SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: February 10, 1997
BALDWIN PIANO & ORGAN COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-14903 31-1091812
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(State of other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification
Number)
422 Wards Corner Road, Loveland, Ohio 45140-8390
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 576-4500
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Item 5. Other Events
On February 10, 1997, the Board of Directors (the "Board") of Baldwin Piano
& Organ Company (the "Company"), as permitted by Article Seventh of the
Company's Certificate of Incorporation, amended and restated the Company's
Bylaws by inserting Section 11 to Article 2 which describes certain information
that must be provided before a stockholder can nominate directors or bring other
business before an Annual Meeting of the stockholders. A copy of the Amended and
Restated Bylaws is attached hereto as Exhibit 3(ii).
On February 27, 1997, the Company announced its earnings for the fiscal
year ended December 31, 1996. A copy of the Company's press release issued on
February 27, 1997 is attached hereto as Exhibit 99.1.
Contemporaneously with the announcement of the Company's earnings for the
fiscal year ended 1996, the Company filed a No-Action request pursuant to Rule
14a-8(d) of the Securities Exchange Act of 1934, as amended, with the Office of
the Chief Counsel of the Division of Corporate Finance. The No-Action request
seeks to omit from the Company's 1997 proxy materials a proposal by Mr. Kenneth
W. Pavia, Sr. of Bolero Investment Group, L.P. which requests the Board to
retain a nationally recognized investment banker to explore various alternatives
to maximize stockholder value. A copy of the No-Action request is attached
hereto as Exhibit 99.2.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
3(ii) Amended and Restated Bylaws of Baldwin Piano and Organ Company
revised as of February 10, 1997.
99.1 Press release dated February 27, 1997.
99.2 No-Action request filed pursuant to Rule 14a-8(d) of the
Securities Exchange Act of 1934, as amended, on behalf of Baldwin
Piano and Organ Company dated February 27, 1997.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned herewith duly authorized.
Date: February 10, 1997 Baldwin Piano and Organ Company
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(Registrant)
By: /s/ Karen L. Hendricks
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Karen L. Hendricks
President, Chief Executive Officer
and Chairman of the Board
EXHIBIT 3(ii)
Amended and Restated Bylaws
of
Baldwin Piano & Organ Company
(A Delaware Corporation)
Revised as of February 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
I. OFFICES
1. Registered Office..................................................
2. Additional Offices.................................................
II. MEETINGS OF STOCKHOLDERS
1. Time and Place.....................................................
2. Annual Meeting.....................................................
3. Notice of Annual Meeting...........................................
4. Special Meetings...................................................
5. Notice of Special Meeting..........................................
6. List of Stockholders...............................................
7. Presiding Officer; Order of Business...............................
8. Quorum; Adjournments...............................................
9. Voting.............................................................
10. Action by Consent..................................................
11. Notice of Stockholder Business and Nominations at Annual Meetings
of Stockholders....................................................
III. DIRECTORS
1. General Powers; Number; Tenure.....................................
2. Vacancies..........................................................
3. Removal; Resignation...............................................
4. Place of Meetings..................................................
5. Annual Meeting.....................................................
6. Regular Meetings...................................................
7. Special Meetings...................................................
8. Quorum; Adjournments...............................................
9. Compensation.......................................................
10. Action by Consent..................................................
11. Meetings by Telephone or Similar Communications....................
IV. NOTICES
1. Form; Delivery.....................................................
2. Waiver.............................................................
V. OFFICERS
1. Designations.......................................................
2. Term of Office; Removal............................................
3. Compensation.......................................................
4. The Chairman of the Board..........................................
5. The Chief Executive Officer........................................
6. The President......................................................
7. The Vice Presidents................................................
8. The Secretary......................................................
9. The Assistant Secretary............................................
10. The Treasurer......................................................
11. The Assistant Treasurer............................................
VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
1. Indemnification....................................................
2. Insurance..........................................................
3. Non-Exclusivity of Rights..........................................
VII. AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
1. Affiliated Transactions............................................
2. Determining Quorum.................................................
VIII. STOCK CERTIFICATES
1. Form; Signatures...................................................
2. Registration of Transfer...........................................
3. Registered Stockholders............................................
4. Record Date........................................................
5. Lost; Stolen or Destroyed Certificates.............................
IX. GENERAL PROVISIONS
1. Dividends..........................................................
2. Reserves...........................................................
3. Fiscal Year........................................................
4. Seal...............................................................
X. AMENDMENTS
<PAGE>
BYLAWS
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ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be at 100 West Tenth Street, in the City of Wilmington, State of Delaware.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. A meeting of stockholders for any purpose may be
held at such time and place, within or without the State of Delaware, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing with
the year 1985, shall be held on the second Tuesday in April, if not a legal
holiday, or, if a legal holiday, then on the next secular day following, at
10:00 A.M., or at such other date and time as shall, from time to time, be
designated by the Board of Directors and stated in the notice of the meeting. At
such annual meeting, the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting,
stating the place, date and time thereof, shall be given to each stockholder
entitled to vote at such meeting not less than 10 (unless a longer period is
required by law) nor more than 60 days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or the Secretary at
the request in writing of a majority of the Board of Directors, or at the
request in writing of the stockholders owning a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose of or purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special meeting,
stating the place, date and time thereof and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than 10 (unless a longer period is required by law) nor
more than 60 days prior to the meeting.
