<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________
SCHEDULE 13D
(AMENDMENT NO. 1)
Under the Securities Exchange Act of 1934
Baldwin Piano & Organ Company
__________________
(Name of issuer)
Common Stock
___________________________
(Title of class of securities)
058246109
--------------
(CUSIP number)
Kenneth W. Pavia, Sr.
Bolero Investment Group, L.P.
1101 E. Balboa Boulevard
Newport Beach, CA 92661-1313
(714) 675-3850
______________________________________________
(Name, address and telephone number of person
authorized to receive notices and communications)
COPY TO:
Scott R. Haber
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111-2562
(415) 391-0600
September 13, 1996
__________________________________________________
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this statement because of Rule 13d-1(b)(3) or (4), check the
following box: [_]
Check the following box if a fee is being paid with the statement: [_]
Page 1 of 16 Pages
Exhibit Index is on Page 10
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 058246109 PAGE 2 OF 16 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1.
BOLERO INVESTMENT GROUP, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2. (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3.
- ------------------------------------------------------------------------------
4. SOURCE OF FUNDS
AF, WC
- ------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
CALIFORNIA
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7.
NUMBER OF 142,560 SHARES OF COMMON STOCK
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8.
-0- SHARES OF COMMON STOCK
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9.
REPORTING 142,560 SHARES OF COMMON STOCK
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10.
-0- SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11.
142,560 SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12. [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.
4.2%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
PN
- ------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 058246109 PAGE 3 OF 16 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1.
KENNETH W. PAVIA, SR.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2. (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3.
- -----------------------------------------------------------------------------
4. SOURCE OF FUNDS
AF, PF
- -----------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
- -----------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
UNITED STATES OF AMERICA
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7.
NUMBER OF 204,560 SHARES OF COMMON STOCK
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8.
-0- SHARES OF COMMON STOCK
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9.
REPORTING 204,560 SHARES OF COMMON STOCK
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10.
-0- SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11.
204,560 SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12. [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.
6.0%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
IN
- ------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 058246109 PAGE 4 OF 16 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1.
FHI, INC.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2. (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3.
- -----------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
- -----------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
- -----------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6.
CALIFORNIA
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7.
NUMBER OF 62,000 SHARES OF COMMON STOCK
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8.
-0- SHARES OF COMMON STOCK
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9.
REPORTING 62,000 SHARES OF COMMON STOCK
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10.
-0- SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11.
62,000 SHARES OF COMMON STOCK
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12. [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
13.
1.8%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14.
CO
- ------------------------------------------------------------------------------
4
<PAGE>
Item 1. Security and Issuer.
--------------------
This Amendment No. 1 to Schedule 13D is being filed on behalf of the
undersigned Reporting Persons to amend the Schedule 13D filed July 18, 1996 (the
"Schedule 13D"), relating to shares of common stock, par value $.01 per share
(the "Shares"), of Baldwin Piano & Organ Company, a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 422
Wards Corner Road, Loveland, Ohio 45140-8390. Unless otherwise indicated, all
capitalized terms used herein but not defined herein shall have the same
meanings as set forth in the Schedule 13D.
Item 3. Source and Amount of Funds or Other Consideration.
--------------------------------------------------
As of the close of business on September 13, 1996, Bolero held 142,560
Shares, of which (i) 10,000 were contributed to Bolero by Mr. Pavia, (ii) 39,600
were contributed to Bolero by Balboa, (iii) 28,000 were contributed to Bolero by
limited partners of Bolero (other than Balboa) and (iv) 64,960 were purchased by
Bolero. Mr. Pavia purchased the Shares which he contributed to Bolero for an
aggregate purchase price (excluding commissions) of $126,750, which amount was
provided from his personal funds. Balboa purchased the Shares which it
contributed to Bolero for an aggregate purchase price (excluding commissions) of
$502,975, which amount was provided from borrowings under standard broker margin
arrangements which have been repaid. It is anticipated that Balboa will be
liquidated in the near future and the limited partner interests in Bolero which
it holds will be distributed to its general partner, Mr. Pavia, and certain of
its limited partners, including FHI. The Shares contributed to Bolero by
limited partners (other than Balboa) had an aggregate market value, at the time
they were contributed, of $404,875. Bolero purchased the Shares that it
purchased for an aggregate purchase price (excluding commissions) of $973,468,
which amount was provided from its working capital.
