April 3, 1995
DEAR SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of
Shareholders which will be held at the Company's headquarters
located at 422 Wards Corner Road, Loveland, Ohio, at 11:00 a.m.
on Tuesday, May 9, 1995. On the following pages you will find
the formal Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting in person, it
is important that your shares be represented and voted at the
meeting. ACCORDINGLY, PLEASE DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY.
I hope that you will attend the meeting and I look forward
to seeing you there.
Sincerely,
R. S. HARRISON
R. S. HARRISON
Chairman of the Board<PAGE>
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 9, 1995
___________________
To the Shareholders of
Baldwin Piano & Organ Company:
The Annual Meeting of Shareholders of Baldwin Piano & Organ
Company, a Delaware corporation, will be held at the Company's
headquarters located at 422 Wards Corner Road, Loveland, Ohio,
45140, on Tuesday, May 9, 1995, at 11:00 a.m., Cincinnati time,
for the following purposes:
(1) To elect five directors for a one-year term ending in
1996;
(2) To ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1995; and
(3) To act upon any other matter that may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
Friday, March 17, 1995, as the date for determining Shareholders
of record entitled to notice of and to vote at the Annual
Meeting.
Your attention is directed to the accompanying Proxy
Statement and 1994 Annual Report to Shareholders.
For the Board of Directors
R. S. HARRISON
R. S. HARRISON
Chairman of the Board
April 3, 1995
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND
RETURN IT IN THE ACCOMPANYING POSTAGE PAID ENVELOPE, EVEN IF
YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY IN
WRITING OR AT THE ANNUAL MEETING IF YOU WISH TO VOTE IN PERSON.
<PAGE>
BALDWIN PIANO & ORGAN COMPANY
422 Wards Corner Road
Loveland, Ohio 45140-8390
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 9, 1995
______________________________
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of
Baldwin Piano & Organ Company, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Shareholders to be
held at 11:00 a.m., Cincinnati time, Tuesday, May 9, 1995, at the
Company's headquarters located at 422 Wards Corner Road,
Loveland, Ohio. The proxy is revocable at any time prior to its
exercise by written notice or in person at the Annual Meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited by
officers, directors, and regular employees of the Company
personally or by telephone or telegraph, and the Company may
reimburse brokers, custodians, nominees, and other fiduciaries
for their reasonable out-of-pocket expenses in forwarding proxy
materials to their principals.
Shares represented by proxy will be voted as directed on the
proxy forms and, if no direction is given, will be voted in the
election of directors for the persons nominated by the Board of
Directors and for the proposals described herein. Any proxy
given by a Shareholder may be revoked at any time prior to its
use by execution of a later-dated proxy, by a personal vote at
the Annual Meeting, or by written notice to the Company's
Secretary.
This proxy material is being sent to Shareholders on or
about April 3, 1995, together with the Company's 1994 Annual
Report, which includes certified financial statements for the
fiscal year ended December 31, 1994.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record at the close of business on Friday,
March 17, 1995 are entitled to notice of and to vote at the
meeting. As of the close of business on that date, there were
outstanding and entitled to vote, 3,415,196 shares of Common
Stock, $.01 par value (the "Common Stock"), each of which is
entitled to one vote. No cumulative voting rights exist under
the Company's Certificate of Incorporation. For information
regarding the ownership of the Company's Common Stock by holders
of more than five percent of the outstanding shares and by the
management of the Company, see "Security Ownership of Certain
Beneficial Owners and Management."
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of a single
class. Each year the directors are elected to serve for a term
of one year. The Board of Directors currently consists of five
members. The Shareholders will vote at the Annual Meeting for
the election of all five directors who will constitute the
Company's Board of Directors for the one-year term expiring at
the Annual Meeting of Shareholders in 1996.
The persons named in the enclosed proxy will vote for the
election of the nominees named below unless authority to vote is
withheld. All nominees have consented to serve if elected. In
the event that any of the nominees should be unable to serve, the
persons named in the proxy will vote for such substitute nominee
or nominees as they, in their discretion, shall determine. The
Board of Directors has no reason to believe that any nominee
named herein will be unable to serve.
Directors will be elected by a majority of the votes cast at
the Annual Meeting upon the presence of a quorum. Any shares not
voted in the election of directors (whether by abstention, broker
non-vote or otherwise) have no impact on the vote. The following
material contains information concerning the nominees for
election as directors.
NOMINEES FOR DIRECTORS
GEORGE E. CASTRUCCI, age 57, has served as a director of the
Company since May, 1987, and served as Chairman of the Board from
August, 1993, until December, 1994. Prior to March, 1992, he
served as Chairman and Chief Executive Officer of Great American
Broadcasting Company, a Cincinnati-based broadcast company, and
as President and Chief Operating Officer of its parent company,
Great American Communications Company. Mr. Castrucci also
currently serves as a director of BMF Savings Bank, The Ohio
National Fund, Inc., and ONE Fund, Inc.
<PAGE>
R. S. HARRISON, age 63, is the Company's Chairman of the
Board. Prior to December, 1994, Mr. Harrison served continuously
as the Company's Chief Executive Officer from its inception in
November, 1983. He also previously served as the Company's
Chairman of the Board from its formation until August, 1993, when
he assumed the responsibilities as the Company's President.
Prior to November, 1983, Mr. Harrison served the Company's
predecessor (the old Baldwin Piano & Organ Company which sold all
of its music-related assets to the Company in June, 1984) as a
director since June, 1983, as its chief executive officer and
president since 1974, and in other capacities since 1955.
