<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
BALDWIN
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):____________
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction: _____________________
________________________________________
(5) Total fee paid: ______________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ______________________________________________
(2) Form, Schedule or Registration Statement No.:_________________________
(3) Filing Party:_________________________________________________________
(4) Date Filed:___________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO] BALDWIN PIANO & ORGAN COMPANY
422 Wards Corner Road
Loveland, Ohio 45140-8390
R.S. HARRISON
Chairman of the Board
April 4, 1996
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 14, 1996. 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,
/s/ RS Harrison
R. S. HARRISON
Chairman of the Board
<PAGE> 3
[LOGO] BALDWIN
BALDWIN PIANO & ORGAN COMPANY
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 14, 1996
---------------------------------------------
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 14, 1996, at 11:00
a.m., Cincinnati time, for the following purposes:
(1) To elect six directors for a one-year term ending in 1997; and
(2) To act upon any other matter that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Thursday, March
28, 1996, 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 1995
Annual Report to Shareholders.
For the Board of Directors
/s/ RS Harrison
R. S. HARRISON
Chairman of the Board
April 4, 1996
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> 4
BALDWIN PIANO & ORGAN COMPANY
422 WARDS CORNER ROAD
LOVELAND, OHIO 45140-8390
---------------------------------------------
PROXY STATEMENT
---------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 14, 1996
---------------------------------------------
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
14, 1996, 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. 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 4,
1996, together with the Company's 1995 Annual Report, which includes certified
financial statements for the fiscal year ended December 31, 1995.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record at the close of business on Thursday, March 28, 1996
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 six members. The Shareholders will vote at the
Annual Meeting for the election of all six directors who will constitute the
Company's Board of Directors for the one-year term expiring at the Annual
Meeting of Shareholders in 1997.
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.
1
<PAGE> 5
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 58, 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.
WILLIAM B. CONNELL, age 55, has served as a director of the Company since
July 1995. Since 1994, he has also served as the Chairman of EDB Holdings, Inc.,
a privately-held company engaged in the international retail sale of optical
eyewear, and has been a director since 1988. From 1990 to 1994, Mr. Connell
served as President and Vice Chairman of Whittle Communications, a limited
partnership which specialized in multi-media services.
R. S. HARRISON, age 64, 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 63, 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. He also currently serves as a
director of Fifth Third Bancorp, since 1987.
KAREN L. HENDRICKS, age 48, joined the Company as Chief Executive Officer,
President and a director in 1994. Prior to joining the Company, Ms. Hendricks
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
over twenty 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 61, 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., and
Star Banc Corporation.
There are no family relationships among any of the above-named nominees for
director nor among any of the nominees and any executive officers of the
Company.
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors of the Company met eight times during the year ended
December 31, 1995. In 1995, all directors attended all meetings of the Board of
Directors and all committees on which the director served during his or her
term.
2
<PAGE> 6
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 1995,
the Executive Compensation Committee consisted of Messrs. Head and Howe and
the Audit Committee was comprised of Mr. Castrucci and Mr. Connell, who became
a member of the Audit Committee after joining the Board of Directors in July
1995. The Executive Compensation Committee met two times in 1995 and the Audit
Committee met four 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 28, 1996.
<TABLE>
<CAPTION>
SHARES OWNED PERCENT OF
NAME(1) BENEFICIALLY OUTSTANDING SHARES
------- ------------ ------------------
<S> <C> <C>
Heartland Advisors, Inc............................. 597,800(2) 17.5%
R. S. Harrison...................................... 367,267(3) 10.7%
State of Wisconsin Investment Board................. 300,000(4) 8.8%
David L. Babson & Company, Inc...................... 261,100(5) 7.6%
Dimensional Fund Advisors Inc....................... 183,000(6) 5.4%
<FN>
- ---------------
(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) Heartland Advisors, Inc. last informed the Company that it is a registered
investment adviser that may be deemed the beneficial owner of 597,800 shares
of Common Stock. Heartland Advisors, Inc. has sole dispositive power over
all 597,800 shares and sole voting power of 495,800 shares.
(3) Of the shares listed, 258,255 are owned directly by Mr. Harrison, and 8,000
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 by Mr. Harrison for his four adult
children.
(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 300,000 shares of Common Stock. State of
Wisconsin Investment Board has sole dispositive power and sole voting power
over all 300,000 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 213,800
shares and shared voting power of 47,300 shares.
