<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Baldwin Piano & Organ Company
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[Baldwin Piano & Organ Company LOGO]
BALDWIN PIANO & ORGAN COMPANY
422 Wards Corner Road
Loveland, Ohio 45140-8390
KAREN L. HENDRICKS
Chairman of the Board
April 24, 1998
DEAR FELLOW SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders of
Baldwin Piano & Organ Company to be held at 11:00 a.m. on Monday, May 18, 1998
at Fifth Third Center, 38 Fountain Square Plaza, Cincinnati, Ohio, on the fifth
floor in the Board Room. On the following pages, you will find the formal Notice
of Annual Meeting and Proxy Statement. Your Board of Directors and management
look forward to greeting those shareholders able to attend.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted at the meeting. ACCORDINGLY, PLEASE
SIGN, DATE AND MAIL YOUR ENCLOSED PROXY CARD PROMPTLY.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
/s/ KAREN L. HENDRICKS
----------------------
KAREN L. HENDRICKS
Chairman of the Board
<PAGE> 3
[Baldwin Piano & Organ Company Logo]
BALDWIN PIANO & ORGAN COMPANY
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 18, 1998
---------------------------------------------
To the Shareholders of
Baldwin Piano & Organ Company:
The Annual Meeting of Shareholders of Baldwin Piano & Organ Company, a
Delaware corporation, will be held at Fifth Third Center, 38 Fountain Square
Plaza, Cincinnati, Ohio, on the fifth floor in the Board Room, on Monday, May
18, 1998, at 11:00 a.m., Cincinnati time, for the following purposes:
(1) To elect six directors for a one-year term ending in 1999;
(2) To approve the 1998 Omnibus Stock Plan, including the issuance of
up to 200,000 shares of Baldwin Piano & Organ Company Common Stock
thereunder; and
(3) To act upon any other matter that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Monday, March 30,
1998, as the date for determining Shareholders of record entitled to notice of
and to vote at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement and 1997
Annual Report to Shareholders.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING:
PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE
ONLY TO SHAREHOLDERS OF THE COMPANY AND THE HOLDERS OF SHAREHOLDER PROXIES.
ADMISSION TO THE MEETING WILL BE ON A FIRST-COME, FIRST-SERVED BASIS.
REGISTRATION WILL BEGIN AT APPROXIMATELY 10 A.M., AND SEATING WILL BE AVAILABLE
AT APPROXIMATELY 10:30 A.M. CAMERAS AND RECORDING DEVICES WILL NOT BE PERMITTED
AT THE MEETING. "STREET NAME" SHAREHOLDERS WILL NEED TO BRING A COPY OF A
BROKERAGE STATEMENT REFLECTING STOCK OWNERSHIP AS OF THE RECORD DATE IN ORDER TO
BE ADMITTED TO THE MEETING.
For the Board of Directors
/s/ KAREN L. HENDRICKS
----------------------
KAREN L. HENDRICKS
Chairman of the Board
April 24, 1998
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE PAID ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE MEETING. YOU
MAY REVOKE YOUR PROXY IN WRITING OR AT THE ANNUAL MEETING IF YOU WISH TO VOTE IN
PERSON.
<PAGE> 4
BALDWIN PIANO & ORGAN COMPANY
422 WARDS CORNER ROAD
LOVELAND, OHIO 45140-8390
---------------------------------------------
PROXY STATEMENT
---------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 18, 1998
---------------------------------------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Baldwin Piano
& Organ Company, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held at 11:00 a.m., Cincinnati time, Monday, May
18, 1998, at Fifth Third Center, 38 Fountain Square Plaza, Cincinnati, Ohio, on
the fifth floor in the Board Room. The proxy is revocable at any time prior to
its exercise by written notice or in person at the Annual Meeting.
Shares represented by proxy will be voted as directed on the proxy form
and, if no direction is given, will be voted in the election of directors for
the persons nominated by the Board of Directors and for the proposals described
herein. Any proxy given by a Shareholder may be revoked at any time prior to its
use by execution of a later-dated proxy, by a personal vote at the Annual
Meeting, or by written notice to the Company's Secretary.
This proxy material is being sent to Shareholders on or about April 24,
1998, together with the Company's 1997 Annual Report, which includes certified
financial statements for the fiscal year ended December 31, 1997.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record at the close of business on Monday, March 30, 1998
are entitled to notice of and to vote at the meeting. As of the close of
business on that date, there were outstanding and entitled to vote 3,445,710
shares of Common Stock, $.01 par value (the "Common Stock"), each of which is
entitled to one vote. No cumulative voting rights exist under the Company's
Certificate of Incorporation. For information regarding the ownership of the
Company's Common Stock by holders of more than five percent of the outstanding
shares and by the Company's directors and executive officers, see "Security
Ownership of Certain Beneficial Owners, Directors and Executive Officers."
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of a single class. Each year
the directors are elected to serve for a term of one year. The Board of
Directors currently consists of six members. The Shareholders will vote at the
Annual Meeting for the election of all six directors who will constitute the
Company's Board of Directors for the one-year term expiring at the Annual
Meeting of Shareholders in 1999.
The persons named in the enclosed proxy will vote for the election of the
nominees named below unless authority to vote is withheld. All nominees have
consented to serve if elected. In the event that any of the nominees should be
unable to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as they, in their discretion, shall determine. The Board of
Directors has no reason to believe that any nominee named herein will be unable
to serve.
The six nominees receiving the greatest number of votes cast at the Annual
Meeting upon the presence of a quorum will be elected as directors. The
following material contains information concerning the nominees for election as
directors.
1
<PAGE> 5
NOMINEES FOR DIRECTORS
KAREN L. HENDRICKS, age 50, is the Company's Chairman of the Board, Chief
Executive Officer and President. Prior to joining the Company in 1994, Ms.
Hendricks served as the Executive Vice President and General Manager, Skin Care
Division of the Dial Corporation since 1992, where she had full responsibility
for Dial's United States bar and liquid soap business and their industrial
products. Ms. Hendricks previously was employed for over twenty years by The
Procter & Gamble Company in various executive positions in product development
and was promoted to General Manager of its Vidal Sassoon Hair Care Company in
1987. In her last two years at Procter & Gamble, she was Manager of Worldwide
Strategic Planning for their hair care business. She also currently serves as a
director of A.C. Nielsen Corporation and Columbia Energy Group.
GEORGE E. CASTRUCCI, age 60, has served as a director of the Company since
May 1987, and served as Chairman of the Board from August 1993 until December
1994. Prior to his retirement in March 1992, he served as Chairman and Chief
Executive Officer of Great American Broadcasting Company, a Cincinnati-based
broadcast company, and as President and Chief Operating Officer of its parent
company, Great American Communications Company. Mr. Castrucci also currently
serves as a director of BMF Savings Bank, LanVision Systems, Inc., The Ohio
National Fund, Inc., and ONE Fund, Inc.