Section 6. List of Stockholders. The officer in charge of the stock ledger
of the Corporation or the transfer agent shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held, which place, if other than the place of the
meeting, shall be specified in the notice of the meeting. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
Section 7. Presiding Officer; Order of Business.
(a) Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or, if he is not present (or, if there is none), by the
President, or, if he is not present, by a Vice President, or, if he is not
present, by such person who may be chosen by the Board of Directors, or, if none
of such persons is present, by a chairman to be chosen by the stockholders
owning a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy. The Secretary of the Corporation, or, if he is not
present, an Assistant Secretary, or, if he is not present, such person as may be
chosen by the Board of Directors, shall act as secretary of meeting of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of the meeting and, if
the meeting is a special meeting, the call thereof.
3. Presentation of proxies.
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or a
meeting called for that purpose.
8. Consideration of the specific purpose or purposes for which the
meeting has been called (other than the election of directors), if the
meeting is a special meeting.
9. Transaction of such other business as may properly come before the
meeting.
10. Adjournment.
Section 8. Quorum; Adjournments. The holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be necessary to, and
shall constitute a quorum for, the transaction of business at all meetings of
the stockholders, except as otherwise required by statute or by the Certificate
of Incorporation. If, however, a quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken, until quorum shall be present or represented at any meeting of the
stockholders, and the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have the power to adjourn the meeting from time
to time for good cause, without notice of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
until a date which is not more than 30 days after the date of the original
meeting. At any such adjourned meeting at which a quorum shall be present in
person or represented by proxy, any business may be transacted which might have
been transacted at the meeting as originally called. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote thereat.
9. Voting.
(a) At any meeting of stockholders, every stockholder having the right to
vote shall be entitled to vote in person or by proxy. Except as otherwise
provided by law or the Certificate of Incorporation, each stockholder of record
shall be entitled to one vote for each share of capital stock registered in his
name on the books of the Corporation.
(b) All elections shall be determined by a plurality vote, and, except as
otherwise required by law or the Certificate of Incorporation, all other matters
shall be determined by a vote of a majority of the shares present in person or
represented by proxy and voting on such other matters.
Section 10. Action by Consent. Any action required or permitted by law or
the Certificate of Incorporation to be taken at any meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present or represented by proxy and
voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing thereto.
Section 11. Notice of Stockholder Business and Nominations at Annual
Meetings of Stockholders.
(A) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies in all respects with the notice
procedures set forth in this Bylaw.
(B) For nominations or other business to be properly brought before an
annual meeting pursuant to clause (iii) of paragraph (A) of this Bylaw, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation in the form set forth below, and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
date set by the Board for the Company's annual meeting or the 10th day following
the date on which public announcement of the date of such meeting is first made
by the Corporation. In no event shall the public announcement of an adjournment
of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. To be in proper form, such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director (each, a
"Stockholder Nominee") all information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and Rule 14a-11 thereunder; (ii) as to each Stockholder Nominee, such person's
(x) written consent (with notarized signature) to being named in the proxy
statement as a nominee and to serving as a director, if elected, (y) written
undertaking (with notarized signature) to attend in person at least 75 percent
of the meetings, regular or otherwise, of the Board, if elected and (z) written
representation (with notarized signature) that such Stockholder Nominee (1) does
not hold any position with, or beneficial interest in, any entity which engages
in competition with the Corporation or whose interests are antagonistic to the
interests of the Corporation, (2) has no fiduciary or other interest contrary to
the interests of the Corporation, and (3) has never been charged or convicted or
been the subject of a consent decree under securities, commodities, antitrust,
consumer protection or similar laws in any jurisdiction; (iii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iv) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (a) the name and address of such stockholder, as they appear on the
Corporation's books and of such beneficial owner and (b) the class and number of
shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(C) Notwithstanding anything in the second sentence of paragraph (B) of
this Bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 70
days prior to the date set by the Board for the Corporation's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and perform all lawful acts and things which are not by law, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or performed by the stockholders. Within the limits specified in this
Section 1, the number of directors shall be determined by the Board of
Directors, except that if no such determination is made, the number of directors
shall be three. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and shall qualify.
Directors need not be stockholders.
Section 2. Vacancies. If any vacancies occur in the Board of Directors, or
if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders and until his successor is duly elected and shall
qualify. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
3. Removal;Resignation.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, a
resignation shall take effect upon delivery thereof to the Board of Directors or
the designated officer. It shall not be necessary for a resignation to be
accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board of
Directors may be held without notice, at such time and place as may from time to
time be determined by the Board of Directors.