As of the close of business on September 13, 1996, FHI held an
aggregate of 62,000 Shares which it had purchased for an aggregate purchase
price (excluding commissions) of $789,500, which amount was provided from FHI's
working capital.
None of the Shares is currently subject to any margin arrangements,
although the Reporting Persons may from time to time enter into one or more of
such arrangements in the future.
Item 4. Purpose of Transaction.
-----------------------
Item 4 to the Schedule 13D is hereby amended, in pertinent part, as
follows:
On September 13, 1996, Mr. Pavia, on behalf of himself, delivered a
letter to the Company, which letter is filed as Exhibit 3 and is incorporated by
reference herein, requesting that the Board of Directors of the Company hire a
nationally recognized investment banker to explore a possible sale, merger or
business combination involving the Company as alternatives in enhancing the
Company's value. In his letter, Mr. Pavia stated that
5
<PAGE>
in the event the Board rejects his request he was notifying the Company of his
intention to present the following proposal (the "Proposal") at the Company's
1997 Annual Meeting of Shareholders, and requesting that the Proposal and the
Supporting Statement set forth below be included in the Company's proxy
solicitation materials for such meeting.
Resolved that the shareholders of the company deem it desirable and
in their best interest that the Board of Directors immediately engage
the services of a nationally recognized investment banker to explore
all other alternatives to enhance shareholder values including, a
possible sale, merger or other business combinations involving the
company.
SUPPORTING STATEMENT: Proponent believes that the company is facing a
variety of challenges and opportunities that management has not
addressed. The company's tradenames - Baldwin, Wurlitzer and
Chickering - have worldwide name recognition, and the company is a
premier producer of mid-priced pianos and organs. As the sole piano
maker in America, Baldwin faces mostly foreign competition in an era
where there is a movement in this country to "buy American." The
finance company of Baldwin has been in existence for a century, and
provides growth opportunities as an independent entity and as a sales
tool for the company. The digital piano division continues to expand
while the church organ unit has increased its market share, and the
circuit board division has demonstrated its potential for growth since
its inception.
Despite all of these and other intrinsic strengths and
opportunities, proponent believes that the company's stock has
underperformed, and that the current, laggard stock price does not
reflect the company's true value. Proponent also believes that there
is an unacceptably low level of investment community interest in the
stock, which has resulted in a lack of liquidity for the shareholders.
Proponent believes that management has not addressed many of the
fundamental issues that face the company, and has failed to take
advantage of the opportunities, which is due in part to the lack of
depth of management.
The Board of Directors should take immediate action to engage the
services of an investment banker to explore all alternatives to
enhance the value of the company, including a possible sale, merger or
other business combination of the company as a way of maximizing
shareholder value. Proponent believes that this action would be in
accordance with the fiduciary obligations of the Board of Directors.
The Board of Directors must understand that the shareholders'
interests would now be best served by prompt, diligent, and good faith
implementation of the above resolution. Retaining an investment
banking firm to assist the Board and management in fulfilling their
duties to enhance shareholder value would require little, if any, cost
outlay by the company. This would be a positive means to enable the
company to realize its potential, and a productive way to yield the
kind of returns which we as shareholders deserve.
6
<PAGE>
Shareholders are urged to vote "FOR" the proposal.
The Reporting Persons reserve the right to solicit proxies for the
Proposal or for other proposals, if any, which they may decide to present at the
meeting.
Item 5. Interest in Securities of the Issuer.