WILLIAM B. CONNELL, age 57, has served as a director of the Company since
July 1995. In January 1997, Mr. Connell was named Lead Director by the Board of
Directors. Since 1994, he has also served as the Chairman of EDB Holdings, Inc.,
a privately-held company engaged in the international retail sale of optical
eyewear, and has been a director since 1988. From 1990 to 1994, Mr. Connell
served as President and Vice Chairman of Whittle Communications, a limited
partnership which specialized in multi-media services.
JOHN H. GUTFREUND, age 68, is President of Gutfreund & Company, Inc., a New
York based financial consulting firm which specializes in advising select
corporations and financial institutions in the United States, Europe and Asia.
Mr. Gutfreund was the former Chairman and Chief Executive Officer of Salomon
Brothers from 1981 to 1991. He also currently serves as a director of AquaPenn
Spring Water Company, Inc., Foamex International Inc., LCA-Vision, Inc. and
Universal Bond Fund.
JOSEPH H. HEAD, JR., age 65, has been a director of the Company since May
1987 and was previously a director from November 1983 until June 1986. He also
served as Secretary of the Company from its formation until May 1989. Mr. Head
is Chairman, former Chief Executive Officer and a director of Atkins & Pearce,
Inc., a manufacturer of industrial textiles, since 1990. He also currently
serves as a director of Fifth Third Bancorp, since 1987.
ROGER L. HOWE, age 63, has been a director of the Company since August
1993. Mr. Howe was formerly the Chairman of the Board of U.S. Precision Lens,
Inc., a manufacturer of optical components used in industrial and consumer
products. Mr. Howe retired from U.S. Precision Lens, Inc. on September 1, 1997,
where he had been employed in various executive positions since 1970. He also
currently serves as a director of Cincinnati Bell Inc., Cintas Corporation, and
Star Banc Corporation.
There are no family relationships among any of the above-named nominees for
director nor among any of the nominees and any executive officers of the
Company.
BYLAW PROVISIONS
Article II, Section 11 of the Company's Bylaws provide that:
(A) Nominations of persons for election to the Board of Directors of the
Company and the proposal of business to be considered by the stockholders may be
made at an annual meeting of stockholders (i) pursuant to the Company's notice
of meeting, (ii) by or at the direction of the Board of Directors or (iii) by
any stockholder of the Company who was a stockholder of record at the time of
giving of notice provided for in Article II, Section 11 of the Bylaws, who is
entitled to vote at the
2
<PAGE> 6
meeting and who complies in all respects with the notice procedures set forth in
Article II, Section 11 of the Bylaws.
(B) For nominations or other business to be properly brought before an
annual meeting pursuant to clause (iii) of paragraph (A) of Article II, Section
11 of the Bylaws, the stockholder must have given timely notice thereof in
writing to the Secretary of the Company 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 Company 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 Company. 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 be 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 Company or whose interests are antagonistic to the
interests of the Company, (2) has no fiduciary or other interest contrary to the
interests of the Company, 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
Company's books and of such beneficial owner and (b) the class and number of
shares of the Company 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
Article II, Section 11 of the Bylaws to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Company is
increased and there is no public announcement by the Company 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 Company's annual
meeting, a stockholder's notice required by Article II, Section 11 of the Bylaws
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 Company not later than the close of
business on the 10th day following the day on which such public announcement is
made by the Company.
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors of the Company met thirteen times during the year
ended December 31, 1997. In 1997, all directors attended at least 90% of the
meetings of the Board of Directors and all committees on which the director
served during his or her term.
The Board of Directors has an Executive Compensation Committee and an Audit
Committee. The Executive Compensation Committee reviews the salaries and
compensation levels of the Company's executive management and the Audit
Committee reviews the Company's accounting practices and controls. In 1997, the
Executive Compensation Committee consisted of Messrs. Head and Howe and
3
<PAGE> 7
the Audit Committee was comprised of Mr. Castrucci and Mr. Connell. The
Executive Compensation Committee met one time in 1997 and the Audit Committee
met three times.
In January 1997, the Board of Directors created the position of Lead
Director and appointed Mr. Connell to that position. The Lead Director is a
non-management director whose additional duties include facilitating
communication between Company management and the Board of Directors and among
the directors, coordinating a performance assessment of the Chief Executive
Officer, facilitating the process of Board of Directors meetings and conducting
a formal evaluation of the Board of Directors by the Board of Directors.
EXECUTIVE OFFICERS
In addition to Karen L. Hendricks, who is listed above, the following
individuals are executive officers of the Company:
PERRY H. SCHWARTZ, age 59, joined the Company as Executive Vice President
and Chief Financial Officer in November 1996. Prior to joining the Company, Mr.
Schwartz served as Vice President and Chief Financial Officer of Richwood
Pharmaceuticals, Inc., and from January 1994 to May 1996, he served as Senior
Vice President and Chief Financial Officer of Brockway Standard Holdings
Corporation. From October 1984 to January 1994, Mr. Schwartz was Senior Vice
President and Chief Financial Officer of Heekin Can, Inc.
STEPHEN P. BROCK, age 43, is the Company's Executive Vice President and
General Manager, Music Division since July 1997. Mr. Brock joined the Company as
Senior Vice President, Sales and Marketing in July 1995. Prior to joining the
Company, Mr. Brock most recently served as Marketing Director, Worldwide
Strategic Planning -- Laundry Products for The Procter & Gamble Company since
1993. From 1984 to 1993, he served in various Brand Manager and Assistant Brand
Manager positions for The Procter & Gamble Company. From 1979 to 1984, he was
employed by the Cincinnati Opera Association in a variety of roles, including
Administrative Manager.
GEORGE C. HUEBNER, age 55, is the Company's Senior Vice President and
General Manager, Keyboard Acceptance Corporation since 1996. Mr. Huebner joined
the Company in 1960 as Assistant Credit Manager. In 1979, he was promoted to
Director of International Operations; and from 1987 to December 1989, he was
Administrative Services Manager. In January 1990, he became National Credit
Manager of the Consumer Finance Subsidiary; in May 1991, was promoted to
Divisional Vice President, Keyboard Acceptance Corporation; in 1993, he was
promoted to Vice President, Keyboard Acceptance Corporation.
RANDOLPH R. MARKS, age 47, joined the Company as Executive Vice President,
Piano Operations in January 1998. Prior to joining the Company, Mr. Marks was
the Managing Director of InterAmerican Holdings Company, a diversified
operational and management consulting firm based in San Diego since 1987. During
his tenure with InterAmerican Holdings Co., Mr. Marks oversaw the development of
more than 25 manufacturing operations in both North and South America. Mr. Marks
served in a consulting role to Baldwin since April 1996 and, as such, has played
a major role in the re-engineering of Baldwin's manufacturing operations since
November 1996.
RONALD P. GEGUZYS, age 58, joined the Company in January 1998 as Executive
Vice President and General Manager, Contract Electronics Division. Prior to
joining the Company, Mr. Geguzys served as President of the Power Supply Systems
Group of Advanced Lighting, a manufacturer of high-intensity discharge lighting
systems since 1997. From 1995 to 1997, Mr. Geguzys served as President of NMA
America, an industrial automation business serving the electronics, computer and
telecommunications industries. From 1994 to 1995, Mr. Geguzys was an independent
management consultant to several large manufacturing companies. From 1991 to
1993, he was Vice President and General Manager of Robertshaw Tennessee and,
from 1987 to 1993, was President and Chief Operating Officer of Valmont
Electric, a multi-location electromagnetic and electric product business. From
1963 to 1987, Mr. Geguzys was employed by General Electric in various managerial
positions, most recently as General Manager of its Ballast Division.