JOSEPH H. HEAD, JR., age 62, has been a director of the
Company since May, 1987 and was previously a director from
November, 1983 until June 6, 1986. He also served as Secretary
of the Company from its formation until May, 1989. Mr. Head is
Chairman, Chief Executive Officer and a director of Atkins &
Pearce, Inc., a manufacturer of industrial textiles. Mr. Head is
also a former partner in the law firm of Graydon, Head & Ritchey,
Cincinnati, Ohio where he practiced law from 1959 through 1993.
He also currently serves as a director of Fifth Third Bancorp,
since 1987.
KAREN L. HENDRICKS, age 47, is the Company's Chief Executive
Officer, President and a director. Prior to joining the Company
in November, 1994, Ms. Hendricks most recently served as the
Executive Vice President and General Manager, Skin Care Division
of the Dial Corp since 1992, where she had full responsibility
for Dial's United States bar and liquid soap business. Ms.
Hendricks previously was employed for twenty-one years by The
Procter & Gamble Company in various executive positions in
product development and was promoted to General Manager of its
Vidal Sassoon Hair Care Company in 1987.
ROGER L. HOWE, age 60, has been a director of the Company
since August, 1993. Mr. Howe is currently employed as the
Chairman of the Board of U.S. Precision Lens, Inc., a
manufacturer of optical components used in industrial and
consumer products, where he has been employed since 1970. He
also currently serves as a director of Cintas Corporation, Eagle-
Picher Industries, Inc., Star Banc Corporation, and The United
States Shoe Corporation.
There are no family relationships among any of the above-
named nominees for director nor among any of the nominees and any
executive officers of the Company.
<PAGE>
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors of the Company met nine times during
the year ended December 31, 1994. In 1994, all directors
attended all meetings of the Board of Directors and all
committees on which the director served during his or her term
except Harry A. Shaw III who due to illness attended fewer than
75 percent of all Board and committee meetings held prior to his
death in September, 1994. In addition, the Board of Directors
took action on behalf of the Company through the unanimous
written agreement of the directors in lieu of an actual meeting
on one occasion.
The Board of Directors has an Executive Compensation
Committee and an Audit Committee. The Executive Compensation
Committee reviews the salaries and compensation levels of the
Company's executive management and the Audit Committee reviews
the Company's accounting practices and controls. In 1994, the
Executive Compensation Committee consisted of Messrs. Head and
Howe and the Audit Committee was comprised of Messrs. Castrucci
and Shaw. The Executive Compensation Committee met four times in
1994 and the Audit Committee met three times.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following table sets forth information regarding all
persons known to the Company to be the beneficial owners of more
than five percent of the Company's Common Stock as of March 17,
1995.
Shares Percent of
Owned Outstanding
Name(1) Beneficially Shares
____ ____________ ___________
R. S. Harrison .................... 377,267(2) 11.0%
Heartland Advisors, Inc. .......... 376,300(3) 11.0%
State of Wisconsin Investment Board 275,000(4) 8.1%
David L. Babson & Company, Inc. ... 261,100(5) 7.6%
Dimensional Fund Advisors Inc. .... 181,400(6) 5.3%
_____________
<PAGE>
(1) The address of R. S. Harrison is 422 Wards Corner Road,
Loveland, Ohio 45140. The address of Heartland Advisors, Inc. is
790 North Milwaukee Street, Milwaukee Wisconsin 53202. The
address of State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707. The address of David L. Babson &
Company, Inc. is One Memorial Drive, Cambridge, Massachusetts
02142. The address of Dimensional Fund Advisors Inc. is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(2) Of the shares listed, 258,255 are owned directly by Mr.
Harrison, and 18,000 are owned beneficially subject to his right
to exercise outstanding stock options. Of the shares owned
directly by Mr. Harrison, 249,505 shares are held under a trust
agreement for the benefit of Mr. Harrison under which he serves
as trustee.
Mr. Harrison is also deemed to be a beneficial owner of
101,012 shares of Common Stock held under four trusts (the
"Trusts") for the benefit of his four adult children. The terms
of all Trusts are substantially identical and provide that the
beneficiary of each Trust is entitled to the entire trust income
during his or her lifetime. Pursuant to the terms of the Trusts,
Anne W. Harrison, the spouse of R. S. Harrison, has an option to
purchase any part or all of the shares owned by the Trusts and
may be deemed a beneficial owner thereof. In addition, she may
be deemed the beneficial owner of the shares beneficially owned
by R. S. Harrison. In the event that she is not married to R. S.
Harrison, her option rights terminate. If she predeceases R. S.
Harrison, he is granted the right to exercise the option.
Because of his right to acquire shares from the Trusts, R. S.
Harrison is deemed to be a beneficial owner of such shares, but
he disclaims any beneficial ownership of such shares in his own
right.
(3) Heartland Advisors, Inc. last informed the Company that it
is a registered investment adviser that may be deemed the
beneficial owner of 376,300 shares of Common Stock. Heartland
Advisors, Inc. has sole dispositive power over all 376,300
shares.
(4) State of Wisconsin Investment Board last informed the
Company that it is a government agency which manages public
pension funds and that it may be deemed the beneficial owner of
275,000 shares of Common Stock. State of Wisconsin Investment
Board has sole dispositive power and sole voting power over all
275,000 shares.
(5) David L. Babson & Company, Inc. last informed the Company
that it is a registered investment adviser that may be deemed the
beneficial owner of 261,100 shares of Common Stock. David L.