(6) Dimensional Fund Advisors Inc. last informed the Company that it is a
registered investment adviser that may be deemed the beneficial owner of
183,000 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 183,000
shares and sole voting
</TABLE>
3
<PAGE> 7
power of 122,800 shares. DFA Investment Dimensions Group Inc. has voting
power of an additional 22,300 shares and DFA Investment Trust Company has
voting power of the remaining 37,900 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 (as defined below) and all executive officers and directors as a group
as of March 28, 1996.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OWNED OUTSTANDING
NAME BENEFICIALLY SHARES
---- -------------- -----------
<S> <C> <C>
CURRENT DIRECTORS AND NOMINEES
R. S. Harrison.................................... 367,267(1)(2) 10.7%
Karen L. Hendricks................................ 104,000(3) 3.0%
Joseph H. Head, Jr................................ 28,000(3) .8%
Roger L. Howe..................................... 21,000(3) .6%
George E. Castrucci............................... 20,000(3) .6%
William B. Connell................................ 3,000(3) .1%
NAMED EXECUTIVES
George C. Huebner................................. 9,000(2) .3%
Charles R. Juengling.............................. 18,000(2) .5%
Larry E. Mustard.................................. 7,500(2) .2%
All executive officers and directors as a group
(11 persons)................................... 590,767(2)(3) 16.3%
<FN>
- ---------------
(1) See note (3) under "Security Ownership of Certain Beneficial Owners and
Management -- Holders of More than Five Percent Beneficial Ownership."
(2) Includes shares owned beneficially subject to the holder's right to exercise
outstanding incentive stock options: 8,000 shares for Mr. Harrison, 9,000
shares for Mr. Huebner, 17,000 shares for Mr. Juengling, 7,500 shares for
Mr. Mustard, and 13,000 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,
18,000 shares for each of Messrs. Head and Castrucci, 6,000 shares for Mr.
Howe, and 2,000 shares for Mr. Connell.
</TABLE>
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 of the Company's directors,
executive 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 1995
fiscal year.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and each of the Company's other four
4
<PAGE> 8
most highly compensated executive officers (the "named executives") during each
of the last three fiscal years.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------------
RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARDS OPTIONS COMPENSATION
POSITION YEAR (1)($) (2)($) (3)($) (#) (4)($)
- ---------------------------- ----- ------- ------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks(5) 1995 300,000 123,212 -0- -0- 10,998
Chief Executive 1994 34,231 -0- -0- 100,000 207
Officer and President
R. S. Harrison 1995 243,750 112,944 -0- 2,000 49,885
Chairman of the 1994 355,700 -0- -0- -0- 43,914
Board and former 1993 355,700 106,710 -0- -0- 45,093
Chief Executive Officer
George C. Huebner 1995 100,000 26,341 -0- 3,000 7,073
Vice President/ 1994 83,000 9,960 -0- 3,000 6,932
Keyboard Acceptance 1993 75,600 22,680 -- -0- 3,363
Corporation
Charles R. Juengling 1995 124,800 30,754 -0- 2,000 8,354
Vice President/ 1994 120,000 -0- -0- 3,000 10,279
Controller/ 1993 111,300 33,390 -0- -0- 9,662
Secretary
Larry E. Mustard(6) 1995 110,000 27,107 -0- 6,000 7,041
Vice President/ 1994 94,232 20,000 -0- 1,500 828
Finance/Treasurer
</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.
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Karen L. Hendricks $ -- $ -- $ --
R. S. Harrison 36,563 69,361 69,361
George C. Huebner 6,598 6,341 5,832
Charles R. Juengling 7,488 9,203 8,586
Larry E. Mustard 4,950 -- --
</TABLE>
(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
5
<PAGE> 9
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.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Karen L. Hendricks
Retirement Plan............................ $ 9,000 $ -- $ --
Group Life Insurance....................... 1,998 207 --
-------- -------- --------
$ 10,998 $ 207 $ --
======== ======== ========
R. S. Harrison
Retirement Plan............................ $ 11,813 $ 27,745 $ 27,445
Executive Insurance........................ 32,843 12,592 12,937
Group Life Insurance....................... 1,554 1,932 1,932
Automobile (Personal Use).................. 3,675 1,645 2,779
-------- -------- --------
$ 49,885 $ 43,914 $ 45,093
======== ======== ========
George C. Huebner
Retirement Plan............................ $ 6,598 $ 6,341 $ 2,916
Group Life Insurance....................... 475 591 447
-------- -------- --------
$ 7,073 $ 6,932 $ 3,363
======== ======== ========
Charles R. Juengling
Retirement Plan............................ $ 7,488 $ 9,203 $ 8,586
Group Life Insurance....................... 866 1,076 1,076
-------- -------- --------
$ 8,354 $ 10,279 $ 9,662
======== ======== ========
Larry E. Mustard
Retirement Plan............................ $ 6,375 $ -- $ --
Group Life Insurance....................... 666 828 --
-------- -------- --------
$ 7,041 $ 828 $ --
======== ======== ========
<FN>
(5) The Company hired Ms. Hendricks as Chief Executive Officer and President
effective November 21, 1994.