4
<PAGE> 8
RONALD W. KRUSE, age 56, joined the Company in June 1996 as Vice President
Operations, Keyboard Acceptance Corporation. In February 1997, Mr. Kruse was
named Vice President and General Manager, Signature Leasing Company; and in
September 1997, he was appointed Secretary of the Company. Prior to joining the
Company, Mr. Kruse had been a Senior Vice President of First National Bank of
Ohio from 1992 to 1996, a Senior Vice President of Ameritrust Bank from 1982 to
1992 and Vice President of Winters Bank from 1978 to 1982.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following table sets forth information regarding all persons known to
the Company to be the beneficial owners of more than five percent of the
Company's Common Stock as of March 30, 1998.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER(1) OWNERSHIP CLASS
------------------- ---------- ----------
<S> <C> <C>
Heartland Advisors, Inc.................................... 822,800(2) 23.9%
David L. Babson & Company, Inc............................. 341,900(3) 9.9%
R. S. Harrison............................................. 338,967(4) 9.9%
State of Wisconsin Investment Board........................ 300,000(5) 8.7%
Bolero Investment Group, L.P............................... 279,460(6) 8.2%
SoGen International Fund, Inc.............................. 212,000(7) 6.2%
Dimensional Fund Advisors Inc.............................. 191,100(8) 5.6%
Franklin Resources, Inc.................................... 177,000(9) 5.1%
</TABLE>
- ---------------
(1) Based upon the Schedule 13D's and Schedule 13G's provided to the Company by
the named shareholders: the address of Heartland Advisors, Inc. is 790 North
Milwaukee Street, Milwaukee Wisconsin 53202; the address of David L. Babson
& Company, Inc. is One Memorial Drive, Cambridge, Massachusetts 02142; the
address of R. S. Harrison is 4040 Mt. Carmel Road, Cincinnati, Ohio 45244;
the address of State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707; the address of Bolero Investment Group, L.P. is
1101 E. Balboa Boulevard, Newport Beach, California 92661; the address of
SoGen International Fund, Inc. is 1221 Avenue of the Americas, New York, New
York 10020; the address of Dimensional Fund Advisors Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California; and the address of Franklin
Resources, Inc. is 777 Mariners Island Boulevard, San Mateo, California
94404.
(2) Pursuant to Amendment No. 6 to Schedule 13G dated January 23, 1998,
Heartland Advisors, Inc., last informed the Company that it is a registered
investment adviser that may be deemed the beneficial owner of 822,800 shares
of Common Stock. Heartland Advisors, Inc. has sole dispositive power over
all 822,800 shares and sole voting power of 776,300 shares.
(3) Pursuant to Amendment No. 7 to Schedule 13G dated January 12, 1998, David L.
Babson & Company, Inc. last informed the Company that it is a registered
investment adviser that may be deemed the beneficial owner of 341,900 shares
of Common Stock. David L. Babson & Company, Inc. has sole dispositive power
over all 341,900 shares and sole voting power over 341,900 shares.
(4) Pursuant to Amendment No. 10 to Schedule 13G dated February 12, 1998, Mr.
Harrison last informed the Company that he directly owns 237,955 shares
(including a trust for his benefit). Mr. Harrison is also deemed to be a
beneficial owner of 101,012 shares of Common Stock held under four trusts
for the benefit of his four adult children.
5
<PAGE> 9
(5) Pursuant to Amendment No. 4 to Schedule 13G dated January 20, 1998, State of
Wisconsin Investment Board last informed the Company that it is a government
agency which manages public pension funds and that it may be deemed the
beneficial owner of 300,000 shares of Common Stock. State of Wisconsin
Investment Board has sole dispositive power and sole voting power over all
300,000 shares.
(6) Pursuant to Amendment No. 7 to Schedule 13D filed by Bolero Investment
Group, L.P. ("Bolero"), Kenneth W. Pavia, Sr. ("Pavia"), FHI, Inc. ("FHI"),
Florence Partners Inc. ("Florence") and Charles Powers ("Powers")
(collectively, "Bolero Investment Group, et. al.") on February 10, 1997,
Bolero, a limited partnership whose principal business is investing in
marketable securities, directly owns 217,460 shares of Common Stock. FHI,
whose principal business is private investment banking, directly owns 52,000
shares of Common Stock, and Florence, a corporation whose principal business
is investing in marketable securities, directly owns 10,000 shares of Common
Stock. Pursuant to such Schedule 13D, Bolero is the beneficial owner of
217,460 shares of Common Stock, FHI is the beneficial owner of 52,000 shares
of Common Stock and Florence is the beneficial owner of 10,000 shares of
Common Stock. As a result, Pavia, whose principal business is to make and
hold investments, and who is the sole general partner of Bolero and the
founder, a director, and the sole executive officer and shareholder of FHI,
is the beneficial owner of 279,460 shares of Common Stock. Powers, whose
principal business is to make and hold investments, and who is the sole
director, executive officer and shareholder of Florence, and a limited
partner of Bolero, is the beneficial owner of 10,000 shares of Common Stock.
(7) Pursuant to Amendments No. 2 to Schedules 13G each dated January 28, 1998,
SoGen International Fund, Inc. last informed the Company that it is a
registered investment company and that, with its investment adviser Societe
Generale Asset Management Corp., it is the beneficial owner of 212,000
shares of Common Stock. SoGen International and its investment adviser share
voting and dispositive power over all 215,000 shares.
(8) Pursuant to Amendment No. 2 to Schedule 13G dated February 5, 1997,
Dimensional Fund Advisors Inc. stated that it is a registered investment
adviser that may be deemed the beneficial owner of 191,100 shares of Common
Stock, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund Advisors
Inc. serves as investment manager. Dimensional Fund Advisors Inc. disclaims
beneficial ownership of all such shares. Dimensional Fund Advisors Inc. has
sole dispositive power over all 191,100 shares and sole voting power over
124,600 shares. DFA Investment Dimensions Group Inc. has voting power over
an additional 38,200 shares and DFA Investment Trust Company has voting
power over the remaining 28,300 shares.
(9) Pursuant to Schedule 13G, dated January 16, 1998, Franklin Resources, Inc.
("Franklin") last informed the Company that it is a holding company through
which it is the beneficial owner of 177,000 shares of Common Stock.
Franklin's investment subsidiary, Franklin Advisory Services, Inc., is an
investment advisor that has sole dispositive power and sole voting power
over all 177,000 shares. Charles B. Johnson and Rupert H. Johnson, Jr. each
own in excess of 10% of the outstanding common stock of Franklin.