-------------------------------------
(a)-(b) As of the close of business on September 13, 1996, Bolero
directly owned in the aggregate 142,560 Shares, which represent approximately
4.2% of the 3,422,196 Shares outstanding as of August 1, 1996, as reported in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
(the "Outstanding Shares"). Bolero, acting through its sole general partner,
Mr. Pavia, has the sole power to vote or direct the vote, and to dispose or to
direct the disposition of, the Shares which it owns directly.
As of the close of business on September 13, 1996, FHI directly owned
in the aggregate 62,000 Shares, which represent approximately 1.8% of the
Outstanding Shares. FHI has the sole power to vote or direct the vote, and to
dispose or to direct the disposition of, the Shares which it owns directly.
As of the close of business on September 13, 1996, Mr. Pavia did not
hold any Shares directly. As the sole general partner of Bolero, Mr. Pavia may
be deemed to beneficially own the Shares held by Bolero. As the sole executive
officer and shareholder of FHI, Mr. Pavia may be deemed to beneficially own the
Shares held by FHI.
As of the close of business on September 13, 1996, Mrs. Pavia did not
hold any Shares directly. Mrs. Pavia has no right to vote or dispose of any
Shares held by Bolero or FHI, and therefore does not beneficially own any of
such Shares.
As of the close of business on September 13, 1996, Balboa did not hold
any Shares directly. As a limited partner of Bolero, Balboa has no right to
vote or dispose of any Shares held by Bolero, and therefore does not
beneficially own any Shares.
The Reporting Persons may be deemed to be acting as a group in
relation to their respective investments in the Company.
Except as set forth in this Item 5(a)-(b), each of the persons named
in this Item 5(a)-(b) disclaims beneficial ownership of any Shares owned
beneficially or of record by any other person named in this Item 5(a)-(b).
(c) On July 19, 1996, Bolero acquired 3,000 of the Shares it presently
owns through a capital contribution by a limited partner, which Shares had an
aggregate market value of $46,125. In addition, within the past 60 days Bolero
purchased 13,000 Shares through open market purchases in the following
transactions, all of which were effected in the over-the-counter market:
7
<PAGE>
<TABLE>
<CAPTION>
Date Number of Shares Price per Share*
---- ---------------- ----------------
<S> <C> <C>
07/22/96 2,000 $15.50
07/25/96 1,500 $15.25
08/02/96 3,000 $15.50
08/19/96 1,500 $15.00
08/22/96 2,000 $15.00
09/04/96 3,000 $15.25
</TABLE>
* Excluding commissions
Except as set forth herein, none of the Reporting Persons, Mrs. Pavia or Balboa
has effected any transaction in the Shares during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 7. Material to be Filed as Exhibits.
---------------------------------
Exhibit 1 Joint Filing Agreement dated as of July 17, 1996, which was filed as
Exhibit 1 to the Schedule 13D filed on July 18, 1996 by the Reporting
Persons and is incorporated by reference herein.
Exhibit 2 Form of Press Release.
Exhibit 3 Letter from Mr. Pavia to the Company dated September 13, 1996.
8
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of each of the undersigned's
knowledge and belief, each of the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: September 13, 1996
Bolero Investment Group, L.P.
By: /s/ Kenneth W. Pavia, Sr.
-----------------------------------
Name: Kenneth W. Pavia, Sr.
Its: General Partner
/s/ Kenneth W. Pavia, Sr.
---------------------------------------
Kenneth W. Pavia, Sr.
FHI, Inc.
By: /s/ Kenneth W. Pavia, Sr.
----------------------------------
Name: Kenneth W. Pavia, Sr.
Its: President
9
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 1 Joint Filing Agreement dated as of July 17, 1996, which was filed as
Exhibit 1 to the Schedule 13D filed on July 18, 1996 by the Reporting
Persons and is incorporated by reference herein.
Exhibit 2 Form of Press Release.
