157 116 459 387
Other operating income 735 739 2,222 2,264
Selling, general and
administrative expenses (5,975) (6,940) (19,440) (21,180)
Interest expense (465) (583) (1,490) (1,442)
------- ------- ------- -------
Earnings before
income taxes 1,042 1,057 3,670 3,319
Income taxes 371 385 1,353 1,269
------- ------- ------- -------
Net earnings $ 671 $ 672 $ 2,317 $ 2,050
======= ======= ======= =======
Net earnings per share $.20 $.20 $.68 $.60
==== ==== ==== ====
Average number of
shares outstanding 3,415 3,415 3,415 3,415
===== ===== ===== =====
</TABLE>
Baldwin Piano & Organ Company has manufactured and marketed keyboard musical
products over 130 years. The market leader of acoustic pianos in the United
States, Baldwin also manufactures electronic and electro-mechanical components
for Original Equipment Manufacturers.
###
CONTACT: Charles Juengling (513) 576-4522
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
AND
GENERALMUSIC S.p.A.
DISTRIBUTION AGREEMENT
This Agreement is made effective as of July 1, 1995, and is
entered into between Baldwin Piano & Organ Company ("Baldwin"),
with its principal office at 422 Wards Corner Road, Loveland, Ohio
45140-8390, and GeneralMusic S.p.A., with its principal office at
Via delle Rose 12, 47048 S. Giovanni in Marignano (FO) ITALY
("GM").
W I T N E S S E T H
WHEREAS, Baldwin has for many years been engaged in the
business of marketing electronic and acoustic pianos and organs;
and
WHEREAS, GM manufactures lines of electronic musical
instruments and desires to appoint Baldwin as its exclusive
distributor in the Territory (as defined below) for the Products
(as defined below);
WHEREAS, Baldwin desires to become the exclusive distributor
for GM and to market the Products in the Territory;
WHEREAS, Baldwin and GM desire to enter this Agreement to
define the terms of their business relationship.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and for other good and valuable consideration,
Baldwin and GM agree as follows:
Article 1 - Products
1. The word "Products" used herein shall mean the following items
from GM's line of electronic pianos: the PS, RP, GRP and GWS
series products, and any products hereafter introduced by GM which
are similar to or in replacement for any such items; it being
understood and agreed by Baldwin that GM will not begin to ship any
RP Products until June 30, 1995 nor ship any GRP Products until
October 31, 1995. "Products" shall also include the software for
the Products. The Products shall bear the "Baldwin" and/or
"Pianovelle" name and/or such other names as Baldwin may designate
from time to time. The Products shall also contain GeneralMusic's
logo or such other designation as Baldwin and GM shall agree.
Product Specifications for the Products (hereinafter "Product
Specifications") are as referenced in Appendix II attached hereto.
The Production Specifications have been reviewed and agreed to by
both GM and Baldwin.
<PAGE>
2. Products shall not include GM's keyboards and modules for the
home and/or professional market (other than 76 note and 88 note
weighted keyboards with patterns as provided below in this Article
1, subsection 2), workstations, professional electronic pianos, or
GM's home or church organs (including, without limitation, the line
of church organs presently distributed by GM in the United States
through Galanti Organ Builders, Inc. and its dealership network).
Such excluded products are sometimes collectively referred to
hereinafter as the "Excluded Instruments". Notwithstanding
anything in the previous sentence to the contrary, GM understands
and agrees that Baldwin shall be presumed to have the exclusive
right to sell all 76 note and 88 note weighted keyboards and
electronic pianos with patterns, and that any professional
electronic piano with built in patterns shall be presumed not to be
an Excluded Instrument unless Baldwin consents in advance in
writing (which consent shall not be unreasonably withheld). GM
agrees that it will inform Baldwin of any plans by GM to develop a
professional product with built-in patterns and to work with
Baldwin in good faith to design any such professional products so
not to be competitive with the Products. GM and Baldwin further
agree that if they cannot agree on the specifications for a
professional product that would not compete with the Products, then
the matter shall be resolved in an arbitration proceeding conducted
pursuant to Article 3, subsection 4. GM further understands and
agrees that GM's CD portable series, 61 note keyboards with
patterns, WX modules and WX2 series keyboards shall be deemed
Excluded Instruments only upon such time as provided in Article 3,
subsection 4.
Article 2 - Sale of Products
GM agrees to sell and Baldwin agrees to buy and distribute Products
subject to the terms and conditions of this Agreement. This
Agreement supersedes any terms printed on the back of any Baldwin
purchase order for Products to be supplied hereunder to the extent
that this Agreement and such purchase order terms may be
inconsistent with each other.
Article 3 - Exclusive Distributor
1. GM hereby appoints Baldwin as its exclusive distributor of
Products within the United States, (including Alaska and Hawaii),
Canada, the Virgin Islands, Puerto Rico and Guam (the "Territory"),
with the exclusive right to distribute, market and sell Products in
the Territory. During the term of this Agreement, GM agrees not to
appoint any other entity or individual as a distributor of Products
within the Territory, nor shall it, directly or indirectly, sell or
distribute Products within the Territory. Baldwin shall distribute
Products through its dealer network, as now or hereafter
constituted. Baldwin further agrees that it will not sell any
Products outside of the Territory unless GM agrees in advance in
writing.
<PAGE>
2. Except as contemplated by Article 3, subsection 4 and Articles
13 and 18, nothing in this Agreement shall be construed to: (i)
restrict Baldwin from developing or from marketing or distributing
through its dealer network any Baldwin instruments or products that
do not directly compete with the Products in the Territory (e.g.
Baldwin may sell acoustic pianos, classical and church organs and
music lab products without restriction); (ii) restrict Baldwin,
through its dealer network, from marketing or distributing outside
the Territory any Baldwin instruments or products whatsoever,
whether now existing or developed hereafter, acoustical or digital,
whether or not such instruments or products compete with the
Products; (iii) provided that GM has consented in advance in
writing (which consent shall not be unreasonably withheld),
restrict Baldwin from marketing or distributing within the
Territory, through its dealer network, any new digital instruments
or products developed by Baldwin; (iv) restrict Baldwin from
liquidating its inventories of GM's CD portable series, 61 note
keyboards with patterns, WX modules and WX2 series keyboards as
contemplated by Article 3, subsection 4; or (v) restrict Baldwin's
sale of the Wurlitzer "ButterFly" digital grand piano on or before
December 31, 1995, it being understood and agreed that after such
date neither Baldwin nor Wurlitzer will ship additional "ButterFly"
digital grand pianos unless agreed in advance in writing by GM,
provided, however, that at all times Baldwin and Wurlitzer dealers
may continue to sell such "ButterFly" grand pianos held in their
inventory until such inventories are exhausted.