Babson & Company, Inc. has sole dispositive power over all
261,100 shares, sole voting power of 216,300 shares and shared
voting power of 44,800 shares.
<PAGE>
(6) Dimensional Fund Advisors Inc. last informed the Company
that it is a registered investment adviser that may be deemed the
beneficial owner of 181,400 shares of Common Stock, all of which
shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of
the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional Fund Advisors Inc. disclaims beneficial ownership of
all such shares. Dimensional Fund Advisors Inc. has sole
dispositive power over all 181,400 shares and sole voting power
of 121,500 shares. DFA Investment Dimensions Group Inc. has
voting power of an additional 37,900 shares and DFA Investment
Trust Company has voting power of the remaining 22,000 shares.
Beneficial Ownership of Management and Nominees
The following table sets forth information regarding the
ownership of Common Stock of the Company for each director, each
nominee, each named executive and all officers and directors as a
group as of March 17, 1995.
Percent of
Shares Owned Outstanding
Name(1) Beneficially Shares
____ ____________ ___________
CURRENT DIRECTORS AND NOMINEES
R. S. Harrison ............... 377,267(1)(2) 11.0%
Karen L. Hendricks ........... 100,000(3) 2.9%
Joseph H. Head, Jr. .......... 26,000(3) .8%
George E. Castrucci .......... 18,000(3) .5%
Roger L. Howe ................ 9,000(3) .3%
EXECUTIVE OFFICERS
Kenen M. Edgington ........... 34,056(2) 1.0%
Harry F. Forbes, Jr. ......... 41,222(2)(4) 1.2%
Charles R. Juengling ......... 16,000(2) .5%
Jimmie H. Smith .............. 16,669(2)(5) .5%
All officers and directors as a
group (19 persons) ......... 733,045(2)(3) 21.5%
___________
<PAGE>
(1) See note (2) under "Security Ownership of Certain Beneficial
Owners and Management -- Holders of More than Five Percent
Beneficial Ownership."
(2) Includes shares owned beneficially subject to the holder's
right to exercise outstanding incentive stock options: 18,000
shares for Mr. Harrison, 12,000 shares for Mr. Edgington, 6,000
shares for Mr. Forbes, 15,000 shares for Mr. Juengling, 13,000
shares for Mr. Smith, and 53,500 shares in the aggregate for the
Company's other executive officers.
(3) Includes shares owned beneficially subject to the holder's
right to exercise outstanding non-qualified stock options:
100,000 shares for Ms. Hendricks, 16,000 shares for each of
Messrs. Head and Castrucci, and 4,000 shares for Mr. Howe.
(4) Includes shares jointly owned with spouse.
(5) Includes 3,669 shares owned by Mr. Smith's son. Mr. Smith
hereby disclaims beneficial ownership of all such shares.
No agreements, formal or informal, exist among the various
officers and directors to vote their shares collectively.
To the best of the Company's knowledge, all except one of
the Company's directors, officers and 10% or more shareholders
have timely filed with the Securities and Exchange Commission all
reports required to be so filed pursuant to Section 16 of the
Securities Exchange Act of 1934 for the Company's 1994 fiscal
year. One of the Company's officers, J. D. Chastain, filed one
report approximately four weeks late in April, 1994 relating to a
February, 1994 sale transaction in the Company's Common Stock.
<PAGE>
<TABLE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, each person who served as the
Company's Chief Executive Officer during 1994 and each of the Company's other
four most highly compensated executive officers (the "named executives")
during each of the last three fiscal years.
<CAPTION>
Long Term Compensation
______________________
Securities All
Restricted Under- Other
Annual Compensation Stock lying Compen-
Name and Principal Salary Bonus Awards Options sation
Postion Year (1)($) (1)(2)($) (3)($) (#) (4)($)
__________________ ____ ______ _________ __________ _______ ______
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks(5) 1994 34,231 -0- -0- 100,000 207
Chief Executive
Officer and
President
R. S. Harrison 1994 355,700 -0- -0- -0- 43,914
Chairman of the 1993 355,700 106,710 -- -0- 45,093
Board and former 1992 348,629 106,710 -- 3,000 45,820
Chief Executive
Officer
Kenen M. Edgington 1994 144,804 -0- -0- 3,000 12,309
Executive Vice 1993 141,929 40,111 -- -0- 10,673
President 1992 133,899 15,721 -- 2,000 11,452
Harry F. Forbes, Jr. 1994 123,400 -0- -0- 3,000 10,823
Former Vice 1993 123,400 37,020 -- -0- 10,717
President, 1992 117,500 35,250 -- 1,000 10,160
Treasurer and
Secretary(6)
Charles R. Juengling 1994 120,000 -0- -0- 3,000 10,279
Vice President, 1993 111,300 33,390 -- -0- 9,662
Treasurer and 1992 106,000 31,800 -- 2,000 9,161
Secretary
Jimmie H. Smith 1994 118,152 -0- -0- 3,000 12,929
Vice President/ 1993 118,152 35,446 -- -0- 12,371
Manufacturing 1992 108,307 35,446 -- 2,000 11,808
______________
</TABLE>
(1) Includes amounts contributed by the following named
executives to the Baldwin Piano & Organ Company Retirement Plan
for Salaried Employees as elective salary reduction
contributions.