Section 7. Special Meetings. Special Meetings of the Board of Directors may
be called by the Chairman of the Board, the President or by 2 or more directors
on at least 2 days' notice to each director, if such notice is delivered
personally or sent by telegram, or on at least 3 days' notice if sent by mail.
Special meetings shall be called by the Chairman of the Board, the President,
the Secretary or 2 or more directors in like manner and on like notice on the
written request of one-half or more of the number of directors then in office.
Any such notice need not state the purpose or purposes of such meeting except as
provided in Article X.
Section 8. Quorum; Adjournments. At all meetings of the Board of Directors,
a majority of the directors then in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Compensation. Directors shall be entitled to such compensation
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any capacity and
receiving compensation and reimbursement for reasonable expenses for such other
services.
Section 10. Action by Consent. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
Section 11. Meetings by Telephone or Similar Communications. The Board of
Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting, at the
commencement of the meeting, such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 1. Designations. The officers of the Corporation shall be chosen by
the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a Chief Executive Officer, a President, a Vice President or Vice
Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries and/or
Assistant Treasurers and other officers and agents as it shall deem necessary or
appropriate. All officers of the Corporation shall exercise such powers and
perform such duties as shall from time to time be determined by the Board of
Directors. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Term of Office; Removal. The Board of Directors at its first
regular meeting after each annual meeting of stockholders, or at such other time
as it may select, shall choose a President, a Secretary and a Treasurer. The
Board of Directors may also choose a Chairman of the Board, a Chief Executive
Officer, a Vice President or Vice Presidents, one or more Assistant Secretaries
and/or Assistant Treasurers, and such other officers and agents as it shall deem
necessary or appropriate. Each officer of the Corporation shall hold office
until his successor is chosen and shall qualify. Any officer elected or
appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Such removal shall not prejudice the contract rights, if any, of the person so
removed. Any vacancy occurring in any office of the Corporation may be filled
for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all Officers of the Corporation
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if any,
shall (unless the Board of Directors shall also choose a Chief Executive
Officer) act as the chief executive officer of the Corporation, and, subject to
the direction of the Board of Directors, shall perform such executive,
supervisory and management functions and duties as may be assigned to him from
time to time by the Board of Directors. He shall, if present, preside at all
meetings of stockholders and of the Board of Directors.
Section 5. The Chief Executive Officer. The Chief Executive Officer, if
any, subject to the direction of the Board of Directors, shall perform such
executive, supervisory and management functions and duties as may be assigned to
him from time to time by the Board of Directors.
6. The President.
(a) The President shall be the chief operating officer of the Corporation
and, subject to the direction of the Board of Directors, shall have general
charge of the business, affairs and property of the Corporation and general
supervision over its other officers and agents. In general, he shall perform all
duties incident to the office of President and shall see that all orders and
resolutions of the Board of Directors are carried into effect. In addition to
and not in limitation of the foregoing, the President shall be empowered to
authorize any change of the registered office or registered agent (or both) of
the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of security holders of other corporations in which the
Corporation may hold securities. At such meeting the President shall possess and
may exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. The Board of Directors may from time to time confer like powers
upon any other person or persons.
Section 7. The Vice Presidents. The Vice President, if any (or in the event
there be more than one, the Vice Presidents in the order designated, or in the
absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 8. The Secretary. The Secretary shall attend all meetings of
stockholders and record all votes and the proceedings of the meetings in a book
to be kept for that purpose and shall perform like duties for the Executive
Committee, if any, or other committees, if required. He shall give, or cause to
be given, notice of all meetings of stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may from time to time
be prescribed by the Board of Directors, the Chairman of the Board or the
President, under whose supervision he shall act. He shall have custody of the
seal of the Corporation, and he, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it, and, when so affixed, the seal
may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing thereof
by his signature.
Section 9. The Assistant Secretary. The Assistant Secretary, if any (or in
the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 10. The Treasurer. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President and the Board of Directors, at regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
Section 11. The Assistant Treasurer. The Assistant Treasurer, if any (or in
the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. Indemnification. Reference is made to Section 145 (and any other
relevant provisions) of the General Corporation Law of the State of Delaware.
Particular reference is made to the class of persons (hereinafter called
"Indemnitees") who may be indemnified by a Delaware corporation pursuant to the
provisions of such Section 145, namely, any person (or the heirs, executors or
administrators of such person) who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The Corporation shall (and is hereby
obligated to) indemnify the Indemnitees, and each of them, in each and every
situation where the Corporation is obligated to make such indemnification
pursuant to the aforesaid statutory provisions. The Corporation shall indemnify
the Indemnitees, and each of them, in each and every situation where, under the
aforesaid statutory provisions, the Corporation is not obligated, but is
nevertheless permitted or empowered, to make such indemnification, it being
understood, that, before making such indemnification with respect to any
situation covered under this sentence, (i) the Corporation shall promptly make
or cause to be made, by any of the methods referred to in subsection (d) of such
Section 145, a determination as to whether each Indemnitee acted in good faith
and in a manner such Indemnitee reasonably believed to be in or not opposed to
the best interests of the Corporation, and, in the case of any criminal action
or proceeding, had no reasonable cause to believe that such Indemnitee's conduct
was unlawful, and (ii) no such indemnification shall be made unless it is
determined that such Indemnitee acted in good faith and in a manner such
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that such Indemnitee's conduct was unlawful.