3. Except as contemplated by Article 3, subsection 4, and
Articles 13 and 18, nothing in this Agreement shall be construed
to: (i) restrict GM's right to sell the Products outside of the
Territory, it being specifically understood and agreed by GM that
GM has no right to use the "Baldwin", "Pianovelle" or "Wurlitzer"
name or any other trademark, tradename or other logo owned,
licensed or used by Baldwin in connection with any such sales and
that no such name, trademark, tradename or logo shall appear on
such Products; or (ii) restrict GM's rights to sell in the
Territory any items it manufactures or distributes which are not
within the definition of Products; (iii) restrict GM from
developing any new instruments or products, acoustical and digital,
or from marketing or distributing any such new instruments or
products outside the Territory, whether or not such items compete
with the Products; or (iv) restrict GM's right to service any of
the items in Article 5.1(e).
4. In the event that GM and Baldwin disagree as to whether an
instrument or product manufactured or sold by the other competes
with any of the Products and may be sold in the Territory, GM and
Baldwin hereby agree that a panel of three arbitrators shall be
selected as provided herein, that such panel shall determine
whether such new instrument or product competes with any of the
Products, and that such decision (which shall be made by a majority
vote of the panel) shall be binding upon GM and Baldwin for all
purposes of this Agreement. Each of GM and Baldwin agree that it
shall provide all information to such arbitrators as the
arbitrators may request in order to reach a determination and that
the procedure selected by the arbitrators for conducting the
arbitration process shall be adhered to by it.
<PAGE>
The arbitrators to be utilized pursuant to this Article 3,
subsection 4, shall be individuals who are reasonably knowledgeable
of the music and keyboard industry but may not be shareholders,
directors, officers, employees, agents, dealers or otherwise
affiliated with or at any time employed by either GM or Baldwin.
Each of GM and Baldwin shall select one arbitrator to serve on such
panel within fifteen days of such time that either Baldwin or GM
first makes a written demand upon the other that arbitration is
desired pursuant to this subsection. The two arbitrators so
selected shall then select the third arbitrator within fifteen days
of the date that the first two arbitrators are so chosen. Once the
panel of arbitrators is selected, such panel shall determine the
time, place and manner in which the arbitration shall be conducted
subject only to the requirement that a final decision be reached
within thirty days of the full panel being selected. Each of GM
and Baldwin shall pay all costs and expenses of the arbitrator
selected by it and shall each pay one half the costs and expenses
of the third arbitrator.
To allow Baldwin and Wurlitzer the opportunity to liquidate
all of their inventories of GM's CD portable series, 61 note
keyboards with patterns, WX modules and WX2 series keyboards
existing as of the date of this Agreement, including all quantities
of such items on consignment or otherwise held for sale by Baldwin
and Wurlitzer dealers, GM will not commence its sale in the
Territory of its CD portable series, 61 note keyboards with
patterns, WX modules, WX2 keyboards and/or any replacement models
for any of the foregoing products and instruments described in this
paragraph (including but not limited to GM's anticipated K4
keyboard intended as a replacement for the WX2 keyboard) until the
earlier of (a) the sale of all such inventories by Baldwin and
Wurlitzer, (b) the purchase by GM at Baldwin's landed cost of such
inventories from Baldwin and Wurlitzer pursuant to Article 10,
subsection 2, or (c) September 1, 1995 for the CD line of
instruments and October 1, 1995 for the WX line of instruments.
Thereafter, GM may sell such CD and WX instruments and products
without restriction. In the event that by October 1, 1995 Baldwin
has not liquidated all such inventories and GM has not purchased
all such inventories, Baldwin may thereafter continue to sell such
remaining inventories in the Territory notwithstanding that GM will
also be free to sell such products and instruments, and the
replacement models therefor, within and outside of the Territory.
However, unless and until Baldwin and Wurlitzer have sold all of
their inventories of CD and WX instruments, GM will sell in the
Territory only the replacement models for such instruments.
5. Baldwin further agrees that neither Baldwin nor any of its
subsidiaries or affiliates will extend any offer of employment or
employ Chris Anthony, GM's product specialist, without the prior
approval of GM.
<PAGE>
Article 4 - Duties of Baldwin
As the exclusive distributor of Products within the Territory,
Baldwin agrees to perform the activities normally performed by a
distributor. Specifically, in such capacity, Baldwin shall:
(a) use its reasonable best efforts to promote the sale of
all of the Products within the Territory through its dealer and
sales network;
(b) maintain an adequate sales and distribution network and
warehouse facilities;
(c) use its reasonable best efforts to require its dealers
who sell Products to maintain adequate inventories of Products;
(d) provide suggestions to GM regarding Product modifications
or new product development; and
(e) provide product service support required after the sale
of Products.