(6) The Company hired Mr. Mustard as Controller effective January 24, 1994.
</TABLE>
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
received an annual base salary of $275,000, adjusted to $150,000 effective
October 1, 1995. Mr. Harrison's salary will 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 employee benefits
normally accorded to the Company's senior officers and will receive lifetime
medical benefits.
6
<PAGE> 10
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, was guaranteed a 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 provided that she would
receive a one time grant of 100,000 nonqualified 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 $1,000,000 and any base
salary and 1995 incentive payment paid prior to the date of termination. Ms.
Hendricks' Employment Agreement contains covenants by Ms. Hendricks not to
compete with the Company for a period of one year after termination of her
Employment Agreement by Ms. Hendricks, by the Company for cause or upon her
disability.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants by the
Company of stock options to each of the named executives during 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
- --------------------------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME (#) YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- ------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks -- -- -- -- -- --
R. S. Harrison 2,000 2.99 12.925 5/9/00 12,430 35,110
George C. Huebner 3,000 4.48 11.75 5/9/05 22,170 56,190
Charles R. Juengling 2,000 2.99 11.75 5/9/05 14,780 37,460
Larry E. Mustard 6,000 8.96 11.75 5/9/05 44,340 112,380
</TABLE>
7
<PAGE> 11
- ---------------
(1) All grants were made at the fair market value of $11.75 per share on the
grant date, except for options granted to Mr. Harrison at $12.925 per share.
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.
(2) Total options granted to all executive officers and other employees of the
Company in 1995 were for an aggregate of 67,000 shares of Common Stock.
(3) Calculated based upon assumed stock prices for the Company's Common Stock of
$19.14 and $30.48, respectively, if 5% and 10% annual rates of stock
appreciation are achieved over the full term of the options granted to the
executive officers reflected in the table. The potential realizable gain
equals the product of the number of shares underlying the stock option grant
and the difference between the assumed stock price and the exercise price of
each option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding individual
exercises of stock options during 1995 by each of the named executives.
<TABLE>
<CAPTION>
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/95 12/31/95
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (1)(#) (2)(3)($)
- ------------------------- ------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Karen L. Hendricks -0- -0- 40,000/ -0-/
60,000 -0-
R. S. Harrison -0- -0- 6,000/ 375/
2,000 -0-
George C. Huebner -0- -0- 3,600/ 5,125/
5,400 2,250
Charles R. Juengling -0- -0- 12,600/ 28,250/
4,400 1,500
Larry E. Mustard -0- -0- 300/ -0-/
7,200 4,500
</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 1995.
(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.
(3) The value of exercisable in-the-money options is calculated by determining
the difference between $12.50 per share, the last reported sale price of the
Common Stock on the Nasdaq National Market on December 29, 1995, 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 1994 Incentive Stock Option Plan granted in 1994 have an exercise
price of $16.00 per share. All unexercisable stock options under the
Company's 1994 Incentive Stock Option Plan
8
<PAGE> 12
granted in 1995 have an exercise price of $11.75 per share, except for
options granted to Mr. Harrison at $12.925 per share. All of Ms. Hendricks'
stock options have an exercise price of $12.50 per share.
COMPENSATION OF DIRECTORS
In 1995, 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 (except Mr. Connell, who was compensated in the amount of $5,000 for
serving on the Board of Directors for the second half of the 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. 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 1995, 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.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
For the Company's 1995 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
9
<PAGE> 13
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.
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 1995 fiscal year. The Company's income
level decreased in 1994 compared to 1993 primarily due to inventory write-downs
relating to decisions to upgrade technology on certain musical instruments and
expenses associated with the transition of senior management. Accordingly, the
Committee believed that only modest increases in base salary were appropriate.
Excluding Ms. Hendricks and Mr. Harrison, the named executives received an
average salary increase of approximately 1% for 1995. Ms. Hendricks is excluded
from such average because her partial year compensation in 1994 prevents an
accurate comparison with her 1995 salary. Mr. Harrison is excluded from such
average because the transition of senior management during 1995 is the primary
cause of the difference between his 1994 and 1995 salaries. The Committee also
believed that the interests of the Company's shareholders would be better served
in 1995 by making executive compensation largely dependent on the attainment of
the targets prerequisite to any awards of the annual cash bonus. Portions of the
Company achieved their goals in 1995 and, accordingly, bonuses amounting to
$443,371 were paid, including guaranteed bonuses of $173,240.