Section 2. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
Section 3. Non-Exclusivity of Rights. The rights conferred by Section 1
hereof shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. Affiliated Transactions. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transactions.
ARTICLE VIII
STOCK CERTIFICATES
1. Form; Signatures.
(a) Every holder of stock in the Corporation shall be entitled to have a
certificate, signed by the Chairman of the Board or the President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, exhibiting the number and class (and series, if any) of
shares owned by him, and bearing the seal of the Corporation. Such signatures
and seal may be facsimile. A certificate may be manually signed by a transfer
agent or registrar other than the Corporation or its employee but may be a
facsimile. In case any officer who has signed, or whose facsimile signature was
placed on, a certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock which are
subject to restrictions on transfer or to other restrictions may have imprinted
thereon such notation to such effect as may be determined by the Board of
Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation or
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate and to record the transaction upon its books.
3. Registered Stockholders.
(a) Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person who is registered on its books as
the owner of shares of the capital stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person.
(b) If a stockholder desires that notices and/or dividends shall be sent to
a name or address other than the name or address appearing on the stock ledger
maintained by the Corporation (or by the transfer agent or registrar, if any),
such stockholder shall have the duty to notify the Corporation (or the transfer
agent or registrar, if any) in writing, of such desire. Such written notice
shall specify the alternate name or address to be used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to the date of any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. Lost; Stolen or Destroyed Certificates. The Board of Directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power, subject
to the provisions of law and the Certificate of Incorporation, to determine
whether any, and, if so, what part, of the funds legally available for the
payment of dividends shall be declared as dividends and paid to the stockholders
of the Corporation. The Board of Directors, in its sole discretion, may fix a
sum which may be set aside or reserved over and above the paid in capital of the
Corporation for working capital or as a reserve for any proper purpose, and may,
from time to time, increase, diminish or vary such fund or funds.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined from time to time by the Board of Directors.
Section 4. Seal. The Board of Directors may provide for a corporate seal
which shall be circular in form and contain such legend as the Board of
Directors shall determine, consistent with the laws of Delaware. In the absence
of such provision by the Board of Directors, the corporation shall not have a
seal.
ARTICLE X
AMENDMENTS
The Bylaws of the Corporation may be made, altered, amended or repealed,
from time to time, at a meeting held for such purpose, by the affirmative vote
of a majority of the Board of Directors of the Corporation, or without such a
meeting by the written consent of all of the members of the Board of Directors
of the Corporation, or at a meeting held for such purpose, by the affirmative
vote of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation on such proposal or without such a meeting, vote
or notice thereof, if such holders consent in writing to such proposal.
The undersigned, being all of the Directors of the Corporation do hereby
adopt the Bylaws hereinbefore set forth, for the government of the corporation.
EXHIBIT 99.1
[Baldwin Piano and Organ Company]
Press Release
Contacts: Perry Schwartz Art Gormley
Baldwin Piano The Dilenschneider Group
(513) 576-4518 (212) 922-0900
BALDWIN PIANO & ORGAN REPORTS ON 1996 4TH QUARTER
AND FULL YEAR; STRATEGIC INITIATIVES IMPACT PERFORMANCE
- --------------------------------------------------------------------------------
CORE PIANO BUSINESS GREW STRONGLY IN 2ND HALF
LOVELAND, Ohio, Feb. 27, 1997: Baldwin Piano & Organ Company (NASDAQ: BPAO) said
today that aggressive initiatives to improve future profitability reduced
fourth-quarter and full-year 1996 sales and earnings below year-earlier levels.
The positive impact of these strategic initiatives is expected to begin to
materialize in the second half of 1997.
In the three-month period ended December 31, 1996 sales were $35.3 million,
compared with $35.7 million in the year-earlier period; and net earnings
amounted to $430,000, or 13 cents a share, versus $1.6 million and 48 cents per
share.
For the full year 1996, sales were $115.1 million, as compared with $122.6
million in 1995. Earnings in the latest year were $2.1 million, or 60 cents a
share, compared with $4.0 million and $1.16 per share in 1995.
Fourth quarter inventories decreased by $7.8 million and debt decreased
$11.6 million relative to the third quarter. However, inventories at December
31, 1996 were up $10.5 million and debt was $12.4 million higher than year end
1995 -- the result of pipeline inventories for the new ConcertMaster autoplayer
and Pianovelle digital piano line and additional purchases of Wurlitzer grand
pianos.