Article 5 - Duties of GM
1. GM agrees to perform the activities normally performed by a
manufacturer. Specifically, GM shall:
(a) provide such technical assistance as may be requested by
Baldwin in connection with the sale and servicing of Products;
(b) publish, in English, in French and in Spanish (if French
and/or Spanish, respectively are available), GM's standard owners
and technical manuals and standard promotional materials (other
than product brochures which Baldwin may produce on its own and at
its own expense), provided that Baldwin shall keep such technical
material confidential except where its dissemination is necessary
for the sale or service of Products;
(c) forward to Baldwin, in a timely manner, all inquiries,
leads and responses to advertising relating to Products from
potential customers located within the Territory;
(d) consult in good faith with Baldwin regarding Baldwin
suggestions related to Product modifications or new product
development;
(e) reimburse Baldwin for any costs (including parts and
labor) incurred by Baldwin in servicing items sold by GM prior to
the date of this Agreement which items otherwise would have
constituted Products for purposes of this Agreement, provided that
GM requests or authorizes such service prior to Baldwin performing
same and provided, further, that items sold by GM to Wurlitzer
under the Distribution Agreement described in Article 30 shall
continue to be subject to the warranty provisions of that Agreement
notwithstanding the termination of that Agreement;
<PAGE>
(f) use its best efforts to fill the orders made by Baldwin
for Products pursuant to the procedures described in Appendix I
hereof;
(g) provide to Baldwin reasonable technical assistance,
including access, at mutually convenient times, to a dedicated
project engineer located at GM's manufacturing facility;
(h) provide, at GM's expense, the services of one of GM's
product specialists to assist Baldwin in servicing the home market
during each year that this Agreement remains in force as provided
in Article 5, subsection 2, such dates to be acceptable to Baldwin,
GM and such specialist and such services to be provided at the
locations specified by Baldwin from time to time, it being agreed
by Baldwin that GM shall use its best efforts to work with Baldwin
to provide such services in the locations desired by Baldwin but
that GM shall not be obligated to arrange for such specialist to be
at a certain location unless Baldwin has provided GM with 60 days
advance notice of the location desired, and provided, further, that
GM's product specialist's out of pocket disbursements shall be paid
for by Baldwin, including travel expenses (it being understood that
GM shall provide the services of the product specialist located
nearest to the location specified by Baldwin and that if such
specialist is unavailable so that GM desires to send a more distant
specialist to the desired location, then Baldwin shall have the
option of either paying the entire travel expense of such distant
specialist or Baldwin may cancel or reschedule its request for a
product specialist in the designated location); and
(i) within thirty (30) days hereof, and at least every ninety
(90) days thereafter, provide Baldwin with a listing of current and
proposed Products, including product descriptions, prices or
estimated prices and the anticipated timing to bring such products
to the market.
2. For purposes of Article 5, subsection 1(h), GM shall provide
the services of its product specialists for a minimum of 30 days
during the first year of this Agreement. In each subsequent year,
GM shall provide the services of its product specialists based upon
the dollar amount of Products purchased by Baldwin pursuant to this
Agreement in the immediately preceding year and that Baldwin shall
be entitled to ten days of services of GM's product specialists for
each $1,000,000 of Products purchased by Baldwin (e.g. if Baldwin's
purchases of Products equal $8,000,000 in the third year, then GM
shall make its product specialists available for 80 days in the
fourth year). In the event that Baldwin's purchases would exceed
$3,000,000 prior to the end of the first year, GM shall also
provide additional services of its product specialists during the
first year on this same basis.
<PAGE>
Article 6 - Product Development
1. GM agrees to use its reasonable best efforts to perform the
development services described herein (the "Services"), including
but not limited to those development services set forth in Article
6, subsection 2, which are directed towards the development of
enhanced digital piano products to be sold by Baldwin as Products
within the Territory. In addition to the Services specified in
subsection 2 below, GM also agrees that it will continue its
individual efforts to develop new products and that GM will seek to
introduce a new generation of digital products no less than every
eighteen to twenty four months during the term of this Agreement.
2. GM agrees that commencing with the effectiveness of this
Agreement, GM will use its reasonable best efforts to undertake the
following product enhancements and introductions:
(a) to produce an entry level slab version digital piano
(with optional stand);
(b) to incorporate the Barcus-Berry and IMX sound enhancement
circuits in certain Products to be agreed upon by Baldwin and GM;
(c) to place the Baldwin and Pianovelle name on all new
digital pianos constituting Products sold to Baldwin pursuant to
this Agreement;
(d) subject to receipt by GM of all necessary information
from Baldwin including the decoding process described in Article 6,
subsection 3(c), to incorporate into all Pianovelle Products with
built-in high density disk drives the ability to read PianoDisc,
Disklavier and Clavinova files in addition to standard midi files;
(e) to incorporate Baldwin's custom rhythms into as many
Products as possible as agreed upon by Baldwin and GM;
(f) to allow Baldwin to incorporate the R.P. piano sound in
the development of Baldwin's silent series acoustic pianos and to
assist Baldwin as requested in such process, provided that any such
systems developed or owned by GM shall be available to GM for
incorporation by GM into other products not subject to this
Agreement and GM's right to do so shall survive termination of this
Agreement;
(g) to work with Baldwin to simplify the user interface of
all Products, both current and future models; and
(h) to develop prototype models that may be displayed at the
January, 1996 NAMM show of instruments that implement Baldwin's
proposals described in clauses (d) and (e).
<PAGE>
3. Baldwin agrees that commencing with the effectiveness of this
Agreement, Baldwin will assist GM in accomplishing the items set
forth in subsection 2 above by undertaking the following actions:
(a) to consider using one chip (64 note polyphony) in model
two (RPI version) product offerings and the most economical chip(s)
in model one (slab version) product offerings, to stay consistent
with GM's future Product line;
(b) to provide GM with a schematic and component box for
incorporating the Barcus-Berry and IMX circuits;
(c) to provide GM, for use in Baldwin Products only, with the
ENSONIQ decoding process for the ability to read competitive files,
in accordance with the Confidentiality and Non-Competition
Agreement dated as of July 1, 1995 among Baldwin, GM and ENSONIQ;
(d) to make Baldwin's custom rhythms available for GM's use
in Baldwin Products only; and
(e) to work with GM to simplify the user interface of all
Products, both current and future models.
GM agrees that it shall not use any of the technology,
software, hardware, trade secrets, know-how or other proprietary
information provided to it by Baldwin, whether or not such
technology, software, hardware, trade secrets, know-how or other
proprietary information is owned or licensed by Baldwin, and not
previously known by, subsequently developed by or otherwise made
available to GM from other sources, for any purpose other than as
specifically set forth in this Agreement or otherwise expressly
agreed to in writing by Baldwin.
Baldwin agrees that it shall not use any of the technology,
software, hardware, trade secrets, know-how or other proprietary
information provided to it by GM, whether or not such technology,
software, hardware, trade secrets, know-how or other proprietary
information is owned or licensed by GM, and not previously known
by, subsequently developed by or otherwise made available to
Baldwin from other sources, for any purpose other than as
specifically set forth in this Agreement or otherwise expressly
agreed to in writing by GM.
Article 7 - Marketing
1. As provided in this Article 7, subsection 1, GM agrees to
contribute to Baldwin's advertising within the Territory for the
Products with an advertising campaign to be mutually agreed upon.
Baldwin will direct the development and placement for such
advertisements. In the first year of this Agreement, subsequent to
Baldwin's purchase and payment of $500,000 of Products, GM will
contribute an amount equal to the amount expended by Baldwin, up to
a maximum contribution by GM of $50,000. In each subsequent year,
GM will contribute an amount equal to the amount expended by
Baldwin, up to a maximum contribution by GM equal to the lesser of
$50,000 or 1% of the dollar amount of Products purchased and paid
for by Baldwin in the year most recently ended.