<PAGE>
1994 1993 1992
____ ____ ____
R. S. Harrison ........... $69,361 $69,361 $67,537
Kenen M. Edgington ....... 18,491 15,765 11,722
Harry F. Forbes, Jr. ..... 24,063 23,797 10,577
Charles R. Juengling ..... 9,203 8,586 8,178
Jimmie H. Smith .......... 23,039 23,039 21,080
(2) The bonuses are shown for the years earned, but were paid in
the following year.
(3) In 1994, the Company's Board of Directors adopted the
Company's 1994 Long Term Incentive Plan. Pursuant to the terms
of that Plan, the Company's Executive Compensation Committee
granted the named executives and other designated employee
participants the right to receive awards of restricted stock
based upon the Company's stock performance in comparison to the
Russell 2000 index over the three year period ending December 31,
1996 (the "award date"). The number of shares of restricted
stock to be awarded, if any, at the end of the three year period
is based upon a percentage of the participant's base salary and
the market value of the Company's Common Stock as of the award
date. The participant would be entitled to all other privileges
of a shareholder with respect to the restricted shares so
awarded, except that such restricted shares could not be
transferred for three years following the award date. The
Company may elect in its discretion, in whole or in part, to pay
cash in lieu of granting any restricted shares earned under the
Plan.
(4) "All Other Compensation" includes, as shown below, amounts
contributed by the Company under the Baldwin Piano & Organ
Company Retirement Plan for Salaried Employees; group term life
insurance premiums paid by the Company on policies obtained by
the Company for all employees; the value of personal use of
Company automobiles; and life insurance premiums paid by the
Company for $1,000,000 of executive life insurance on the life of
Mr. Harrison. The net proceeds of this executive life policy are
payable to the estate of Mr. Harrison after reimbursement to the
Company of all premiums paid by the Company on his behalf.
<PAGE>
1994 1993 1992
____ ____ ____
Karen L. Hendricks
Group Life Insurance ..... $ 207 -- --
$ 207 -- --
R. S. Harrison
Retirement Plan .......... $ 27,745 $ 27,445 $ 27,015
Executive Insurance ...... 12,592 12,937 14,747
Group Life Insurance ..... 1,932 1,932 1,764
Automobile (Personal Use). 1,645 2,779 2,294
$ 43,914 $ 45,093 $ 45,820
Kenen M. Edgington
Retirement Plan .......... $ 11,095 $ 9,459 $ 10,343
Group Life Insurance ..... 1,214 1,214 1,109
$ 12,309 $ 10,673 $ 11,452
Harry F. Forbes, Jr.
Retirement Plan .......... $ 9,625 $ 9,519 $ 9,066
Group Life Insurance ..... 1,198 1,198 1,094
$ 10,823 $ 10,717 $ 10,160
Charles R. Juengling
Retirement Plan .......... $ 9,203 $ 8,586 $ 8,178
Group Life Insurance ..... 1,076 1,076 983
$ 10,279 $ 9,662 $ 9,161
Jimmie H. Smith
Retirement Plan .......... $ 9,216 $ 9,216 $ 8,432
Group Life Insurance ..... 1,060 1,060 968
Automobile (Personal Use). 2,653 2,095 2,408
$ 12,929 $ 12,371 $ 11,808
(5) The Company hired Ms. Hendricks as Chief Executive Officer
and President effective November 21, 1994.
(6) Mr. Forbes retired from the Company on March 31, 1995.
<PAGE>
EMPLOYMENT AGREEMENTS
During 1994, the Company entered into new Employment
Agreements with R. S. Harrison and Karen L. Hendricks. Such
Employment Agreements provide that Mr. Harrison will be employed
as the Chairman of the Board of the Company and that Ms.
Hendricks will be employed as the Chief Executive Officer and
President of the Company and that she will be nominated as a
director for each year of her employment. Pursuant to the terms
of his December, 1994 Employment Agreement which amended and
restated his previous employment agreement, Mr. Harrison will
receive a base salary of $275,000 in 1995, which salary will
thereafter be reviewed for increases or decreases in any
additional year that Mr. Harrison may serve as Chairman. If his
employment terminates for any reason (other than due to Mr.
Harrison's death) before December 31, 1997, the Company and Mr.
Harrison will enter into a consulting agreement having a term of
three years after the termination of his employment. Mr.
Harrison will also receive all other benefits normally accorded
to the Company's senior officers and will receive lifetime
medical benefits.
Mr. Harrison's new Employment Agreement provides that, in
the event of either Mr. Harrison attaining age 65 or his
termination of employment by reason of disability or death
(regardless of his age), the Company must pay Mr. Harrison
deferred compensation in 120 equal monthly installments in the
aggregate fixed amount of $2,312,050, plus accrued interest from
May 8, 1994. Such amount represents the sum of all deferred
compensation that would have been payable to Mr. Harrison under
his previous employment agreement if he had terminated his
employment at age 62. In addition, if Mr. Harrison dies before
December 31, 1997, the Company must immediately pay to Mr.
Harrison's spouse or estate, as the case may be, an amount equal
to the amount he would have been entitled to receive for
providing consulting services. Mr. Harrison's Employment
Agreement contains covenants by Mr. Harrison not to compete with
the Company during the period beginning with the termination of
his employment and ending with the last payment of the deferred
compensation.
Pursuant to the terms of her November, 1994 Employment
Agreement, Ms. Hendricks will continue in the Company's employ
until December 31, 1997, unless sooner terminated. Ms. Hendricks
will receive an annual base salary of no less than $300,000 and,
in 1995, a guaranteed minimum cash bonus of $100,000. She will
participate in the Company's management incentive plans at the
highest participant level and will receive all other benefits
normally accorded to the Company's senior officers. Ms.