6
<PAGE> 10
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the ownership of
Common Stock of the Company for each director, each nominee, each named
executive and all executive officers and directors as a group as of March 30,
1998.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------ ---------- ----------
<S> <C> <C>
CURRENT DIRECTORS AND NOMINEES
Karen L. Hendricks....................................... 166,500(1)(2) 4.6%
Joseph H. Head, Jr....................................... 32,000(2) .9%
Roger L. Howe............................................ 25,000(2) .7%
George E. Castrucci...................................... 24,000(2) .7%
William B. Connell....................................... 7,000(2) .2%
John H. Gutfreund........................................ 5,000 .1%
EXECUTIVE OFFICERS
Stephen P. Brock......................................... 25,000(1)(2) .7%
George C. Huebner........................................ 24,000(1)(2) .7%
Perry H. Schwartz........................................ 13,000(1) .4%
Ronald W. Kruse.......................................... 7,000(1) .2%
All executive officers and directors as a group (12
persons).............................................. 348,500(1)(2) 9.3%
</TABLE>
- ---------------
(1) Includes shares owned beneficially subject to the holder's right to exercise
outstanding incentive stock options: 39,000 shares for Ms. Hendricks, 23,000
shares for Mr. Brock, 13,000 shares for Mr. Schwartz, 7,000 shares for Mr.
Kruse, 21,000 shares for Mr. Huebner and 10,000 shares in the aggregate for
the Company's other executive officers.
(2) Includes shares owned beneficially subject to the holder's right to exercise
outstanding non-qualified stock options: 100,000 shares for Ms. Hendricks,
22,000 shares for each of Messrs. Head and Castrucci, 10,000 shares for Mr.
Howe, 6,000 shares for Mr. Connell, 2,000 shares for each of Messrs. Brock
and Huebner, and 10,000 shares in the aggregate for the Company's other
executive officers.
No agreements, formal or informal, exist among the various officers and
directors to vote their shares collectively. Except as otherwise indicated
herein, no director is a party to any contracts, arrangements or understandings
with any person with respect to any securities of the Company. In addition,
except as otherwise indicated herein, no director nor any associate of any
director has any arrangements or understandings with any person with respect to
any future employment by the Company or with respect to any future transaction
to which the Company will or may be a party. See "Executive
Compensation-Employment Contracts and Change in Control Agreements."
RIGHTS AGREEMENT
The preceding tables under "Holders of More than Five Percent Beneficial
Ownership" and "Security Ownership of Directors and Executive Officers" do not
reflect the effect of the Rights Agreement entered into by the Company in
September 1996 (the "Rights Agreement"), pursuant to which the Board of
Directors of the Company authorized the issuance of one common share purchase
right (a "Right") with respect to each outstanding share of Common Stock. The
Rights were issued on September 10, 1996 to the holders of record of Common
Stock on that date. Each Right entitled the registered holder to purchase from
the Company one share of Common Stock at a price of $60.00, subject to
adjustment. After considering the suggestions of several shareholders, the Board
of Directors of the Company, in April 1998, authorized the redemption of the
Rights at the redemption price of one cent ($0.01) per Right specified in the
Rights Agreement.
7
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by the Company's Chief Executive
Officer and each of the Company's other four most highly compensated executive
officers (the "named executives") during each of the last three fiscal years or
such shorter period during which the named executive served as an executive
officer of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR (1)($) (2)($) (3)($) (#) (4)($)
------------------ ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks 1997 $350,000 $ 98,000 41,250 29,000 $27,100
Chairman, Chief 1996 318,000 -0- -0- 10,000 31,741
Executive Officer 1995 300,000 123,212 -0- -0- 14,178
and President
Stephen P. Brock 1997 190,000 29,568 -0- 3,000 12,572
Executive Vice 1996 170,500 -0- -0- 12,000 9,846
President and General 1995 72,982(5) 33,000 -0- 10,000 367
Manager, Music Division
Perry H. Schwartz 1997 180,000 30,240 -0- 3,000 7,049
Executive Vice 1996 25,155(6) -0- -0- -0- -0-
President and Chief
Financial Officer
Ronald W. Kruse 1997 125,433 15,400 -0- 1,000 6,799
Corporate Secretary, 1996 69,551(7) -0- -0- -0- 7,734
Vice President and
General Manager,
Signature Leasing Co.
George C. Huebner 1997 116,917 8,962 -0- 3,000 7,783
Senior Vice 1996 110,123 -0- -0- 12,000 8,663
President and General 1995 100,000 26,341 -0- 3,000 7,073
Manager, Keyboard
Acceptance Corporation
</TABLE>
- ---------------
(1) Includes amounts contributed by the following named executives to the
Baldwin Piano & Organ Company Retirement Plan for Salaried Employees and the
Baldwin Piano & Organ Company Non-Qualified Deferred Compensation Plan as
elective salary reduction contributions.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Karen L. Hendricks.......................... $20,000 $35,530 -0-
Stephen P. Brock............................ 13,072 10,010 -0-
Perry H. Schwartz........................... 5,400 -0- -0-
Ronald W. Kruse............................. 7,413 -0- -0-
George C. Huebner........................... 6,910 11,431 $6,598
</TABLE>
8
<PAGE> 12
(2) The bonuses are shown for the years earned, but were paid in the following
year.
(3) In 1994, the Company's Board of Directors adopted the Company's 1994 Long
Term Incentive Plan pursuant to which awards of restricted stock based upon
the Company's stock performance in comparison to the Russell 2000 index
could be made. No shares of restricted stock have been earned to date under
this Plan. The 12,500 shares of restricted stock granted to Ms. Hendricks in
1997 were issued pursuant to the terms of her employment agreement with the
Company.
(4) "All Other Compensation" includes, as shown below, amounts contributed by
the Company under the Baldwin Piano & Organ Company Retirement Plan for
Salaried Employees; amounts contributed by the Company under the Baldwin
Piano & Organ Company Non-Qualified Deferred Compensation Plan; group term
life insurance premiums paid by the Company on policies obtained by the
Company for all employees; life insurance premiums paid by the Company for
$500,000 of executive life insurance on the life of Ms. Hendricks; and
insurance premiums paid by the Company for supplemental disability coverage
for Ms. Hendricks providing $10,000 in excess disability coverage per month.
The net proceeds of the executive life policy is payable to the estate of
Ms. Hendricks.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Karen L. Hendricks
Retirement Plan................................. $ 21,000 $ 26,563 $ 9,000
Executive Insurance............................. 2,400 2,400 2,400
Disability Insurance............................ 1,480 780 780
Group Life Insurance............................ 2,220 1,998 1,998
-------- -------- --------
$ 27,100 $ 31,741 $ 14,178
======== ======== ========
Stephen P. Brock
Retirement Plan................................. $ 11,400 $ 8,745 $ -0-
Group Life Insurance............................ 1,172 1,101 367
-------- -------- --------
$ 12,572 $ 9,846 $ 367
======== ======== ========
Perry H. Schwartz
Retirement Plan................................. $ 5,850 -0- -0-
Group Life Insurance............................ 1,199 -0- -0-
-------- -------- --------
$ 7,049 $ -0- $ -0-
======== ======== ========
Ronald W. Kruse
Retirement Plan................................. $ 5,964 $ -0- $ -0-
Group Life Insurance............................ 835 348 -0-
-------- -------- --------
$ 6,799 $ 348 $ -0-
======== ======== ========
George C. Huebner
Retirement Plan................................. $ 7,015 $ 8,188 $ 6,598
Group Life Insurance............................ 768 475 475
-------- -------- --------
$ 7,783 $ 8,663 $ 7,073
======== ======== ========
</TABLE>
(5) The Company hired Mr. Brock effective July 24, 1995.