<PAGE>
2. Each of Baldwin and GM will make periodic marketing visits to
the other's facilities at times mutually agreed upon. The
traveling party shall be responsible for its own travel expenses
except that the host company shall provide lodging accommodations.
Article 8 - Quantity
1. As of the date hereof, Baldwin represents to GM that Baldwin
has a good faith, reasonable belief that Baldwin will place orders
to purchase not less than U.S. $5,700,000 (the "Minimum Order") of
Products during the first twenty four months of this Agreement, in
the quantity and on the delivery dates as set forth in Appendix I
consistent with Baldwin's Initial Forecast (as defined in Article
19). Baldwin further represents to GM that Baldwin has a good
faith, reasonable belief that during the first twenty four months
of this Agreement, Baldwin will place orders amounting in the
aggregate to no less than the Minimum Order as follows: Through
the first six months, a total of $500,000 of Products; through the
first twelve months, a total of $1,700,000 of Products; and through
the first eighteen months, a total of $3,400,000 of Products (the
"Incremental Orders"). Baldwin shall place firm orders from time
to time through delivery of its purchase orders to GM in accordance
with the procedures established in Appendix I (hereinafter
"Orders"). In the event that Baldwin fails to purchase Products in
the first twenty four months of this Agreement having a value at
least equal to the Minimum Order or at least equal to the
Incremental Order for any earlier six months interval, such failure
shall be grounds for immediate termination of this Agreement by GM
upon written notice provided at any time during the six months
following the time period in which such Minimum Order or
Incremental Order was not made, notwithstanding any other
provisions of this Agreement to the contrary; provided, however,
that following any termination of this Agreement, GM shall fill
Orders as set forth in, and pursuant to the terms of, Article 20,
subsection 5. In the event that Baldwin fails to purchase $500,000
of Products in the first six months of this Agreement due to the
inability of GM to ship RP Products subsequent to June 30, 1995,
the minimum order requirement for the first six months shall
automatically be deemed reduced in dollar amount by the dollar
amount of RP Products that were not timely shipped, and the minimum
order requirement in every later interval specified in this
Agreement shall also be reduced by the amount of RP Products
ordered by Baldwin in accordance with the procedures established in
Appendix I and not available for shipment. GM also agrees that for
purposes of determining whether the Minimum Order amounts have been
satisfied, the purchases by Baldwin from GM of electronic
components for use in the 675 limited edition Pianovelle models to
be manufactured by Baldwin shall be included in calculating
Baldwin's aggregate purchases of Products up to an aggregate
maximum of $200,000.
<PAGE>
2. Following the expiration of the first twenty four months of
this Agreement, for each year thereafter (including all renewal
terms) Baldwin will place Orders in both the first six months of
such year and in the second six months of such year in an amount
equal to 50% of one half of the annualized minimum purchase
commitment agreed upon for that year (the "Semi-Annual Order"). If
Orders in the first six months of any such year exceed the Semi-
Annual Order, such excess Orders shall be counted in determining
whether Baldwin has placed sufficient Orders in the second six
months of that same year. In the event that Baldwin fails to
purchase Products in any such six month period having a value at
least equal to the Semi-Annual Order, such failure shall be grounds
for immediate termination of this Agreement by GM upon written
notice provided at any time during the six months following the
time period in which such Semi-Annual Order was not made,
notwithstanding any other provisions of this Agreement to the
contrary; provided, however, that following any termination of this
Agreement, GM shall fill Orders as set forth in, and pursuant to
the terms of, Article 20, subsection 5.
Article 9 - Shipment and Risk of Loss
Upon GM's receipt of Orders, the time of shipment of Products shall
be made in accordance with the procedures set forth in Appendix I.
Title and risk of loss shall pass to Baldwin upon delivery of
Products to the freight carrier selected by Baldwin. Except as
expressly set forth herein or as otherwise agreed to from time to
time by GM and Baldwin, all Products shall be shipped only against
irrevocable letters of credit.
Article 10 - Prices and Expenses
1. Prices of Products shall be F.O.B. GM's manufacturing
facility, as set forth in Appendix III, denominated in U.S.
Dollars.
2. Baldwin and GM agree that it is anticipated that GM may, at
its option, purchase those items in Baldwin's and/or Wurlitzer's
inventory pursuant to Article 3, subsection 4, and as GM and
Baldwin may agree (the "Inventory"), subject to GM's prior
inspection and approval of same. Payment for any such Inventory
purchased by GM shall be to Baldwin by wire transfer, pursuant to
instructions from Baldwin, within thirty (30) days after delivery
of such items by Baldwin to GM. Upon the earlier of (a) the sale
by Baldwin and Wurlitzer of such inventories, (b) GM's purchase of
all such remaining inventories, or (c) September 1, 1995 for the CD
line of instruments and October 1, 1995 for the WX line of
instruments, GM may then sell such instruments and products, and
the replacement models therefor, as provided in Article 3,
subsection 4.
3. All taxes, excise and other charges levied on the production
or sale of the Products purchased hereunder prior to shipment by GM
shall be the responsibility of and shall be paid by GM. All
shipping costs, taxes, tariffs, customs, duties, or similar charges
payable after GM's shipment of Products hereunder shall be paid by
Baldwin.
<PAGE>
4. GM shall accommodate UL, FCC and CSA follow-up inspections.
GM shall obtain, at its sole expense, necessary permits under
applicable UL (to the extent reasonably available), FCC, CSA and
other standards for all Products Baldwin desires listed with those
agencies.
Article 11 - Payment
1. Baldwin shall issue or cause to be issued irrevocable letters
of credit in the amount of the purchase price of the Products to be
shipped each month, no later than the scheduled date of shipment in
that month. Said letters of credit, shall be in form and substance
and shall be issued by a bank reasonably acceptable to GM.
2. GM reserves the right to charge interest on overdue accounts
at the lesser of 1% per month or the maximum rate allowed by Ohio
law.