Hendricks' Employment Agreement further provides that, in
addition to the customary insurance provided to Company
employees, the Company will purchase a $500,000 term life
insurance policy on her life payable to her beneficiaries and
supplemental disability coverage providing $10,000 in excess
disability coverage per month. As an added inducement for Ms.
Hendricks to join the Company, her Employment Agreement further
<PAGE>
provided that she would receive a one time grant of 100,000 non-
qualified stock options upon commencement of her employment, such
options having an exercise price equal to the fair market value
of the Company's Common Stock as of such date.
Ms. Hendricks' Employment Agreement provides that in the
event the Company does not renew her employment upon the
expiration of the Employment Agreement, the Company would be
required to pay Ms. Hendricks on or before March 31, 1998
severance pay in the amount of her 1997 annual base salary plus
50% of such base salary. In the event that the Company
terminates her employment without cause, the Company must pay to
Ms. Hendricks within 90 days thereafter an amount equal to the
greater of $450,000 or the difference between $1,000,000 and any
base salary and 1995 incentive payment paid prior to the date of
termination. Ms. Hendricks' Employment Agreement contains
covenants by Ms. Hendricks not to compete with the Company for a
period of one year after termination of her Employment Agreement
by Ms. Hendricks, by the Company for cause or upon her
disability.
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants by
the Company of stock options to each of the named executives during 1994.
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of
Stock Price
Appreciation
for
Individual Grants(1) Option Term(3)
% of
___________________________________________________________ ______________
Total Exer-
Securities Granted cise
Underlying to or
Options Employees Base Expir-
Granted in Fiscal Price ation
(#) Year(2) ($/Share) Date 5%($1) 10%($)
__________ _________ _________ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks 100,000 71.42 12.50 11/22/04 786,000 1,992,000
R. S. Harrison -- -- -- -- -- --
Kenen M. Edgington 3,000 2.14 16.00 5/10/04 30,180 76,500
Harry F. Forbes, Jr. 3,000 2.14 16.00 5/10/04 30,180 76,500
Charles R. Juengling 3,000 2.14 16.00 5/10/04 30,180 76,500
Jimmie H. Smith 3,000 2.14 16.00 5/10/04 30,180 76,500
_____________
</TABLE>
<PAGE>
(1) All grants were made at the fair market value on the grant
date. Other than the options granted to Ms. Hendricks, all
options were granted under the Company's 1994 Incentive Stock
Option Plan and vest over a five year period, 20% on each
anniversary of the grant date. The options granted to Ms.
Hendricks are non-qualified options issued pursuant to the terms
of her employment agreement in partial consideration for her
accepting the Company's offer of employment. Ms. Hendricks'
options vested 20% upon her commencement of employment and an
additional 20% vest on each anniversary thereof.
(2) Total options granted to all executive officers and other
employees of the Company in 1994 were for an aggregate of 140,000
shares of Common Stock.
(3) Calculated based upon assumed stock prices for the Company's
Common Stock of $20.36 and $32.42, respectively, if 5% and 10%
annual rates of stock appreciation are achieved over the full
term of the options granted to Ms. Hendricks and on assumed stock
prices of $26.06 and $41.50, respectively, with respect to the
options granted to all of the other executive officers reflected
in the table. The potential realizable gain equals the product
of the number of shares underlying the stock option grant and the
difference between the assumed stock price and the exercise price
of each option.
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding individual
exercises of stock options during 1994 by each of the named executives.
<CAPTION>
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/94 12/31/94
Shares
Acquired on Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
Name (#) ($) (1) (#) (2) (3) ($)
____ __________ ________ _____________ _____________
<S> <C> <C> <C> <C>
Karen L. Hendricks -0- -0- 20,000/ -0-/
80,000 -0-
R. S. Harrison -0- -0- 18,000/ 9,488/
-0- -0-
Kenen M. Edgington -0- -0- 9,000/ 8,375/
3,000 -0-
Harry F. Forbes, Jr. -0- -0- 3,000/ 2,375/
3,000 -0-
Charles R. Juengling -0- -0- 12,000/ 13,075/
3,000 -0-
Jimmie H. Smith -0- -0- 10,000/ 10,075/
3,000 -0-
_____________
</TABLE>
(1) All stock options issued to the named executives under the
Company's 1986 Incentive Stock Option Plan must be held for two
years subsequent to the date of the option grant before such
options first become exercisable. See note (1) to the Option
Grants in Last Fiscal Year table regarding the vesting of options
granted in 1994.
(2) The shares of the Company's Common Stock issuable upon the
exercise of outstanding stock options granted under the Company's
1986 Incentive Stock Option Plan, or upon the exercise of non-
qualified stock options, have not been registered under the
Securities Act of 1933 ("1933 Act"). Generally, such shares may
not be resold by the holder for a minimum period of two years
following exercise of the option. The shares of the Company's
Common Stock issuable upon the exercise of outstanding stock
options granted under the Company's 1994 Incentive Stock Option
Plan have been registered under the 1933 Act and generally can be
resold immediately upon exercise.
<PAGE>
(3) The value of exercisable in-the-money options is calculated
by determining the difference between $11.00 per share, the last
reported sale price of the Common Stock on the Nasdaq National
Market on December 30, 1994, and the exercise price of the option
as of such date, multiplied by the number of shares subject to
the option. All unexercisable stock options under the Company's
1986 Incentive Stock Option Plan have an exercise price of $15.75
per share, except for unexercisable stock options held by Mr.