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 1995. Stock options were granted under the
ISOP primarily to motivate enhanced individual performance in 1995 and beyond.
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.
10
<PAGE> 14
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.
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, 1990, respectively, in Baldwin Piano & Organ Company common stock, the
Russell 2000 index and in an industry group index of 32 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 11% 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, 1995) is
approximately $288 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: Basset Furniture
Industries, Bed Bath & Beyond Industries, Chromcraft Revington, Inc., Crown
Crafts, Inc., Department 56, Inc., Ethan Allen Interior, Falcon Products, Inc.,
Haverty Furniture, Heilig-Meyers Co., Interco, Inc., La-Z-Boy Chair Co., Ladd
Furniture, Lechters, Inc., Leggett & Platt, Inc., Levitz Furniture, Inc.,
Libbey, Inc., Lifetime Hoan Corp., Mikasa, Inc., National Presto Industries,
Newell Companies, Oneida, Ltd., O'Sullivan Industrial Holdings, Pillowtex Corp.,
Premark International, Rubbermaid, Inc., Safety First, Inc., Shaw Industries,
Inc., Springs Industries, Stanhome, Inc., Syratech Corp., Westpoint Stevens
Industries, 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, 1995 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.
11
<PAGE> 15
COMPARATIVE SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BPAO R2000 HF
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 132.14 146.05 164.75
1992 239.29 172.94 198.09
1993 214.29 205.64 273.61
1994 157.14 201.90 250.32
1995 178.57 259.31 254.88
- Baldwin Piano & Organ Company (BPAO)
+ Russell 2000 Index (R2000)
X Household Furnishings (HF)
--------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------------------------------------------
BPAO $100.00 $132.14 $239.29 $214.29 $157.14 $178.57
--------------------------------------------------------------------------------------------------------------------
R2000 $100.00 $146.05 $172.94 $205.64 $201.90 $259.31
--------------------------------------------------------------------------------------------------------------------
HF $100.00 $164.75 $198.09 $273.61 $250.32 $254.88
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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).
INDEPENDENT AUDITORS
The Company has not yet selected or recommended an independent auditor for
the year ending December 31, 1996, pending review by management. KPMG Peat
Marwick LLP served as the independent auditors of the Company for the year
ending December 31, 1995. Representatives of KPMG Peat Marwick LLP are expected
to be present at the 1996 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.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any Shareholder proposal intended for inclusion in the proxy material for
the 1997 Annual Meeting must be received in writing by the Company on or before
January 1, 1997. The inclusion of any proposal will be subject to applicable
rules of the Securities and Exchange Commission.
12
<PAGE> 16
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995, 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 CONTROLLER. 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 1996 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,
/s/ R. S. Harrison
R. S. HARRISON
Chairman of the Board
13
<PAGE> 17
<TABLE>
<CAPTION>
BALDWIN PIANO & ORGAN COMPANY THIS PROXY IS SOLICITED ON
422 WARDS CORNER ROAD - LOVELAND, OHIO 45140-8390 BEHALF OF THE BOARD OF DIRECTORS
P The undersigned hereby appoints Larry E. Mustard, Charles R. Juengling, and Thomas W. Kahle, or any of them,
each with the power of substitution, as Proxies of the undersigned to attend the Annual Meeting of Shareholders of
R Baldwin Piano & Organ Company (the "Company") to be held on Tuesday, May 14, 1996, at 11:00 a.m., Cincinnati time,
at the Company's headquarters located at 422 Wards Corner Road, Loveland, Ohio and any adjournment thereof, and to
O 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:
X
1. ELECTION OF DIRECTORS
Y Vote for (6) Nominees to serve as Directors of the Company for the one-year term ending at the 1997
Annual Meeting of Shareholders.
WITHHOLD AUTHORITY
NOMINEE FOR TO VOTE
------- --- ------------------
<S> <C> <C>
George E. Castrucci [ ] [ ]
William B. Connell [ ] [ ]
R. S. Harrison [ ] [ ]
Joseph H. Head, Jr. [ ] [ ]
Karen L. Hendricks [ ] [ ]
Roger L. Howe [ ] [ ]
2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come
before the meeting.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
</TABLE>
<PAGE> 18
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 AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER BUSINESS AS MAY BE PROPERLY COME BEFORE THE MEETING.
Dated_______________________________, 1996
(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 AND DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENVELOPE
PROVIDED