Article 12 - Warranty Obligations
1. General. Subject to the remaining Sections of this Article
12, Seller warrants to Buyer that all Products shall comply with
the Product Specifications, shall be free from defects in material
or workmanship under normal use and service for a period of five
(5) years from the date the Product is sold by Baldwin to a
customer, and shall be free from any liens or encumbrances created
by, through or under GM. If a Product furnished to Baldwin under
this Agreement proves to be defective, in material or workmanship,
during such five year period, or if at the date of shipment such
Product fails to conform to the Product Specifications and GM was
notified of this failure within such five year period, and provided
that the Product has not been damaged by neglect, abuse, accident
or unauthorized alteration, GM will provide to Baldwin a
replacement part in exchange for the return by Baldwin to GM of the
defective or nonconforming part.
<PAGE>
2. Parts; Parts Inventory. GM shall furnish Baldwin, at GM's
expense(including the cost of freight unless the parts are shipped
in the same container as any Products), with replacement parts as
needed from time to time during the term of this Agreement, and
with a replacement part for each defective part under warranty
returned to GM by Baldwin (with the cost of freight to return the
defective part to be at GM's expense). Baldwin shall pay for any
replacement part which failed after the expiration of the
applicable warranty period and such replacement parts shall be sold
by GM to Baldwin at GM's cost. In order to facilitate required
servicing of Products, upon the commencement of the Initial Term,
GM shall provide to Baldwin at no cost an inventory of replacement
parts having a value of U.S. $20,000 (based upon GM's then current
parts prices) which inventory shall be maintained at such $20,000
level throughout the term of this Agreement. GM and Baldwin shall
mutually agree from time to time upon the types and quantities of
replacement parts to be maintained in such inventory. On a
quarterly basis (unless a different time period is agreed upon in
writing by Baldwin and GM), (a) Baldwin shall pay GM for all non-
warranty replacement parts used by Baldwin from such inventory
during the previous quarter, and (b) GM shall replenish the
inventory by shipping to Baldwin additional parts to replace all
parts used from the inventory during the preceding quarter,
including parts used both for warranty repair and for non-warranty
repair. To the extent a repair requires parts not in such
inventory, Baldwin may request such parts pursuant to Article 12,
subsection 6.
3. Labor. For a period of 12 months after Baldwin's sale of a
particular Product, GM shall reimburse Baldwin for all reasonable
labor charges and other expenses incurred to repair any Products
found to be defective in workmanship or materials.
4. Recall. In the event of a field recall or modification of any
Product requested by GM or required by a governmental agency, GM
shall be responsible (and shall reimburse Baldwin for) all costs
incurred in order to complete such recall or modification program.
5. Replacement. If a warranty problem arises with respect to a
Product, which problem cannot be satisfactorily resolved upon the
diligent best efforts of Baldwin and GM following the replacement
or repair of parts and the expenditure of all needed labor costs,
GM will provide additional parts and labor in an attempt to resolve
the problem in the field if necessary. If such extraordinary
efforts fail to resolve such a warranty problem, GM will provide a
replacement unit for the defective Product at no additional charge
to Baldwin or the customer.
6. Warranty Requests. GM will honor all warranty replacement
parts requests from Baldwin. GM agrees to use its best efforts to
ship warranty replacement parts within two (2) business days of
receipt of an authorized request. If GM determines return of the
defective part is required, it must be returned to GM within sixty
(60) days of the date Baldwin receives the replacement part or the
requesting entity will be billed for the replacement part at the
then current parts price.
<PAGE>
7. Freight and Duty. During the parts warranty period described
in Article 12, subsection 1, shipping and duty costs for the
shipment by GM of replacement parts shall be borne by GM, provided
that such shipment is normal UPS (or equivalent Italian shipping
method). If Baldwin requests that the parts be shipped by an
expedited method (Federal Express, Air, Next Day, etc.) such
shipping costs, shall be borne by Baldwin. Baldwin shall also be
responsible for all shipping and duty costs for the shipment by GM
of replacement parts no longer under warranty and for the return of
defective parts to GM.
Article 13 - Confidential Information
Both parties agree to treat as confidential all of the information,
in whatever form, provided to the other or mutually exchanged with
respect to each party's business, the transactions contemplated
hereunder and the Products, including without limitation all
software, hardware, firmware, prototypes, work in progress, related
know-how and documentation, patents, copyrights, trade secrets,
specifications and schematics, and shall cause their directors,
officers, employees and agents at all times to treat such information as
confidential. Unless specifically stated in this Agreement
or set forth in a separate writing, nothing in this Agreement shall
be construed to grant a transfer of, license or other right in or
with respect to any technology, technology related information or
intellectual property by either Baldwin or GM to the other party.
This Article 13 shall not apply to any information:
(a) which the receiving party lawfully had in its possession
prior to its receipt from the other party;
(b) which is part of the public domain at the time of receipt
from the other party, or which has become part of the public domain
after receipt from the other party through no fault of the
receiving party;
(c) which shall have been lawfully obtained from a third
party who has the right to make such disclosure;
(d) which is required to be disclosed by statute, rule or
regulation or by a court of law;
(e) is or becomes generally known or available by publication
or is released on a non-confidential basis by the disclosing party
in writing; or
(f) is independently developed by one party hereto without
use of the other party's confidential information.
<PAGE>
Article 14 - No Diversion of Business; Non-Competition
1. GM shall not, either for itself or on behalf of any person,
firm, corporation or any other entity, directly or indirectly,
divert or attempt to divert from Baldwin any business relating to
Baldwin's sale of Products in the Territory. In connection
therewith, at no time during the term of this Agreement shall GM,
either for itself or on behalf of any person, firm, corporation or
any other entity, directly or indirectly own, control, or
participate in the ownership or control of, or be employed by or on
behalf of, any business involving or relating to instruments or
products which are similar to the Products and which is competitive
with Baldwin's business in the Products in the Territory.
Notwithstanding the foregoing, Baldwin agrees that any activities
of GM described in Article 3, subsection 3 shall not be a breach of
this Article 14, and subject to the conditions set forth below in
this Article 14, that GM has an existing dealer network in the
Territory for organs and professional products and instruments,
that GM will honor its contractual commitments to such dealers, and
that any such activities by GM shall not be a breach of this
Article 14.
2. Except as permitted by Article 3, subsection 2, Baldwin shall
not, either for itself or on behalf of any person, firm,
corporation or any other entity, directly or indirectly, (i)
develop for sale in the Territory products similar to the Products,
or (ii) purchase for sale from others any products which compete
with the sale of the Products in the Territory. In connection
therewith, at no time during the term of this Agreement shall
Baldwin, either for itself or on behalf of any person, firm, corporation
or any other entity, directly or indirectly own, control, or participate
in the ownership or control of, or be employed by or on behalf of, any
business involving or relating to pianos which are similar to the Products
and which are competitive with GM's business in the Products in the Territory.