(6) The Company hired Mr. Schwartz effective November 12, 1996.
(7) The Company hired Mr. Kruse effective June 12, 1996.
9
<PAGE> 13
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company entered into a new Employment Agreement with Karen L. Hendricks
in June 1997. Pursuant to the terms of her Employment Agreement, Ms. Hendricks
will be employed as the Chief Executive Officer, President and Chairman of the
Board of the Company and she will be nominated as a director for each year of
her employment. Her Employment Agreement provides that Ms. Hendricks will
continue in the Company's employ until December 31, 1998, and thereafter,
without a specified term, until terminated by the Company or Ms. Hendricks. Ms.
Hendricks will receive an annual base salary of no less than $350,000. She will
participate in the Company's management incentive plans at the highest
participant level and will receive all other benefits normally accorded to the
Company's senior officers. Ms. Hendricks' Employment Agreement further provides
that, in addition to the customary insurance provided to Company employees, the
Company will purchase a $500,000 term life insurance policy on her life payable
to her beneficiaries and supplemental disability coverage providing $10,000 in
excess disability coverage per month. As an added inducement for Ms. Hendricks
to enter into the Employment Agreement, her Employment Agreement further
provided that she would receive a grant of an additional 19,000 non-qualified
stock options, such options having an exercise price equal to the fair market
value of the Company's Common Stock as of such date. As a further inducement for
Ms. Hendricks to enter into the Employment Agreement, her Employment Agreement
provided that she would receive a one time restricted stock grant of 12,500
shares of the Company's common stock, with 20% of such shares vesting on
execution of the Employment Agreement and the remaining shares vesting 20% on
January 1 of each year through January 1, 2001, but only if Ms. Hendricks is
employed by the Company on such vesting dates.
Ms. Hendricks' Employment Agreement provides that in the event the Company
terminates her employment without cause, the Company will pay her as severance
pay a lump sum amount equal to 18 months of base salary at the time of
termination; provided, however, if the Company terminates Ms. Hendricks'
employment without cause prior to December 31, 1998, the Company shall pay her
as severance pay a lump sum amount equal to her base salary from the date of
termination through December 31, 1998 plus 18 months of her base salary at the
time of termination. Such severance payment shall be paid by the Company within
ninety 90 days following the date of termination. In the event the Company
terminates Ms. Hendricks' employment without cause, the Company shall also pay
the cost of out placement services for Ms. Hendricks up to an amount equal to
15% of her annual base salary at the time her employment is terminated. In the
event Ms. Hendricks is terminated for cause, she shall receive her salary
through the effective date of termination and all incentive payments earned by
but not yet paid to her prior to such date. Such amounts shall be paid by the
Company within 30 days of the effective date of such termination. Ms. Hendricks'
Employment Agreement contains covenants by Ms. Hendricks not to compete with the
Company for a period of one year after termination of her Employment Agreement
by Ms. Hendricks or by the Company for cause or upon her disability.
The Company has entered into agreements with each of Karen L. Hendricks,
Stephen P. Brock, George C. Huebner, Perry H. Schwartz, Randolph R. Marks and
Ronald P. Geguzys (the "Change in Control Agreements") which provide that if
there is a change in control of the Company and such executive officer's
employment with the Company is terminated within a stated time period
thereafter, the Company must pay certain compensation and provide certain
perquisites to the executive officer. The Change in Control Agreements have a
term of five years. Ms. Hendricks' Change in Control Agreement provides that if
a change in control occurs during the term of the agreement and either the
Company or Ms. Hendricks terminates her employment within three years after the
change in control, Ms. Hendricks will receive 2.99 times the average annual
salary and average annual bonus and/or incentive compensation that she received
over the five years immediately preceding her termination. At Ms. Hendricks'
option, such severance compensation may be paid by the Company over 36 months or
in a lump sum discounted to present value. Ms. Hendricks' Change in Control
Agreement also provides that health and life insurance coverage will be
maintained by the Company at the level in existence at the time of her
termination, and that Ms. Hendricks will be fully vested and continue her
participation in all employee retirement plans maintained by the Company on the
date of her
10
<PAGE> 14
termination, either for 36 months or until Ms. Hendricks becomes employed by any
other employer. Pursuant to Ms. Hendricks' Change in Control Agreement, any
agreement not to compete entered into by the Company and Ms. Hendricks shall
remain in effect.
The Change in Control Agreements of Messrs. Brock, Huebner, Schwartz, Marks
and Geguzys are identical. Pursuant to those Change in Control Agreements, if a
change in control occurs during the term of the agreement and the Company
terminates the employment of the executive officer within one year after the
change in control, the executive officer will receive the average annual salary
and average annual bonus and/or incentive compensation that he received over the
five years immediately preceding his termination. At the executive officer's
option, such severance compensation may be paid by the Company over 12 months or
in a lump sum discounted to present value. The Change in Control Agreements of
Messrs. Brock, Thompson, Huebner, Schwartz, Marks and Geguzys also provide that
health and life insurance coverage will be maintained at the level in existence
at the time of his termination, and that the executive officer will be fully
vested and continue his participation in all employee retirement plans
maintained by the Company on the date of his termination, either for 12 months
or until the executive officer becomes employed by any other employer. Pursuant
to the Change in Control Agreements of Messrs. Brock, Thompson, Huebner,
Schwartz, Marks and Geguzys, the executive officers are subject to an agreement
not to compete with the Company for one year following the date of termination.
The Change in Control Agreements for each of Ms. Hendricks and Messrs.
Brock, Huebner, Schwartz, Marks and Geguzys also provide that all stock options,
restricted stock and other incentive awards granted to such executive officers
will, upon termination of employment, immediately vest in full and the executive
officers will be entitled to receive immediately upon termination the cash value
of any long term incentives payable under any long term incentive compensation
plans maintained by the Company on the date of termination.
The Company also agreed in its offer of employment to Mr. Schwartz that,
upon a termination of his employment without cause prior to November 1998, he
will be entitled to severance pay of $15,000 per month for a period of 12 months
following the termination date.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants by the
Company of stock options to each of the named executives during 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
- -------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(4)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME (#)(2) FISCAL YEAR(3) ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Karen L. Hendricks 10,000 15.5% 13.63 5/20/07 85,687 217,147
19,000 29.5% 13.00 6/19/07 155,337 393,654
Stephen P. Brock 3,000 4.7% 13.63 5/20/07 25,706 65,144
Perry H. Schwartz 3,000 4.7% 13.63 5/20/07 25,706 65,144
Ronald W. Kruse 1,000 1.6% 13.63 5/20/07 8,569 21,715
George C. Huebner 3,000 4.7% 13.63 5/20/07 25,706 65,144
</TABLE>
- ---------------
(1) All grants were made at the fair market value on the grant date. All options
were granted under the Company's 1994 Incentive Stock Option Plan, except
for the grant of 19,000 non-qualified stock options to Ms. Hendricks in June
1997.