Chairman and Chief Executive Karen L. Hendricks said, "Our core piano
business has shown strong progress. Dollar sales increased 8 percent in the last
half of 1996 versus a year ago, as a result of 7 percent unit sales growth. This
is a very positive accomplishment given the overall decline in the U.S. piano
category in the second half of 1996, a period in which our industry leading
market share in acoustic pianos rose from 26 to 29 percent.
"All of our basic businesses--Music, Contract Electronics and Keyboard
Acceptance Corporation--were profitable in 1996 but, as a whole, their
performance was offset by strategic initiatives designed to enhance our future
competitiveness. We expect to begin seeing the first results from our strategy
later this year.
"The decline in sales and earnings in the quarter and year was largely the
result of decisions made in 1995 and 1996 to exit our non-strategic contract
music and furniture businesses, and this process is nearing completion," she
said.
"There were also some lingering effects from the earlier streamlining of
the dealer network in Baldwin's Wurlitzer piano line, from elimination of
redundancies between the Baldwin and Wurlitzer product lines, and the
introduction of a multi-brand marketing strategy. The fourth quarter was also
affected by a one-time charge equivalent to 10 cents a share, which was related
to a workforce reduction of 50 salaried employees.
"We believe that these and other actions, while having a negative effect on
1996 results, better position Baldwin to compete effectively and more profitably
in its core piano businesses. We expect to continue to refine and implement our
strategic plan during 1997," she continued.
Retention of Lehman Brothers
- ----------------------------
Ms. Hendricks noted that Baldwin is in the midst of executing a strategic
plan to increase shareholder value, and that in the past two years a number of
decisions were made to focus on core company businesses and streamline
operations. "To advise and assist us in the continuing execution of the
company's strategic plan, Baldwin has retained the internationally known
investment banking firm of Lehman Brothers," she concluded.
Baldwin Piano & Organ Company has made and sold keyboard musical products
for 135 years. Its piano brands are Baldwin, Chickering and Wurlitzer. The
company, which is the U.S. leader in acoustic pianos, also markets digital
pianos and makes electronic and electromechanical components for OEM
manufacturers. Its Keyboard Acceptance Corporation provides financing to
keyboard dealers' retail customers.
- --------------------------------------------------------------------------------
"Safe Harbor" statements under the Private Securities Litigation Reform Act of
1995:
This release contains forward looking statements that are subject to risks and
uncertainties, including, but not limited to, the impact of competitive products
and pricing, product demand and market acceptance, reliance on key strategic
alliances, fluctuations in operating results and other risks detailed from time
to time in the Company's filings with the Securities and Exchange Commission.
(Condensed income statements and balance sheets attached)
<PAGE>
BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
(In Thousands, except net earnings per share)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1996 1995 1996 1995
---------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales $ 35,276 $ 35,667 $ 115,070 $ 122,634
Cost of goods sold 28,861 28,154 92,495 96,333
------ ------ ------ ------
Gross profit 6,415 7,513 22,575 26,301
Gross profit % of net sales 18.2% 21.1% 19.6% 21.4%
Interest income on installment receivables 1,784 1,628 7,107 5,852
Other operating income, net 828 1,305 3,476 4,010
Selling, general and administrative (7,538) (7,197) (27,186) (27,755)
------ ------ ------- -------
Operating profit 1,489 3,249 5,972 8,408
Operating profit % of net sales 4.2% 9.1% 5.2% 6.9%
Interest expense (859) (597) (2,868) (2,087)
---- ---- ------ ------
Earnings before income taxes 630 2,652 3,104 6,321
Income taxes 200 1,008 1,048 2,361
--- ----- ----- -----
Net earnings $ 430 $ 1,644 $ 2,056 $ 3,960
======= ======== ======== =========
Net earnings per share $ .13 $ .48 $ .60 $ 1.16
======= ======== ======== =========
Average number of shares outstanding 3,425 3,415 3,421 3,415
===== ===== ===== =====
</TABLE>
CONSOLIDATED SUMMARY BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1996 1995
------------- --------------------
<S> <C> <C> <C>
Assets
Receivables, net $ 15,414 $ 13,933 $ 14,338
Inventories 64,352 56,555 46,039
Other current assets 7,758 8,803 9,220
----- ----- -----
Total current assets 87,524 79,291 69,597
Installment receivables, less current portion 12,547 11,435 11,215
Property, plant and equipment, net 16,800 16,479 14,934
Other assets 5,466 4,859 5,683
----- ----- -----
Total assets $122,337 $ 112,064 $ 101,429
======== ========= =========
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 42,314 $ 30,901 $ 17,646
Other current liabilities 13,678 14,826 17,248
------ ------ ------
Total current liabilities 55,992 45,727 34,894
Long-Term debt, less current portion 3,575 3,350 4,250
Other liabilities 6,926 6,712 8,171
Shareholders' equity 55,844 56,275 54,114
------ ------ ------
Total liabilities and shareholders' equity $122,337 $ 112,064 $ 101,429
======== ========= =========
</TABLE>
EXHIBIT 99.2
[ON LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT]
February 27, 1997
VIA HAND DELIVERY
- -----------------
Office of Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Baldwin Piano and Organ Company, Commission File No. 0-14903,
Exclusion of Stockholder Proposal by Mr. Kenneth W. Pavia Pursuant to
Rule 14a-8(d)
----------------------------------------------------------------------
Dear Ladies and Gentlemen:
On September 13, 1996, Baldwin Piano and Organ Company, a Delaware
corporation ("Baldwin" or the "Company"), received a stockholder proposal
requesting that the Company hire an investment bank to explore any and all
alternatives to enhance stockholder value, including the possible sale, merger
or other business combination of the Company (the "Proposal"). The Proposal was
submitted to the Company by Mr. Kenneth W. Pavia Sr. (the "Proponent"), who
(together with other persons deemed to be a "group" under Rule 13d-3) claims to
be the beneficial owner of 280,882 shares, or 8.2%, of the Company's issued and
outstanding common stock.