Exhibit 3 Letter from Mr. Pavia to the Company dated September 13, 1996.
10
<PAGE>
EXHIBIT 2
BOLERO INVESTMENT GROUP L.P.
----------------------------
PO DRAWER 5208 1101 E. BALBOA BLVD
HILTON HEAD ISLAND NEWPORT BEACH, CA 92661-1313
(803) 785-7730 (714) 675-3850
(803) 686-2659 (FAX) (714) 673-0434 (FAX)
CONTACT: KENNETH W. PAVIA
FOR RELEASE: IMMEDIATELY
SEPTEMBER 13, 1996
PAVIA CALLS ON BALDWIN BOARD TO HIRE INVESTMENT BANKER
------------------------------------------------------
Hilton Head Island, SC, September 13, 1996 -- Kenneth W. Pavia,
General Partner of Bolero Investment Group, L.P., announced today that he had
called on the Board of Directors of Baldwin Piano and Organ Co. to hire a
nationally recognized investment banker to explore a possible sale, merger or
business combination involving the company as alternatives in enhancing the
company's value.
In July 1996, Mr. Pavia announced that he and Bolero Investment Group
had acquired a 5.5% stake in Baldwin. Mr. Pavia reported that the shares were
acquired as an investment which he views as having significant potential for
increased value. Currently, Mr. Pavia and Bolero collectively own 6.0% of the
outstanding shares of Baldwin.
Mr. Pavia stated that in the event the Board rejected his suggestion,
he requested that the following proposal be included in the proxy materials for
the company's 1997 annual meeting of shareholders:
Resolved, that the shareholders of the company deem it desirable and
in their best interest that the Board of Directors immediately engage the
services of a nationally recognized investment banker to explore a possible
sale, merger, or other business combination involving the company and all other
alternatives to enhance shareholder value.
In his supporting statement for the proposal, Mr. Pavia stated that he
believed that the company is facing a variety of challenges and opportunities
that management has not addressed. Mr. Pavia also stated that he believed that
the company's stock has underperformed and called on the Board to take immediate
action to engage the services of an investment banker to explore all
alternatives to enhance the value of the company, including a possible sale,
merger or other business combination of the company as a way of maximizing
shareholder value.
<PAGE>
EXHIBIT 3
BOLERO INVESTMENT GROUP, L.P.
-----------------------------
PO BOX 5208 1101 E. BALBOA BLVD.
HILTON HEAD ISLAND, SC 29938 NEWPORT BEACH, CA 92661-1313
(803) 785-7730 (714) 675-3850
(803) 686-2659 (FAX) (714) 673-0434 (FAX)
September 13, 1996
Ms. Karen Hendricks
Chief Executive Officer & President
Baldwin Piano & Organ Co.
422 Wards Corner
Loveland, OH 45140-8390
Dear Ms. Hendricks:
As you may recall, on August 14th I sent you a letter requesting a
meeting and provided you with my notes which I suggested might form the basis
for our discussions. Your response, dated August 16th, declined my invitation
to meet, and requested that in the event I had any comments or suggestions, I
should submit them in writing in deference to your busy schedule. Subsequently,
I sent a letter, dated August 20th, wherein I acknowledged receipt of your
August 16th letter and requested various documents which would aid in my
analysis of the company. It was my opinion at the time that due to your
apparent unwillingness to meet, the documents requested were necessary in order
to obtain an accurate and complete picture of Baldwin Piano & Organ Co. Upon
reflection, however, it became apparent that any analysis based solely on
documents would be made in a vacuum. Only with management's input could I truly
understand all of the practical considerations which influenced management in
making its decisions. Based on this reasoning, I sent a follow up letter dated
August 29th wherein I asked you to reconsider your decision not to meet with me.
On September 4th, I received your reply wherein you again refused my invitation
to meet and requested that I submit all my suggestions in writing.