Harrison which have an exercise price of $17.325. All
unexercisable stock options under the Company's 1994 Incentive
Stock Option Plan have an exercise price of $16.00 per share and
Ms. Hendricks' unexercisable stock options have an exercise price
of $12.50 per share. Based upon the $11.00 per share market
price of the Common Stock at December 30, 1994, these
unexercisable stock options had no value because the exercise
price exceeded the market price.
COMPENSATION OF DIRECTORS
In 1994, non-employee directors of the Company were
compensated for serving on the Board of Directors and the
committees thereof, in the amount of $10,000 per year, payable in
quarterly installments, and received an additional $900 for each
Board of Directors meeting and each committee meeting attended in
person or by telephone. Such directors are reimbursed for all
reasonable expenses incurred in connection with their services
and receive an annual grant of 2,000 non-qualified stock options
having an exercise price equal to the market price on the date of
the grant. Mr. Castrucci received compensation in the amount of
$40,000 for serving as Chairman of the Board through December,
1994. Mr. Harrison and Ms. Hendricks receive no additional
compensation for serving on the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Head and Howe comprised the Company's entire
Executive Compensation Committee during 1994, and were both non-
employee directors of the Company. No director or executive
officer of the Company serves on any board of directors or
compensation committee of any entity which compensates Messrs.
Head or Howe.
<PAGE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
For the Company's 1994 fiscal year, the Executive
Compensation Committee of the Board of Directors (the
"Committee") was at all times comprised entirely of independent
non-employee directors. The Committee is charged with
responsibility for reviewing the performance and approving the
compensation of the Company's key executives on an annual basis.
The Committee believes that a significant portion of an executive
officer's compensation should be subject to the Company's annual
performance, while at the same time motivating long-term growth
in shareholder value.
In 1994, the Committee, with the assistance of an
independent consulting company experienced in executive
compensation, thoroughly reviewed the Company's compensation
package and developed three compensation plans designed to more
directly link individual compensation to the performances of the
Company and of its executive officers and key management
employees. The Committee believed that establishing an enhanced
compensation package would make the Company more competitive with
similar size companies and would increase the Company's ability
to attract and retain highly skilled executives. The three plans
approved by the Committee, and adopted by the full Board of
Directors, were the 1994 Management Incentive Plan (the "MIP"),
the 1994 Incentive Stock Option Plan (the "ISOP") and the 1994
Long Term Incentive Plan (the "LTIP").
The MIP sets forth the four main components of executive
compensation that the Company may currently offer to its
executive officers and other key management employees: base
salary, annual cash bonus, stock options and restricted shares of
the Company's Common Stock. The MIP provides that the Company
will establish annual base salaries for participants therein,
subject to approval by the Committee. Base salaries may be
adjusted annually based primarily on the participant's individual
performance and secondarily on the Company's performance. The
Company and the Committee may subjectively consider any and all
factors deemed relevant in adjusting each participant's base
salary from time to time.
The MIP also allows the Committee to grant annual cash
bonuses based primarily upon the performance of the Company or,
if appropriate, a subsidiary, division or business segment
thereof. The MIP provides that earnings before income taxes will
be the performance measure used to evaluate annual performance at
the Company, subsidiary, division or business segment level,
unless the Committee selects a different performance measure.
Specific performance targets are to be established as early as
possible at the start of each calendar year and no bonus is
payable unless the minimum threshold established is met or
exceeded. In addition, specific individual performance levels
may also be specified as a condition to the payment of any bonus
to an individual.
<PAGE>
The MIP further enables the Committee to grant participants
stock options pursuant to the ISOP and rights to receive
restricted stock pursuant to the LTIP. These plans are designed
to afford executive officers and key management employees an
incentive to acquire a proprietary interest in the Company. The
primary objective of both plans is to enhance both the short-term
and long-term profitability of the Company by directly linking
awards under these plans to increased shareholder values.
Pursuant to the terms of the ISOP, the Committee is to
establish financial and other performance targets for the Company
and for the individual participants. Such targets are to serve
as guidelines in making the actual awards. The primary factor to
be considered by the Committee in awarding stock options is the
employee's individual performance, and the Committee retains
discretion as to the actual number of options granted under the
ISOP to any individual in a given year.
Pursuant to the terms of the LTIP, the Committee is to
establish the beginning and end dates for a three year cycle over
which the total shareholder return on Company Common Stock is to
be compared to the total shareholder return on the Russell 2000
index. If the return on the Company's Common Stock equals or
exceeds the targets established by the Committee at the end of
the three year cycle, the participants in the LTIP are then
awarded restricted shares of the Company's Common Stock in an
amount equal to a percentage of their base salary in the third
year of the cycle. The number of restricted shares so awarded
will be determined based on the fair market value at the end of
the three year cycle and such shares may not be transferred by a
recipient for three years thereafter.
With respect to each of the MIP, ISOP and LTIP, the
Committee established five levels of employee participation. The
size of the possible awards under each plan is dependent in large
part upon the level at which an employee is designated for
participation. In determining the level of participation for
each participant, the Committee subjectively considers the
participant's level of responsibility within the Company's
organization.
The Committee followed the above philosophies and
procedures in determining executive compensation for the
Company's 1994 fiscal year. Although the Company improved its
income levels in 1993 compared to 1992, the Committee believed
that only modest increases in base salary were appropriate
pending further improvement. Accordingly, the named executives
received an average salary increase of approximately 2% for 1994.