On behalf of Baldwin, we hereby notify the Securities and Exchange
Commission (the "Commission") and the Proponent that Baldwin does not intend to
include the Proposal in its proxy statement for the 1997 annual meeting for the
reasons set forth below. By copy of this letter, we are simultaneously informing
the Proponent of Baldwin's intention. This letter constitutes the Company's
statement of the reasons it deems the omission to be proper.
In accordance with Rule 14a-8 promulgated under the Securities Exchange Act
of 1934, as amended, we are writing to request that the Division of Corporate
Finance (the "Division") not recommend any enforcement action against the
Company if the Proposal is omitted. We have been advised by the Company as to
the factual matters set forth below. Pursuant to clause (d) of Rule 14a-8,
enclosed are six (6) copies of the Proposal, the Proponent's supporting
statement and this letter.
The Proposal states: "RESOLVED that the stockholders 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 stockholder values including, a possible sale,
merger or other business combinations involving the company."
The Company believes the Proposal may be omitted from the 1997 proxy
materials on each of the following, separately sufficient, grounds:
(1) Pursuant to Rule 14a-8(c)(10) because the Proposal has been rendered
moot; and
(2) Pursuant to Rule 14a-8(c)(7) because the Proposal pertains to matters
within the ordinary business operations of Baldwin.
1. The Proposal has been rendered moot (Rule 14a-8(c)(10)).
On February 10, 1997, the Board of Directors of Baldwin (the "Board")
agreed to retain Lehman Brothers Inc. ("Lehman Brothers"), a nationally
recognized investment bank, to assist Baldwin in the review, development and
implementation of its strategic plan, with the focus on maximizing stockholder
value. The terms of the Lehman engagement were finalized on February 24, 1997.
In particular, Lehman has been specifically directed to (i) assess the value of
Baldwin's non-core businesses and review strategies for such businesses; (ii)
develop appropriate financial and capital structure targets and ratios,
including evaluating potential sources of additional liquidity; (iii) review
current sources and potential uses of Baldwin's cash flow; and (iv) review
strategic opportunities available to Baldwin, including acquisitions, mergers or
strategic alliances.
Rule 14a-8(c)(10) permits a company to omit a proposal and supporting
statement from its proxy materials if the proposal has been rendered moot. A
proposal is rendered moot if it has been "substantially implemented by the
issuer." See SEC Rel. No. 20091 (August 16, 1983). We believe that the facts
enumerated above demonstrate that Baldwin has already taken specific steps to
implement each and every action called for by the Proposal. Moreover, the
stockholders of Baldwin would gain nothing if Baldwin were forced to repeat and
incur the related expenses associated with the action called for by the Proposal
after the 1997 annual meeting.
The circumstances in the present situation are virtually identical to
recent cases in which the Division has granted No-Action relief. For example, in
Health Insurance of Vermont, Inc. (February 28, 1995), the proposal specified
that the board of directors seek to "hire an outside firm to review potential
alternatives to enhance stockholder value, including a merger of business,
purchase of additional books of business, sale of the company and any other
alternatives in the best interests of the stockholders." Upon receiving the
proposal, the Health Insurance board formally retained KPMG Peat Marwick LLP to
act as a financial advisor to Health Insurance. The Division agreed that the
proposal was moot, noting that "[Health Insurance] has retained an outside
financial consulting firm to evaluate various business alternatives, including
those suggested by the proponent." As a result, the Division concluded that the
proposal has been "substantially implemented." In this case, as in Health
Insurance, the Proposal seeks only the retention of an outside firm to analyze
additional ways to enhance stockholder value. In addition, as in Health
Insurance, Baldwin has retained an outside firm, i.e. Lehman Brothers, a
nationally recognized investment banking firm, to review the Company's strategic
plan with the goal of assisting the Company in maximizing stockholder value. The
Proposal at issue here does not call for any action beyond that already taken --
the engagement of Lehman Brothers on the terms described above.