3. The parties recognize that a breach of this Article 14 by one
party will cause irreparable harm to the other party and that
actual damages may be difficult to ascertain and in any event may
be inadequate. Accordingly, GM and Baldwin agree that in the event
of such breach, the non-breaching party shall be entitled to
injunctive relief in addition to such other legal or equitable
remedies as may be available.
4. In the event that GM and Baldwin disagree as to whether any
instruments or products compete with the Products, the disagreement
shall be settled by arbitration pursuant to Article 3, subsection
4 hereof. If one party fails to adhere to the terms of any
arbitration decision rendered pursuant to Article 3, subsection 4,
the other party shall then be entitled to terminate this Agreement
and seek all relief and remedies as provided in this Article 14.
Article 15 - Non-assignability
Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party to any third party without the prior
written consent of the other party.
<PAGE>
Article 16 - Parts
1. Baldwin shall have complete discretion on its sales, pricing,
and distribution of all of the Products in the Territory.
2. GM will maintain sufficient spare parts at GM's manufacturing
facility as is reasonably necessary to support all warranty and
service needs for all Products, including a parts inventory for
discontinued models or Products for five (5) years after such item
may have been discontinued.
Article 17 - Insurance
GM hereby agrees at all times to maintain insurance coverage with
such companies and in such amounts as GM deems appropriate (but not
less than $1,000,000 per occurrence) so as to protect and hold
harmless Baldwin at all times from claims of warranty liability
caused by GM-produced Products purchased by Baldwin hereunder. GM
shall provide Baldwin with evidence of such insurance as requested
by Baldwin from time to time and, upon the request of Baldwin,
shall use its best efforts to have Baldwin listed as an additional
named insured on such policies.
Article 18 - Proprietary Rights
1. GM shall indemnify and hold harmless Baldwin from and against
any and all costs, damages and expenses related to any allegation,
claim or suit that Baldwin's sale of the Products violates or
infringes upon the patent, copyright or other proprietary rights of
any third party, except with respect to parts or components
specified by Baldwin, for which Baldwin will indemnify and hold
harmless GM.
2. Nothing in this Agreement shall be construed as a grant by
Baldwin to GM of a license or any other right to use the "Baldwin",
"Pianovelle" or "Wurlitzer" name or any other trademark, tradename
or other logo owned, licensed or used by Baldwin, except in
connection with the delivery of Products to Baldwin for resale
under the "Baldwin" or "Pianovelle" name. Except as set forth in
the preceding sentence, GM acknowledges that it has no interest,
title or right in or to the "Baldwin", "Pianovelle" or "Wurlitzer"
name, or to any other trademark, tradename or other logo owned,
licensed or used by Baldwin, by virtue of this Agreement or otherwise.
3. All trademarks, tradenames and the software (including,
without limitation, the design and manufacture of the song disks,
ROM packs and similar data storage and retrieval devices) of GM
associated with the Products shall remain the exclusive property of
GM and no rights to such trademarks, tradenames or software shall
vest in Baldwin because of this Agreement. Baldwin shall cease use
of such trademarks, tradenames and software (it being understood
that Baldwin is only being granted the right to sell software
relating to the Products pursuant to this Agreement) promptly upon
termination of this Agreement.
<PAGE>
Article 19 - Forecasts; Duration
1. Baldwin's best estimate of its forecast of Products expected
to be purchased by Baldwin over the twenty four months following
the execution of this Agreement is attached hereto as Appendix IV
(the "Initial Forecast"), it being understood that orders for such
Products shall become binding Orders only in accordance with the
procedures set forth in Appendix I. Prior to the end of month
twenty one following the execution of this Agreement, Baldwin shall
provide GM with a forecast of Products expected to be purchased by
Baldwin in months twenty five through thirty six of the term of
this Agreement. Thereafter, Baldwin shall provide a forecast no
later than month thirty three for months thirty seven through forty
eight, and no later than ninety days prior to the commencement of
each year within each renewal term of this Agreement.
2. This Agreement shall become effective on July 1, 1995 and
remain valid and binding for four (4) years from that date (the
"Initial Term"), unless earlier terminated pursuant to the
provisions of Article 8 or Article 20.
3. Following the expiration of the Initial Term, this Agreement
will be automatically renewed for successive periods of four (4)
years each, provided that not less than ninety (90) days prior to
the expiration of the Initial Term and the expiration of each
subsequent term, (i) Baldwin shall submit a new forecast to GM
covering the twenty four month period beginning at the conclusion
of the period covered by the last forecast submitted, which
forecast must be reasonably acceptable to GM; (ii) Baldwin and GM
must agree on a new price list for the Products, which price list
shall supersede and replace Appendix III hereto; and (iii) neither
Baldwin nor GM has provided written notice to the other that the
notifying party is terminating the Agreement at the end of the
current four year term. Thereafter, annual forecasts would be
provided in the manner contemplated by Article 19, subsection 1.
4. The provisions of this Agreement shall be considered unchanged
upon renewal unless expressly altered in writing and agreed by the
parties.
5. Upon the expiration of this Agreement pursuant to this Article
19, GM shall fill all firm Orders in accordance with the last
delivery schedule provided to GM in accordance with Appendix I
prior to such expiration.
Article 20 - Termination
1. GM may terminate this Agreement upon thirty (30) days prior
written notice if during the Initial Term Baldwin fails to
purchase, during the first twenty four months of this Agreement
Products equal in dollar amount to U.S. $5,700,000, and during
months twenty five through forty eight of this Agreement, U.S.
$6,270,000. Baldwin and GM further agree that GM shall have no
right to terminate this Agreement pursuant to this subsection 1 if
Baldwin's failure to purchase the required quantity of Products is
due to GM's inability to ship sufficient Product quantities and/or
GM's failure to develop new and replacement Products as
contemplated by Article 6 hereof.
<PAGE>
2. Baldwin may terminate this Agreement upon thirty (30) days
prior written notice if during the Initial Term or during any
twelve month period thereafter, GM fails to timely ship the
quantity of Products for which Orders have been placed and/or GM
fails to develop new and replacement Products as contemplated by
Article 6 hereof.