The Committee also believed that the interests of the Company's
shareholders would be better served in 1994 by making executive
compensation largely dependent on the attainment of the targets
prerequisite to any awards of the annual cash bonus. The Company
did not achieve those targets and no cash bonuses were awarded to
Mr. Harrison or the named executives for 1994.
<PAGE>
Consistent with the Committee's desire to enhance the long-
term profitability of the Company, the Committee awarded stock
options and the right to receive restricted shares of the
Company's Common Stock to executive officers and other management
employees in 1994. Stock options were granted under the ISOP
primarily to motivate enhanced individual performance in 1994 and
beyond, and in part upon the belief that the individual
performances of the recipients directly contributed to the
Company's increased income levels in 1993. The Committee also
designated the Company's executive officers and certain other
management employees as participants in the LTIP for the three
year cycle ending December 31, 1996. The Committee believed that
granting such persons the right to receive restricted shares of
Company Common Stock at the end of that three year cycle, if the
Company outperforms the Russell 2000 index over that time period,
would further motivate such participants to improve the Company's
short-term and long-term profitability.
The Committee further applied the above considerations in
determining the 1994 compensation for Mr. Harrison, the Company's
Chief Executive Officer prior to the hiring of Ms. Hendricks.
The Committee believed that Mr. Harrison's base salary for 1994
should be determined primarily upon the Company's performance and
that such salary would remain constant pending a significant
improvement in the Company's income levels. The Committee also
determined that no stock options would be awarded to Mr. Harrison
in 1994 in view of his substantial existing ownership of Company
Common Stock. The Committee did, however, designate Mr. Harrison
as a top level participant in the LTIP upon the belief that
awards under that plan depend solely upon the Company's stock
performance and that Mr. Harrison's efforts would directly
contribute to the Company's ability to achieve the target
objectives.
The Committee, with the approval of the full Board of
Directors, also established the compensation package provided to
Ms. Hendricks, who was hired as the Company's Chief Executive
Officer effective November 21, 1994. In doing so, the Committee
utilized all elements of the Company's compensation package
available under the MIP, ISOP and LTIP and designated Ms.
Hendricks for participation in all such plans at the top level.
The Committee also determined that, in order to induce Ms.
Hendricks to join the Company, a one time grant of 100,000 non-
qualified stock options was appropriate to provide a substantial
link between the Company's future performance and the total value
of Ms. Hendricks's compensation package. The Committee further
established her annual base salary at $300,000, which level was
deemed necessary in order to be competitive with other
opportunities that Ms. Hendricks may have otherwise explored.
The Committee will review her base salary annually to determine
whether any increases are merited.
Based on the Company's past compensation practices, the
Committee does not currently believe that Section 162(m) of the
Internal Revenue Code, which limits the deductibility of
executive compensation in certain events, will adversely affect
the Company's ability to obtain a tax deduction for compensation
paid to its executive officers.
<PAGE>
THE EXECUTIVE COMPENSATION COMMITTEE
Joseph H. Head, Jr. Roger L. Howe
COMMON STOCK PERFORMANCE
The following performance graph compares the Company's
cumulative shareholder return over a five year period, assuming
$100 invested at December 31, 1989, respectively, in Baldwin
Piano & Organ Company common stock, the Russell 2000 index and in
an industry group index of nineteen companies within the Russell
2000 index engaged in the manufacture or sale of household
furnishing related products. Total shareholder return is based
on the increase in the price of the stock and assumes the
reinvestment of all dividends.
The Russell 2000 index consists of the smallest 2,000
companies in the Russell 3000 index (comprised of 3,000 large
U.S. companies representing approximately 98% of the investable
U.S. equity market). The Russell 2000 index represents
approximately 7% of the Russell 3000 total market capitalization.
The Russell 2000 index is a small cap index where the average
market capitalization of the companies represented (as of
December 31, 1994) is approximately $270 million. The Company
selected the Russell 2000 index as an appropriate index for
comparison based upon the Company's similar size to the smaller
companies represented in the index.
The industry household furnishing group is comprised of:
Aaron Rents, Inc., Basset Furniture Industries, Chromcraft
Revington, Inc., Crown Crafts, Inc., Falcon Products, Inc.,
Flexsteel Industries, Fossil, Inc., Juno Lighting, Inc., Kimball
International, Inc., La-Z-Boy Chair Co., Ladd Furniture, Leggett
& Platt, Inc., Miller (Herman) Inc., Newell Companies, O'Sullivan
Industrial Holdings, Premark International, Shaw Industries,
Inc., Sunbeam-Oster, Inc., and Zenith Electronics Corp. The
Company is not included in this Russell 2000 industry group index
because the Company was not included in the Russell 2000 as of
December 31, 1994 due to the Company's smaller market
capitalization level. Nevertheless, the Company selected this
industry group index because this industry group is the most
similar to the Company's business and due to the fact that
inadequate information is available regarding the Company's
direct competitors in the music industry because many of such
direct competitors are not public companies and/or are foreign
companies.
<PAGE>
COMPARATIVE SHAREHOLDER RETURNS
(Dividends Reinvested)
[A paper copy of the performance graph is being submitted
supplementally to the Company's Branch Chief in the Division of
Corporation Finance as required by Rule 304(d) of Regulation S-T.
The data as presented in such graph is set forth below.]