Similarly, in Stone & Webster, Inc. (February 26, 1996), the Division
concurred that a proposal virtually identical to this Proposal was moot because
the proposal had been "substantially implemented." [FN1] In that case, the Stone
& Webster board had retained Goldman, Sachs & Co. ("Goldman") prior to the
receipt of the stockholder proposal to evaluate the possible sale or merger of
Stone & Webster or the acquisition by Stone & Webster of securities or assets of
other companies. In fact, the Division agreed that the proposal was moot even
though Goldman's advice was not to merge or sell the company, but rather to
continue to implement the strategic plan previously approved by the board. In
Borden, Inc. (February 23, 1994), the Division agreed that a proposal, which
requested that the board of directors retain an investment banking firm to
determine the value of the company if its non-food businesses were divested, was
moot since Borden's board had already retained CS First Boston & Co. (and the
independent members of the board had retained Lazard Freres & Co.) to review the
company's business plan, including a sale or merger of the company. The Division
concluded that the proposal was moot because Borden had retained an investment
bank to evaluate various business alternatives, including the one suggested by
the proponents, even though the investment bank was not specifically directed to
assess the value of the company under certain scenarios demanded by the
proponent.
- --------
[FN 1] The proposal in Stone & Webster requested that the board "engage the
services of a nationally recognized investment banker to explore all
alternatives to enhance the value of the company, including, but not limited to,
possible sale, merger, or other transaction for all assets of the company."
<PAGE>
Moreover, the Company's situation is entirely distinguishable from those
cases in which the Division has refused to permit the omission of a stockholder
proposal pursuant to Rule 14a-8(c)(10). For example, in EDO Corporation
(February 16, 1995), the stockholder proposal requested that the board retain an
investment banking firm to explore alternatives to enhance the company's value.
The EDO board sought to exclude the proposal as moot pursuant to Rule
14a-8(c)(10) because it was the company's policy to "consult with investment
bankers at any and all such times as the directors, in their discretion, deem it
appropriate," and such consultations had occurred regularly over the years prior
to the stockholder proposal. The Division did not concur with the company's view
that the proposal had been rendered moot. Unlike the situation in EDO, Baldwin
has not simply consulted with an investment banker, but rather, has specifically
retained an investment banking firm for the very purposes stated in the
Proposal. See also Kiddie Products, Inc. (February 9, 1989)(proposal to retain
an investment banking firm was not deemed to be mooted simply because the board
had considered retaining, but had not actually retained, an investment banker on
numerous occasions) and MSB Bancorp, Inc. (February 20, 1996)(proposal to retain
an investment bank to explore alternatives for maximizing stockholder value was
not deemed to be mooted by the board's previous retention of an investment bank
to explore alternatives for maximizing stockholder value).
2. The Proposal pertains to matters relating to the conduct of the ordinary
business operations of Baldwin (Rule 14a-8(c)(7)).
Rule 14a-8(c)(7) permits a company to omit a stockholder proposal that
deals with matters relating to the conduct of the ordinary business operations
of the company. The purpose of subsection (c)(7) is to exclude proposals that
"deal with ordinary business of a complex nature that stockholders, as a group,
would not be qualified to make an informed judgment on, due to their lack of
business expertise and their lack of intimate knowledge of the issuer's
business." See SEC Release No. 34-12999 (November 22, 1976). In addition, the
Commission has also stated that the rationale underlying the ordinary business
exclusion is that it is impractical in most cases for stockholders to make
management decisions at corporate meetings. See SEC Release No. 34-19135
(October 14, 1992). Moreover, Delaware corporate law provides that "the business
and affairs of every corporation organized under [Delaware law] shall be managed
by or under the direction of the board of directors, except as may be otherwise
provided in this chapter or in its certificate of incorporation." Delaware
General Corporation Law (the "DGCL") Section 141(a). Neither the other
provisions of the DGCL nor Baldwin's certificate of incorporation limits in any
way the authority of the board of directors to manage the Company's business and
affairs. Therefore, it is the board of directors' responsibility to determine
the "long-term strategic, financial and organizational goals of the corporation"
and to "approve formal or informal plans for the achievement of these goals."
C.L. Grimes v. Donald, 20 Del. J. Corp. L. 757 (Del. Ch. 1995).