(2) Options vest over a four year period, 20% on the grant date and 20% on each
anniversary of the grant date.
11
<PAGE> 15
(3) Total options granted to all executive officers and other employees of the
Company in 1997 were for an aggregate of 64,500 shares of Common Stock.
(4) Calculated based upon assumed stock prices for the Company's Common Stock
assuming 5% and 10% annual rates of stock appreciation are achieved over the
full term of the options granted to the executive officers reflected in the
table. The potential realizable gain equals the product of the number of
shares underlying the stock option grant and the difference between the
assumed stock price and the exercise price of each option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information regarding individual
exercises of stock options during 1997 by each of the named executives.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT 12/31/97 12/31/97
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (1)(#) (2)(3)($)
- ---- --------------- -------------- --------------------- -------------
<S> <C> <C> <C> <C>
Karen L. Hendricks -0- -0- 87,800/ 268,725/
51,200 137,400
Stephen P. Brock -0- -0- 10,800/ 25,575/
14,200 33,675
Perry H. Schwartz -0- -0- 4,600/ 8,700/
8,400 16,050
Ronald W. Kruse -0- -0- 2,600/ 6,700/
4,400 11,050
George C. Huebner 1,000 4,375 9,800/ 21,100/
13,200 31,650
</TABLE>
- ---------------
(1) All stock options issued to the named executives under the Company's 1986
Incentive Stock Option Plan are fully vested and are currently exercisable.
See note (2) to the table appearing under "Option Grants in Last Fiscal
Year" regarding the vesting of options granted in 1997.
(2) The shares of the Company's Common Stock issuable upon the exercise of
outstanding stock options granted under the Company's 1986 Incentive Stock
Option Plan, or upon the exercise of non-qualified stock options (except as
noted below), have not been registered under the Securities Act of 1933
("1933 Act"). Generally, such shares may not be resold by the holder for a
minimum period of one year following exercise of the option. The shares of
the Company's Common Stock issuable upon the exercise of outstanding stock
options granted under the Company's 1994 Incentive Stock Option Plan, and
the shares issuable upon the exercise of 100,000 non-qualified stock options
granted to Ms. Hendricks under her employment agreement, have been
registered under the 1933 Act and generally can be resold immediately upon
exercise.
(3) The value of exercisable in-the-money options is calculated by determining
the difference between $15.625 per share, the last reported sale price of
the Common Stock on the Nasdaq National Market on December 31, 1997, and the
exercise price of the option as of such date, multiplied by the number of
shares subject to the option. All unexercisable stock options granted in
1994 have an exercise price of $16.00 per share, except for the 100,000
stock options granted to Ms. Hendricks under her employment agreement which
have an exercise price of $12.50. All unexercisable stock options granted in
1995 have an exercise price of $11.75 per share, except for options granted
to Stephen P. Brock at $13.375 per share. All unexercisable stock options
granted in 1996 to the Company's executive officers have exercise prices of
$13.25 and $13.00 per share. All unexercised stock options granted in 1997
have an exercise price of $13.63 per share, except for
12
<PAGE> 16
19,000 stock options granted to Ms. Hendricks under her employment agreement
which have an exercise price of $13.00 per share. Based upon the $15.625 per
share market price of the Common Stock at December 31, 1997, the
unexercisable stock options granted in 1994, at a price of $16.00 per share,
had no value because the exercise price exceeded the market price.
COMPENSATION OF DIRECTORS
In 1997, non-employee directors of the Company were compensated for serving
on the Board of Directors and the committees thereof, in the amount of $10,000
per year, payable in quarterly installments, and received an additional $900 for
each Board of Directors meeting and each committee meeting attended in person or
by telephone. Such directors are reimbursed for all reasonable expenses incurred
in connection with their services and receive an annual grant of 2,000
non-qualified stock options having an exercise price equal to the market price
on the date of the grant. Ms. Hendricks received no additional compensation for
serving on the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Head and Howe comprised the Company's entire Executive Compensation
Committee during 1997, and were both non-employee directors of the Company. No
director or executive officer of the Company serves on any board of directors or
compensation committee of any entity which compensates Messrs. Head or Howe.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
For the Company's 1997 fiscal year, the Executive Compensation Committee of
the Board of Directors (the "Committee") was at all times comprised entirely of
independent non-employee directors. The Committee is charged with responsibility
for reviewing the performance and approving the compensation of the Company's
key executives on an annual basis. The Committee believes that a significant
portion of an executive officer's compensation should be subject to the
Company's annual performance, while at the same time motivating long-term growth
in shareholder value.
In 1994, the Committee, with the assistance of an independent consulting
company experienced in executive compensation, thoroughly reviewed the Company's
compensation package and developed three compensation plans designed to more
directly link individual compensation to the performances of the Company and of
its executive officers and key management employees. The Committee believed that
establishing an enhanced compensation package would make the Company more
competitive with similar size companies and would increase the Company's ability
to attract and retain highly skilled executives. The three plans approved by the
Committee, and adopted by the full Board of Directors were the 1994 Management
Incentive Plan (the "MIP"), the 1994 Incentive Stock Option Plan (the "ISOP")
and the 1994 Long Term Incentive Plan (the "LTIP").
The MIP sets forth the four main components of executive compensation that
the Company may currently offer to its executive officers and other key
management employees: base salary, annual cash bonus, stock options and
restricted shares of the Company's Common Stock. The MIP provides that the
Company will establish annual base salaries for participants therein, subject to
approval by the Committee. Base salaries may be adjusted annually based
primarily on the participant's individual performance and secondarily on the
Company's performance. The Company and the Committee may subjectively consider
any and all factors deemed relevant in adjusting each participant's base salary
from time to time.
The MIP also allows the committee to grant annual cash bonuses based
primarily upon the performance of the company or, if appropriate, a subsidiary,
division or business segment thereof. The MIP provides that earnings before
income taxes will be the performance measure used to evaluate annual performance
at the Company, subsidiary, division or business segment level, unless the
Committee selects a different performance measure. Specific performance targets
are to be established as early as possible at the start of each calendar year
and no bonus is payable unless the minimum threshold established is met or
exceeded. In addition, specific individual performance levels may also
13
<PAGE> 17
be specified as a condition to the payment of any bonus to an individual. The
Committee selected net income as the primary performance measure for the
Company's 1997 fiscal year for the Company's officers having enterprise wide
responsibilities. For the Company's officers having responsibilities primarily
with respect to a specific business unit, the primary performance measure was
net operating income for that business unit.
The MIP further enables the Committee to grant participants stock options
pursuant to the ISOP and rights to receive restricted stock pursuant to the
LTIP. These plans are designed to afford executive officers and key management
employees an incentive to acquire a proprietary interest in the Company. The
primary objective of both plans is to enhance both the short-term and long-term
profitability of the Company by directly linking awards under these plans to
increased shareholder values.
Pursuant to the terms of the ISOP, the Committee establishes financial and
other performance targets for the Company and for the individual participants.