- Baldwin Piano & Organ Company (BPAO)
+ Russell 2000 Index (R2000)
* Household Furnishings (HF)
1989 1990 1991 1992 1993 1994
BPAO $100.00 $70.00 $ 92.50 $167.50 $150.00 $110.00
R2000 $100.00 $80.49 $117.56 $139.21 $165.53 $162.51
HF $100.00 $75.85 $124.95 $150.24 $207.52 $189.86
OTHER SECURITIES FILINGS
The information contained in this Proxy Statement under the
headings "Executive Compensation--Report of Compensation
Committee on Executive Compensation" and "--Common Stock
Performance" are not, and should not be deemed to be,
incorporated by reference into any filings by the Company under
the 1933 Act or the Securities Exchange Act of 1934 that purport
to incorporate other Securities and Exchange Commission filings
made by the Company, or portions thereof, by reference (including
this Proxy Statement).
CERTAIN TRANSACTIONS AND PROCEEDINGS
The November, 1994 Employment Agreement between the Company
and Karen L. Hendricks, the Company's Chief Executive Officer and
President, provided that the Company, upon the request of Ms.
Hendricks, would arrange temporary financing to facilitate her
purchase of a new residence in Cincinnati and to pay all interest
expense of such loan for up to six months. Pursuant to such
contractual obligation, in December, 1994 the Company loaned Ms.
Hendricks the principal amount of $130,000 to assist her in
relocating to Cincinnati from Phoenix, Arizona. The stated per
annum interest was the prime rate announced from time to time by
The Fifth Third Bank, Cincinnati, Ohio. Ms. Hendricks repaid the
full principal amount of the loan in February, 1995, and the
Company forgave the accrued interest amount of $2,241.
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP to
be the independent auditors of the Company for the year ending
December 31, 1995. This selection will be submitted for
ratification at the Annual Meeting. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting.
They will have the opportunity to make a statement if they desire
to do so and are expected to be available to respond to
appropriate questions.
Ratification of the selection of auditors requires a
majority of the votes cast at the Annual Meeting. Any shares not
voted (whether by abstention, broker non-vote or otherwise) have
no impact on the vote. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE FOR RATIFICATION.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any Shareholder proposal intended for inclusion in the proxy
material for the 1996 Annual Meeting must be received in writing
by the Company on or before January 1, 1996. The inclusion of
any proposal will be subject to applicable rules of the
Securities and Exchange Commission.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1994, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE MAILED WITHOUT CHARGE TO
SHAREHOLDERS UPON REQUEST. REQUESTS SHOULD BE ADDRESSED TO THE
COMPANY, 422 WARDS CORNER ROAD, LOVELAND, OHIO 45140-8390,
ATTENTION: MR. CHARLES R. JUENGLING, VICE PRESIDENT, SECRETARY
AND TREASURER. THE FORM 10-K INCLUDES CERTAIN EXHIBITS, WHICH
WILL BE PROVIDED ONLY UPON PAYMENT OF A FEE COVERING THE
COMPANY'S REASONABLE EXPENSES.
OTHER MATTERS
The Board of Directors of the Company is not aware of any
other matters to come before the meeting. If any other matters
should come before the meeting, the persons named in the enclosed
proxy intend to vote the proxy according to their best judgment.
You are urged to complete, sign, date and return your proxy
to make certain your shares will be voted at the 1995 Annual
Meeting. For your convenience in returning the proxy, an
addressed envelope is enclosed, requiring no additional postage
if mailed in the United States.
For the Board of Directors,
R. S. HARRISON
R. S. HARRISON
Chairman of the Board
<PAGE>
PROXY
BALDWIN PIANO & ORGAN COMPANY THIS PROXY IS SOLICITED
422 Wards Corner Road ON BEHALF OF THE
Loveland, Ohio 45140-8390 BOARD OF DIRECTORS
The undersigned hereby appoints Charles R. Juengling, Larry
E. Mustard and Thomas W. Kahle, or any of them, each with power
of substitution, as Proxies of the undersigned to attend the
Annual Meeting of Shareholders of Baldwin Piano & Organ Company
(the "Company") to be held on Tuesday, May 9, 1995, at 11:00
a.m., Cincinnati time, at the Company's headquarters located at
422 Wards Corner Road, Loveland, Ohio and any adjournment or
adjournments thereof, and to vote the number of shares of the
Company's Common Stock (par value $.01 per share) which the
undersigned would be entitled to vote if personally present on
the following matters:
1. ELECTION OF DIRECTORS
Vote for Five (5) Nominees to Serve as Directors of the
Company for the one-year term ending at the 1996 Annual Meeting
of Shareholders.
WITHHOLD AUTHORITY
NOMINEE FOR TO VOTE
_______ ___ __________________
George E. Castrucci ___ ___
R. S. Harrison ___ ___
Joseph H. Head, Jr. ___ ___
Karen L. Hendricks ___ ___
Roger L. Howe ___ ___
2. RATIFICATION OF AUDITORS
For ___ Against ___ Abstain ___ the ratification of the
selection by the Board of Directors of KPMG Peat Marwick LLP as
auditors for the Company for the fiscal year ending December 31,
1995.
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
[Reverse Side]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" ALL NOMINEES LISTED IN
PROPOSAL 1, "FOR" PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES
ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated ......................, 1995<PAGE>
<PAGE>
[Shareholder's Name and Address as on Record Books]
__________________________________
__________________________________
(Please sign exactly as your name or names appear hereon. When
shares are held by joint tenants, both should sign. If signing
as an attorney, executor, administrator, trustee or guardian,
give your full title as such. If signing on behalf of a
corporation, the full name of the corporation should be set forth
accompanied by the signature on its behalf of a duly authorized
officer.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE
ENVELOPE PROVIDED.