As stated in its 13(D) filing, the Bolero Partnership views its
investment in Baldwin as having significant potential for increased value. In
analyzing Baldwin as an investment opportunity, I was attracted by various
facets of Baldwin. The company has been in existence for over one hundred and
thirty years and the Baldwin, Wurlitzer and Chickering names have worldwide name
recognition. The company is firmly established as a premier producer of mid-
priced pianos and organs. As the sole piano maker in America, Baldwin faces
mostly foreign competition in an era where there is a movement in this country
to "buy American." The finance company of Baldwin has been in existence for a
century, and provides growth opportunities as an independent entity and as a
sales tool for the company. The digital piano division continues to expand
while the church organ unit has
<PAGE>
increased its market share, and the circuit board division has demonstrated its
potential for growth since its inception.
Yet, despite the foregoing, Baldwin continues to face a variety of
challenges. The company's stock is selling at or near book value, and the
company posted flat earnings and sales for the last quarter. Additionally, the
company is valued at a lower multiple than other companies in its peer group and
may lack the critical mass necessary to justify its infrastructure. While your
eighteen month tenure as chief executive officer has produced a variety of
changes internally, the shareholders of the company have not been afforded any
relief from Baldwin's lackluster performance, which is one of the primary
responsibilities of management. Based on the aforementioned, the primary
purpose of the requested meeting was to discuss the opportunities available to
the company and hopefully offer some constructive suggestions which would
benefit all shareholders. This meeting would not be unlike meetings you have
had with analysts and other investors and would not have breached any regulatory
or fiduciary duties on your part. Our goal was to merely develop a better
understanding of the public information available to all shareholders. The
discussions would have been similar to the ones we have had on numerous
occasions over the telephone.
Your response, which seemed arbitrary, was to refuse to meet with me
and to request that any suggestions made by myself should be submitted in
writing since you had a busy schedule. Additionally, when I requested various
public documents that would aid in my analysis, you stated that you are
attempting to compile the documents while referring me to the Internet and
requesting that I search the SEC's Edgar Database. Management's approach to my
requests, which appears to be bureaucratic and equivocal, is not conducive to
solving the problems outlined above and not in accordance with traditional
notions of corporate governance.
Management and shareholders should have a common goal of increasing
profitability and shareholder value. As my notes may suggest, there are a
variety of issues that if properly addressed could have the net effect of
enhancing values of the company. My notes were a product of my analysis of
public documents, and your response to my inquiries concerns me on several
levels. If management is aware of the issues raised by my correspondence, and
has failed to act in response, I am concerned that management is refusing to act
in the best interests of its shareholders. The failure to act would indicate a
myopic view of the company which is ill-suited to today's business climate. If
that is the case, management should promptly seek a sale of the company or a
business combination as a means of maximizing shareholder value.
If, on the other hand, management is simply unaware of the issues
being raised, I am concerned that management should seek advice on how to
identify and address these issues. If management refuses to meet with a major
shareholder such as myself (even as a courtesy), then it should seek a
professional evaluation of the company from another qualified party who would be
acceptable to both shareholders and management. That evaluation should address
a sale or business combination and all other strategic alternatives.
Under the circumstances, the Board of Directors should seek input from
a non-partisan, reputable investment banker who could guide management in
addressing the
2
<PAGE>
concerns posed by the shareholders, and provide the Board with the advice
necessary in order to enhance the company's value. That advice should
specifically address a potential sale, merger or other business combination of
the company as a way of maximizing shareholder value.
Based on the foregoing concerns, and my inability to receive a proper
response, and as a concession to the shortness of life, I would respectfully
request that the Board hire a nationally recognized investment banker to explore
a possible sale, merger or business combination as alternatives to enhancing the
company's value. In the event the Board rejects my request, I hereby notify the
company of my intention to present the following proposal at the company's 1997
Annual Meeting of Shareholders and request that the following proposal be
included in the proxy materials for the company's 1997 annual meeting:
Resolved that the shareholders of the company deem it desirable and in their
best interest that the Board of Directors immediately engage the services of a
nationally recognized investment banker to explore all other alternatives to
enhance shareholder values including, a possible sale, merger, or other business
combinations involving the company.