Such targets are to serve as guidelines in making the actual awards. The primary
factor to be considered by the Committee in awarding stock options is the
employee's individual performance, and the Committee retains discretion as to
the actual number of options granted under the ISOP to any individual in a given
year.
Pursuant to the terms of the LTIP, the Committee would establish the
beginning and end dates for a three year cycle over which the total shareholder
return on Company Common Stock is to be compared to the total shareholder return
on the Russell 2000 index. If the return on the Company's Common Stock equals or
exceeds the targets established by the Committee at the end of the three year
cycle, the participants in the LTIP would then be awarded restricted shares of
the Company's Common Stock in an amount equal to a percentage of their base
salary in the third year of the cycle. The number of restricted shares so
awarded would be determined based on the fair market value at the end of the
three year cycle and such shares would not be transferable by a recipient for
three years thereafter. No grants were made under the LTIP in 1997.
With respect to each of the MIP, ISOP and LTIP, the Committee has
established six levels of employee participation. The size of the possible
awards under each plan is dependent in large part upon the level at which an
employee is designated for participation. In determining the level of
participation for each participant, the Committee subjectively considers the
participant's level of responsibility within the Company's organization.
The Committee followed the above philosophies and procedures in determining
executive compensation for the Company's 1997 fiscal year. The Committee
established the 1997 annual base salary for Ms. Hendricks, the Company's Chief
Executive Officer, President and Chairman of the Board, as part of the terms of
her new employment agreement with the Company as discussed in more detail below.
Based on individual performances, performance of their respective business units
and, in the case of Mr. Brock, expanded responsibilities, the Committee
increased the 1997 annual base salaries for Messrs. Brock and Huebner by 11.4%
and 6.1%, respectively. The 1997 annual base salaries for Messrs. Schwartz and
Kruse were based on the Company's offers of employment to these individuals made
in 1996, which terms had been previously approved by the Committee.
The Committee continued to believe that the interests of the Company's
shareholders would be best served by making the annual cash bonus component of
executive officer compensation in 1997 largely dependent on the Company's
attainment of targeted levels of net income. Because the targeted levels of net
income were exceeded in part due to certain one-time accounting adjustments, the
Committee determined that the 1997 bonuses provided for under the MIP were not
fully earned and should not be paid in full. However, based upon a significant
increase in the Company's net income, an improved balance sheet and the broad
organizational effort in connection with the exit from consignment sales and
resulting inventory reduction, the Committee determined that the Company's
executive officers earned the reduced level of bonuses as shown under "Executive
Compensation--Summary Compensation Table."
14
<PAGE> 18
Consistent with the Committee's desire to enhance the long-term
profitability of the Company, the Committee awarded stock options to executive
officers and a combination of other management employees in 1997 who the Company
and the Committee believe can positively impact the Company's results through
their individual performance. Stock options were granted primarily to motivate
enhanced individual performance in 1997 and beyond.
As indicated above, the Company entered into a new employment agreement
with Ms. Hendricks in June 1997. Based on the additional duties Ms. Hendricks
assumed as Chairman of the Board, her individual performance in 1997 and the
Committee's belief that she had successfully positioned the Company for improved
1997 results, the Committee increased Ms. Hendricks annual base salary by
approximately 10% to $350,000. In addition, to further directly align Ms.
Hendricks individual interests to the performance of the Company, the Committee,
under the terms of the new employment agreement, granted Ms. Hendricks a
non-qualified stock option to acquire 19,000 shares of the Company's common
stock and granted her 12,500 shares of restricted stock.
The Committee also determined that, based on the same criteria applied to
the other executive officers, Ms. Hendricks earned a cash bonus of $98,000 for
1997. The Committee further determined that the maximum stock option bonus under
the MIP was appropriate to further provide a substantial link between the
Company's future performance and the total value of Ms. Hendricks' compensation
package.
Based on the Company's past compensation practices, the Committee does not
currently believe that Section 162(m) of the Code, which limits the
deductibility of executive compensation in certain events, will adversely affect
the company's ability to obtain a tax deduction for compensation paid to its
Chief Executive Officer and its four most highly compensated other executive
officers. Nonetheless, the proposed 1998 Omnibus Stock Plan has been designed to
preserve the Company's tax deduction, to the extent possible, for compensation
that may be paid to certain persons in the future.
THE EXECUTIVE COMPENSATION COMMITTEE
Joseph H. Head, Jr. Roger L. Howe
COMMON STOCK PERFORMANCE
The following performance graph compares the Company's cumulative
shareholder return over a five year period, assuming $100 invested at December
31, 1992, respectively, in Baldwin Piano & Organ Company common stock, the
Russell 2000 index and in an industry group index of twenty-four companies
within the Russell 2000 index engaged in the manufacture or sale of household
furnishing related products. Total shareholder return is based on the increase
in the price of the stock and assumes the reinvestment of all dividends.
The Russell 2000 index consists of the smallest 2,000 companies in the
Russell 3000 index. The Company selected the Russell 2000 index as an
appropriate index for comparison based upon the Company's similar size to the
smaller companies represented in the index. The Company is not included in the
Russell 2000 index as of December 31, 1997 due to the Company's smaller market
capitalization level.
The industry household furnishing group is comprised of: Aaron Rents, Inc.,
Basset Furniture Industries, Incorporated, Blyth Industries, Inc., Bush
Industries, Inc., Department 56, Inc., Ethan Allen Interiors Inc., Furniture
Brands International, Inc., Heilig-Meyers Company, La-Z-Boy Incorporated,
Leggett & Platt, Incorporated, Libbey Inc., Mikasa, Inc., National Presto
Industries, Inc., Newell Co., Oneida Ltd., O'Sullivan Industries Holdings,
Pillowtex Corporation, Premark International, Inc., Rubbermaid Incorporated,
Shaw Industries, Inc., Springs Industries, Inc., Stanhome Inc., Westpoint
Stevens Inc., and Zenith Electronics Corporation. The Company selected this
industry group because this industry group is the most similar to the Company's
business and due to the fact that inadequate information is available regarding
the Company's direct competitors in the music industry because many of such
direct competitors are not public companies and/or are foreign companies.
15
<PAGE> 19
COMPARATIVE SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BPAO R2000 HF
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 89.55 118.91 138.12
1994 65.67 116.74 126.37
1995 74.63 149.94 128.67
1996 67.16 174.67 148.40
1997 93.28 213.73 185.19
[ ] Baldwin Piano & Organ Company (BPAO)
+ Russell 2000 Index (R2000)
X Household Furnishings (HF)
---------------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---------------------------------------------------------------------------------------------------------------------------
BPAO $100.00 $ 89.55 $ 65.67 $ 74.63 $ 67.16 $ 93.28
---------------------------------------------------------------------------------------------------------------------------
R2000 $100.00 $118.91 $116.74 $149.94 $174.67 $213.73
---------------------------------------------------------------------------------------------------------------------------
HF $100.00 $138.12 $126.37 $128.67 $148.40 $185.19
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the Company's knowledge, all of the Company's directors,
officers and 10% or more shareholders have timely filed with the Securities and
Exchange Commission all reports required to be so filed pursuant to Section 16
of the Securities Exchange Act of 1934 for the Company's 1997 fiscal year.