3. Either party may terminate this Agreement upon written notice
provided more than 90 days in advance of the expiration of any four
year term of this Agreement or upon fourteen (14) days written
notice in the event that:
(a) the other party fails to pay any sum payable hereunder
within ten (10) days of when it is due;
(b) the other party fails to comply with or perform any
agreement or obligation (other than an obligation to pay any sum
payable hereunder) to be complied with or performed by such other
party in accordance with this Agreement if such failure is not
remedied on or before the thirtieth (30th) day after notice of such
failure is given to such other party; or
(c) the other party, (i) is dissolved; (ii) becomes insolvent
or fails or is unable or admits in writing its inability generally
to pay its debts as they become due; (iii) makes a general
assignment, arrangement or composition with or for the benefit of
its creditors; (iv) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is presented
for the winding-up or liquidation of such other party and, in the
case of any such proceedings or petition instituted or presented
against it, such proceeding or petition (x) results in a judgment
of insolvency or bankruptcy or the entry of an order for relief or
the making of an order for the winding-up or liquidation of such
other party, or (y) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (v) has a resolution passed for its winding-
up or liquidation; (vi) seeks or becomes subject to the appointment
of an administrator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets
(regardless of how brief such appointment may be, or whether any
obligations are promptly assumed by another entity or whether any
other event described in this clause (vi) has occurred and is
continuing); (vii) any event occurs with respect to such other
party which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (i) to
(vi) (inclusive); or (viii) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of
the foregoing acts.
4. Upon a termination by Baldwin pursuant to this Article 20, no
additional work on any Orders shall be undertaken by GM unless
specifically authorized in writing by Baldwin.
<PAGE>
5. Upon a termination by GM pursuant to this Article 20 or
Article 8, GM will complete the manufacture of Products for which
firm Orders have been received prior to the sixtieth day following
Baldwin's receipt from GM of GM's notice of termination. If
termination by GM results from a non-payment of obligations by
Baldwin, GM may suspend work on all firm Orders until Baldwin pays
such past due amounts. GM's obligation to fill Firm Orders
pursuant to this subsection 5 shall be subject to receipt by GM of
reasonably satisfactory assurances from Baldwin, following a
written request for such assurances by GM to Baldwin, that in
connection with filling such orders GM will receive payment from
Baldwin pursuant to this Agreement. Unless Baldwin has been, or
is, delinquent on the payment of any invoice by GM to Baldwin under
this Agreement in the six months preceding the date of termination,
Baldwin and GM agree that a letter from a Baldwin officer
confirming Baldwin's intent to purchase and pay for the Products
which are the subject of such Firm Orders shall constitute
satisfactory assurance.
Article 21 - Remedies
In addition to all other rights and remedies specified in this
Agreement or otherwise provided by law, the parties shall be
entitled to the following:
1. If delivery is not made as specified in this Agreement,
Baldwin may terminate this Agreement as to all or any portion of
the Products ordered.
2. Payment for the Products delivered hereunder shall not
constitute acceptance thereof. Baldwin shall have the right to
inspect and reject all Products delivered hereunder upon receipt of
shipment. GM will promptly replace or correct the Products as set
forth in Article 12.
3. Each party shall indemnify and hold the other party harmless
from all liability, loss, damage and expenses (including reasonable
attorneys' fees) resulting from or arising out of breach by the
other party of any of its duties or obligations under this
Agreement or from the error, omission, negligence or intentional
act of the other party, its employees or agents in the use, sale or
distribution of Products as contemplated herein.
4. NEITHER PARTY SHALL BE ENTITLED TO RECOVER ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES UPON ANY BREACH BY THE OTHER PARTY UNDER OR
RELATED TO THIS AGREEMENT.
5. In the event of a breach of this Agreement by either party,
the non-breaching party shall be entitled, in addition to such
other relief as may be available to it, to all types of equitable
relief (including without limitation the issuance of an injunction
or temporary restraining order) as may be necessary or useful to
cause the breaching party to comply with its obligations under this
Agreement.
<PAGE>
Article 22 - Notices
1. Effectiveness. Any notice or communication in respect of this
Agreement will be sufficiently given to a party if in writing and
delivered in person, sent by certified or registered mail or the
equivalent (with return receipt requested) or by overnight courier,
or given by facsimile (with confirmation received) at the address
or facsimile number specified below. A notice or communication
will be effective:
(a) if delivered by hand or sent by overnight courier, on the
day it is delivered (or if that day is not a business day, on the
first following business day); or
(b) if sent by facsimile, on the day the recipient's
confirmation is received (or if, after the close of business, on
the first following business day); or
(c) if sent by certified or registered mail or the equivalent
(return receipt requested), on the date set forth on the receipt.
2. Change of Address. Either party may by notice to the other
change the address or facsimile number at which notices or
communications are to be given.
3. Addresses: Baldwin Piano & Organ Company
422 Wards Corner Road
Loveland, OH 45140-8390
Attention: Mr. Kenneth J. Clark
Facsimile Number: (513) 576-4655
Phone Number: (513) 576-4500
GeneralMusic S.p.A.
Via delle Rose 12
47048 S. Giovanni in Marignano (FO)
Italy
Attention: Mr. Matteo Galanti
Facsimile Number: 011-39-541-957595
Phone Number: 011-39-541-959511
Article 23 - Force Majeure
Neither party shall be liable, directly or indirectly, in any manner
for its failure, of or delay in fulfillment of any obligations under this
Agreement, owing to Acts of God, governmental restrictions, war, warlike
conditions, fire, riot, strike, flood,accident or any other cause or
circumstances beyond such party's reasonable control. In the event of any
Force Majeure which prevents either party from fulfilling its obligations
hereunder for a period exceeding one hundred fifty (150) consecutive calendar
days, the other party shall be free to terminate this Agreement in accordance
with the provisions of Article 20.
<PAGE>
Article 24 - Governing Law
The validity, construction and performances of this Agreement and
any terms and conditions of sale to be made hereunder shall be
governed by and interpreted in accordance with the laws of Ohio.
Article 25 - Jurisdiction and Venue
The parties hereby submit to the jurisdiction of, and waive any
venue objections against, the United States District Court for the
Southern District of Ohio, the Hamilton County Common Pleas Court
of the State of Ohio, and any mutually agreed to alternative
dispute resolution proceeding taking place in Hamilton County,
Ohio, in any litigation arising out of the Agreement.