The Division has consistently stated that the decision to hire an
investment banker or other financial advisor to assist generally in reviewing
alternatives to enhance stockholder value is a matter relating to the conduct of
the ordinary business operations of a registrant. The key variable in assessing
whether a proposal is excludable under Rule 14a-8(c)(7) is whether the thrust of
the proposal implicates ordinary business matters. Roosevelt v. E.I. Du Pont de
Nemours & Co., 958 F.2d 416, 426 (D.C. Cir. 1992)
The Proposal mirrors the proposal in Bel Fuse Incorporated (April 24,
1991), which called for the board to retain an investment banking firm to
explore alternatives for maximizing stockholder value, including a possible sale
of assets or equity. The Division found the proposal to be excludable under
subsection (c)(7) since it involved the question of whether to hire an
investment banker to provide advice with respect to the conduct of the business,
including aspects relating to day-to-day operations. Similarly, in Integrated
Circuits Incorporated (December 27, 1988), the proposal called for the hiring of
an investment banker for the purpose of analyzing the financial condition of the
company and making recommendations to maximize stockholder value. Again, the
Division determined that the proposal was excludable on the basis that "the
determination and implementation, generally, of the Company's investment
strategies" is a matter relating to the conduct of ordinary business operations.
The Proposal is substantively identical to the Integrated Circuits
proposal, except that the Proposal has the additional clause "including a
possible sale, merger or other business combinations involving the company." It
is difficult to see how this clause, which, by the very meaning of the word
"including" does nothing to narrow the substance of what precedes it, could lead
to a different result from that reached in Integrated Circuits. In addition, the
Proponent, by using the word "possible," implicitly admits that a sale, merger
or other business combination might not be the best way to maximize stockholder
value. Instead, cost cutting initiatives, attempts to expand the Company's
current business into new geographical or other markets, new pricing methods for
its products and other such considerations all affect the Company's costs,
expenses, profitability and prospects, which in turn impact the stock price.
Clearly, these types of initiatives implicate the ordinary business operations
of the Company and, under Delaware law, are the sole province of the Board.
Moreover, under DGCL Section 251, the board of a Delaware corporation must first
approve any merger or consolidation before submitting the proposed transaction
to the company's stockholders. Therefore, for the Board to merge or sell the
Company without analyzing the multitude of ways to enhance stockholder value
would not only fail to implement the Proposal but would also be a breach of
their fiduciary duty to all of the stockholders and a violation of Delaware
corporate law.
The breadth of the Proposal and its lack of specific direction clearly
distinguish it from the more focused proposals which call for a registrant to
hire an investment banker to promptly sell the company or to proceed with some
other specific extraordinary event. For instance, the Proposal is unlike the
proposal in RJR Nabisco Holdings Corp. (December 15, 1995), which called for the
Board of Directors to take necessary steps leading to the separation of the
company's tobacco business from its non-tobacco business. The ultimate focus of
the Proposal is to enhance stockholder value generally, not a specific
extraordinary transaction such as a "spin-off" of part of its business. The
Division reaffirmed this strict dichotomy between proposals requesting the
retention of an investment bank to effect a specific extraordinary transaction
from proposals requesting the retention of an investment bank to maximize
stockholder value generally in The Quaker Oats Company No-Action request
(December 28, 1995). In denying No-Action relief, the Division specifically
focused on the proposal's directive that the board hire an investment bank to
analyze the separation of the company into two distinct and independent
companies. See e.g., MSB Bancorp, Inc. (February 20, 1996) (specific proposal
directing Board to undertake specific steps that could lead to the separation of
the company's businesses not properly omitted in reliance on subsection (c)(7))
and Sears, Roebuck and Co. (March 16, 1992) (specific proposal requesting the
retention of an investment bank to assess the value of Sears, Roebuck if the
financial services divisions were spun-off not properly omitted in reliance on
subsection (c)(7)). The Proposal is also distinguishable from Daniel Green
Company (December 29, 1993), which called for a sale of the company if certain
financial targets were not reached, and Weldotron Corporation (May 23, 1991),
which called for the Board to contact and negotiate with potential buyers of the
company.
In sum, it is clear that in its response to No-Action requests in this area
the Division has differentiated between proposals requesting the Board of
Directors or management to hire an investment banker (or take other action) to
proceed with a specific extraordinary transaction (which proposals may not be
omitted in reliance on subsection (c)(7)) from proposals which call on the board
of directors or management to hire an investment banker (or proceed with some
other action) to assist in enhancing stockholder value in a general way (which
proposals may be omitted in reliance on subsection (c)(7)). This Proposal
clearly falls into the latter category.
In view of the foregoing and on behalf of the Company, we request that the
Division confirm that it will not recommend enforcement action against the
Company if the Company omits the Proposal from its 1997 proxy materials.
In accordance with Rule 14a-8, we are furnishing the Proponent with a copy
of this letter.
Please acknowledge receipt of this letter and its enclosures by stamping
the enclosed receipt copy of this letter and returning it to our messenger, who
has been instructed to wait for its return.
Any comments with respect to the subject matter of this letter should be
addressed to the undersigned. Should the Division disagree with our conclusions
with respect to the omission of the Proposal or should the Division need
additional information or explanation, we request the opportunity to confer with
the Division prior to issuance of your 14a-8(d) response. Please feel free to
contact the undersigned at (212) 504-6259 or Derek McNulty, Esq. at (212)
504-6754, if you have any questions or require further information.
Very truly yours,
/s/ Lawrence A. Larose
----------------------
Lawrence A. Larose