SUPPORTING STATEMENT:
Proponent believes that the company is facing a variety of challenges
and opportunities that management has not addressed. The company's tradenames -
Baldwin, Wurlitzer and Chickering - have worldwide name recognition, and the
company is a premier producer of mid-priced pianos and organs. As the sole
piano maker in America, Baldwin faces mostly foreign competition in an era where
there is a movement in this country to "buy American." The finance company of
Baldwin has been in existence for a century, and provides growth opportunities
as an independent entity and as a sales tool for the company. The digital piano
division continues to expand while the church organ unit has increased its
market share, and the circuit board division has demonstrated its potential for
growth since its inception.
Despite all of these and other intrinsic strengths and opportunities,
proponent believes that the company's stock has underperformed, and that the
current, laggard stock price does not reflect the company's true value.
Proponent also believes that there is an unacceptably low level of investment
community interest in the stock, which has resulted in a lack of liquidity for
the shareholders. Proponent believes that management has not addressed many of
the fundamental issues that face the company, and has failed to take advantage
of the opportunities, which is due in part to the lack of depth of management.
The Board of Directors should take immediate action to engage the
services of an investment banker to explore all alternatives to enhance the
value of the company, including a possible sale, merger or other business
combination of the company as a way of maximizing shareholder value. Proponent
believes that this action would be in accordance with the fiduciary obligations
of the Board of Directors.
3
<PAGE>
The Board of Directors must understand that the shareholders'
interests would now be best served by prompt, diligent, and good faith
implementation of the above resolution. Retaining an investment banking firm to
assist the Board and management in fulfilling their duties to enhance
shareholder value would require little, if any, cost outlay by the company.
This would be a positive means to enable the company to realize its potential,
and a productive way to yield the kind of returns which we as shareholders
deserve.
Shareholders are urged to vote "FOR" the proposal.
As general partner of Bolero Investment, I currently am the beneficial
owner of 204,560 shares of Baldwin Common Stock. Of these shares, I acquired
beneficial ownership of 96,500 shares (which represent more than $1,000 in
market value of Baldwin Common Stock) more than a year ago. I intend to
continue to own such shares through the date on which the 1997 Annual Meeting of
Shareholders of Baldwin is held. I am not the record holder of any shares at
this time.
The Schedule 13D filed by Bolero, FHI and me with the Securities and
Exchange Commission on July 18, 1996, and amendments thereto set forth
transactions pursuant to which I acquired beneficial ownership of certain
Baldwin shares. In addition, I have listed below the date I acquired the other
Baldwin shares that I beneficially own.
Date of Acquisition by Kenneth Pavia Number of Shares
------------------------------------ ----------------
August 2, 1994 10,000
Date of Acquisition by FHI, Inc. Number of Shares
-------------------------------- ----------------
August 12, 1994 32,000
August 12, 1994 9,000
August 16, 1994 15,000
February 28, 1995 1,000
September 18, 1995 2,000
September 27, 1995 1,000
April 1, 1996 2,000
Date of Acquisition by
----------------------
Balboa Investment Group L.P. Number of Shares
---------------------------- ----------------
August 12, 1994 8,500
August 16, 1994 15,000
December 20, 1994 5,000
July 11, 1995 1,000
September 18, 1995 2,000
December 15, 1995 1,000
March 21, 1996 1,600
April 25, 1996 2,000
April 30, 1996 2,000
4
<PAGE>
Please advise as to the Board's position on this matter and if there
are any additional requirements necessary to include the proposal in the proxy
materials.
Sincerely,
/s/ Kenneth W. Pavia
Kenneth W. Pavia, G.P.
5