Article 26 - Arbitration
Except for those disputes subject to Article 3, subsection 4 of
this Agreement (which disputes shall be handled as provided
therein), any dispute, controversy or claim arising in connection
with this Agreement, including without limitation with respect to
any claim for indemnification, shall be settled by arbitration if
so requested in writing by either party hereto. The arbitration
shall be conducted by three arbitrators, who shall be appointed
pursuant to the rules of the American Arbitration Association
("AAA"). The arbitration shall be held in Cincinnati, Ohio and
shall be conducted in accordance with the commercial arbitration
rules of the AAA, provided, however, that the parties shall have
the right to take depositions and to conduct discovery in any such
arbitration proceeding in accordance with the Federal Rules of
Civil Procedure without the need to obtain the consent or approval
of the arbitrators. The determination of the arbitrators shall be
final and binding on the parties. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction.
Article 27 - Announcement
Neither Baldwin nor GM shall make any announcement or disclosure
regarding this Agreement without the written consent of the other,
except (i) as may be required by applicable law, including without
limitation the rules and regulations of the Securities and Exchange
Commission, (ii) to those persons or entities who have or may
acquire a financial interest in either Baldwin or GM, including
without limitation bankers and prospective investors; and (iii)
that each party shall be free to make its own communication to its
dealers, provided that at least 48 hours in advance of any
communication to its dealers, each party shall provide to the other
party a copy of any such communication which names such other party
in connection with any matter that is a subject of, or would
reasonably be considered to be within the scope of, this Agreement
and the parties agree to work with each other in good faith in the
event of any disagreement regarding such communications.
<PAGE>
Article 28 - Future Orders
The terms and conditions of this Agreement shall apply to all
additional purchase orders delivered by Baldwin to GM for Products
pursuant to the procedures described in Appendix I hereof. Such
additional purchase orders shall be deemed addenda to this
Agreement.
Article 29 - Relationship of the Parties
The relationship between Baldwin and GM hereunder is solely that of
purchaser and seller. None of Baldwin, its employees or its agents
are granted any authority to assume or create any obligation or
responsibility, express or implied, on behalf of or in the name of
GM, or to bind GM in any manner whatsoever, and shall not hold
themselves out as agents or representatives of GM for any purpose.
None of GM, its employees or its agents are granted any authority
to assume or create any obligation or responsibility, express or
implied, on behalf of or in the name of Baldwin, or to bind Baldwin
in any manner whatsoever, and shall not hold themselves out as
agents or representatives of Baldwin for any purpose.
Article 30 - Effectiveness of this Agreement; Termination of
Wurlitzer Agreement
This Agreement shall become effective upon the execution by both
Baldwin and GM of this Distribution Agreement. Upon the
effectiveness of this Distribution Agreement, the existing
distribution agreement between GM and Baldwin's wholly-owned
subsidiary, The Wurlitzer Company, dated March 9, 1994 shall be
terminated. Notwithstanding such termination, each party
thereunder shall continue to be responsible for its respective
obligations which arose under the Agreement prior to such
termination.
Article 31 - Counterparts
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same instrument and shall
become effective when one or more counterparts have been signed by
each of the parties, it being understood that both parties need not
sign the same counterpart.
Article 32 - Enforceability
If for any reason a court of competent jurisdiction finds any
provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to
the maximum extent permissible so as to effect the intent of the
parties, and the remainder of this Agreement will continue in full
force and effect. This Agreement has been negotiated by the
parties and their respective counsel. This Agreement will be
interpreted fairly in accordance with its terms and without any
strict construction in favor of or against either party.
<PAGE>
Article 33 - Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes and
replaces all prior or contemporaneous understandings or agreements,
written or oral, regarding such subject matter. No amendment to or
modification of this Agreement will be binding unless in writing
and signed by a duly authorized representative of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Distribution Agreement to be signed and sealed by their duly
authorized officer or representatives as of the date first above
written.
BALDWIN PIANO & ORGAN COMPANY
BY: KAREN L. HENDRICKS
Karen L. Hendricks, President
GENERALMUSIC S.p.A.
BY: RAFFAEL GALANTI
Raffael Galanti, Managing
Director
AGREED (for purposes of Article 30 only):
THE WURLITZER COMPANY
BY: KENNETH CLARK
Kenneth Clark
TITLE: Vice President
<PAGE>
APPENDIX I
ORDERS AND SHIPPING SCHEDULE
Baldwin hereby purchases from GM in accordance with the terms
set forth in the Agreement to which this Appendix is attached:
REQUESTED
DELIVERY
PRODUCT QUANTITY DATE
APPENDIX I (cont.)
Baldwin shall prepare and deliver to GM not less than 60 days
prior to the commencement of each calendar quarter (i) a schedule
setting forth a firm purchase order by month for such calendar
quarter; and (ii) a projection of all purchases anticipated by
Baldwin for months four through twelve following the date of the
firm purchase order.
Following receipt from Baldwin of its firm purchase orders, GM
will prepare and provide to Baldwin delivery schedules, with such
delivery to occur not later than 120 days after the date of
Baldwin's submission of the purchase order.
APPENDIX II
PRODUCT SPECIFICATIONS
Baldwin hereby acknowledges that the product specifications
for items currently manufactured by GM and falling within the
definition of Products as of the date of the execution of the
Distribution Agreement to which this Appendix II is attached are
satisfactory to Baldwin. Baldwin and GM agree that from time to
time they may work together to develop additional product
specifications for additional items to be manufactured by GM and
added to the definition of Products.
<PAGE>
APPENDIX III
Prices *
GENERALMUSIC PRODUCT PRICING
(In U.S. Dollars)
RPS
RP 1 PVC
RP 2 PVC
RP 2 HPF
PS1500
PS2500
GRP 3
GPS2500
Bench PVC
Bench HPF
_______________________
* Prices are firm for six months after products first become
available for shipment, and thereafter may be increased or
decreased by GM, upon sixty (60) days prior written notice, to
preserve GM's existing profit margins for the Products, including
increases necessary to defray the increased costs of labor and
materials, provided, however, that if any product shall increase in
price by more than 5% over any consecutive twelve month period,
then GM, following written request from Baldwin, shall provide
Baldwin with such information as is reasonably necessary to
demonstrate that such price increase(s) was required to preserve
GM's existing profit margin.
<PAGE>
APPENDIX IV
INITIAL FORECAST
FIRST SIX MONTHS
FIRST TWELVE MONTHS
FIRST EIGHTEEN MONTHS
YEARS ONE AND TWO (first 24 months)