OTHER SECURITIES FILINGS
The information contained in this Proxy Statement under the headings
"Executive Compensation--Report of Compensation Committee on Executive
Compensation" and "Executive Compensation--Common Stock Performance" are not,
and should not be deemed to be, incorporated by reference into any filings by
the Company under the 1933 Act or the Securities Exchange Act of 1934 that
purport to incorporate other Securities and Exchange Commission filings made by
the Company, or portions thereof, by reference (including this Proxy Statement).
16
<PAGE> 20
PROPOSAL TO APPROVE THE 1998 OMNIBUS STOCK PLAN,
INCLUDING THE ISSUANCE OF UP TO 200,000 SHARES THEREUNDER
OVERVIEW OF OMNIBUS PLAN
On March 4, 1998, the Board of Directors of the Company adopted the 1998
Omnibus Stock Plan (the "Omnibus Plan"), including the issuance of up to 200,000
shares of Baldwin Common Stock thereunder, subject to shareholder approval. The
Omnibus Plan permits a committee of the Company's Board of Directors to grant
non-qualified stock options (NQSOs), incentive stock options (ISOs), restricted
stock, stock appreciation rights (SARs), performance units and performance
shares to directors, executive officers and other key employees.
The Omnibus Plan has been designed to comply with Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which generally denies a
corporate tax deduction for annual compensation exceeding $1,000,000 paid to the
chief executive officer and the four other most highly compensated officers of a
public company ("Covered Employees"). Certain types of compensation, including
"performance-based compensation," are generally excluded from this deduction
limit. It is contemplated that all stock awards made under the Omnibus Plan will
constitute "performance-based compensation" under Section 162(m) of the Code. In
an effort to ensure that stock awards under the plan will qualify as
"performance-based compensation," the Omnibus Plan is being submitted to
shareholders for approval at the Annual Meeting. While the Company believes that
compensation payable pursuant to the Omnibus Plan generally will be deductible
for federal income tax purposes, under certain circumstances such as death,
disability, a change in control, or a grant of restricted stock to a Covered
Employee that does not qualify as "performance-based compensation" under Section
162(m) of the Code, compensation not qualified under Section 162(m) of the Code
may be payable pursuant to the provisions of the Omnibus Plan. By approving the
Omnibus Plan, the shareholders will be approving, among other things, the
performance measures, eligibility requirements and limits on various stock
awards contained therein.
Set forth below is a summary of certain important features of the Omnibus
Plan, which summary is qualified in its entirety by reference to the actual plan
attached as Annex 1 to this proxy statement. All capitalized terms which are not
defined herein are defined in the Omnibus Plan. If the Omnibus Plan is approved
by shareholders, all future awards of stock option grants and other stock based
incentives to Covered Employees and directors will be made pursuant to the
Omnibus Plan, including the annual grant of 2,000 non-qualified stock options to
each of the Company's nonemployee directors. Stock option awards to other
executive officers and key employees may continue to be made under the Company's
1994 Stock Option Plan until options for the remaining 64,000 shares available
for grant under the 1994 plan are awarded.
Purpose. The purpose of the Omnibus Plan is to promote the success of the
Company and its Subsidiaries by providing incentives to key employees and
directors that link their compensation to the long-term financial success of the
Company and its Subsidiaries and to growth in shareholder value. The plan is
designed to provide flexibility to the Company and its Subsidiaries in their
ability to motivate, attract and retain the services of key employees and
directors upon whose judgment, interest and special effort the successful
conduct of their operations is largely dependent.
Administration. The Omnibus Plan will be administered by a committee (the
"Committee") of the Board of Directors which will be composed of not less than
two directors, who, to the extent required by Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act"), qualify as "non-employee directors"
for purposes of Rule 16b-3 and who, to the extent required by Section 162(m) of
the Code, also qualify as "outside directors" for purposes of Section 162(m).
Among other things, the Committee will have the authority to select directors,
executive officers and other key employees to whom awards may be granted, to
determine the type of awards as well as the number of shares of Baldwin Common
Stock to be covered by each award, and to determine the terms and conditions of
any such awards. The Committee will also have the authority to construe and
interpret the plan, establish, amend or waive rules and regulations for its
administration, accelerate the exercisability of
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<PAGE> 21
any award, and amend the terms and conditions of any outstanding option, stock
appreciation right or other award. However, the Committee shall have no
authority to adjust upward any amounts payable to a Covered Employee with
respect to a particular award or to take any of the foregoing actions to the
extent that such action or the Committee's ability to take such action would
cause any award to any Covered Employee to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code. All decisions made by the
Committee will be final and binding. For 1998, the Committee will be the
Executive Compensation Committee, as discussed under the caption "ELECTION OF
DIRECTORS--Board Meetings--Committees of the Board."
Eligibility. Participants in the plan will be directors and employees of
the Company or any Subsidiary, including officers of the Company or any
Subsidiary who, in the opinion of the Committee, contribute significantly to the
growth and profitability of the Company and its Subsidiaries.
Number of Shares. The Omnibus Plan authorizes the issuance of up to 200,000
shares of Common Stock pursuant to the grant or exercise of stock options,
including ISOs and NQSOs, SARs, restricted stock, performance units and
performance shares, provided that no more than 50,000 shares of restricted stock
may be issued under the Omnibus Plan in the aggregate. No single participant may
be granted awards of options (NQSOs or ISOs), SARs or restricted stock,
respectively, for in excess of 12,000 shares of Baldwin Common Stock per award
in any calendar year. Also, no Covered Employee may be granted any performance
unit or performance share award with respect to any performance period (i) in an
aggregate amount payable in cash in excess of $30,000, or (ii) in excess of
12,000 shares. The exercise of SARs, whether paid in cash or Baldwin Common
Stock, is deemed an issuance of shares under the Omnibus Plan. The payment of
performance shares or performance units is an issuance of shares under the plan
only to the extent payment is made in Baldwin Common Stock. Subject to the
foregoing limits, the shares available under the Omnibus Plan can be divided
among the various types of awards and among the participants as the Committee
sees fit. Such shares are to be made available from authorized but unissued
shares of Common Stock or shares of Baldwin Common Stock reacquired by the
Company in the open market. The number of shares subject to the Omnibus Plan and
subject to awards outstanding under the plan will adjust with any stock dividend
or split, recapitalization, reclassification, merger, consolidation, combination
or exchange of shares, or similar corporate change.
DESCRIPTION OF AWARDS
Stock Options. The Omnibus Plan permits the award of ISOs and NQSOs. Each
option granted under the plan must be evidenced by a written agreement
specifying terms, including the type, the number of shares covered, the exercise
price, when it is exercisable, any restriction on transferability of shares
obtained from the exercise of the option and the duration. The purchase price
per share of Baldwin Common Stock covered by an option shall be determined by
the Committee, but may not be less than 100% of the Fair Market Value of the
underlying Baldwin Common Stock on the date of grant. No ISOs shall be
exercisable more than ten years after their date of grant. Payment of an option
may be made with cash, with previously owned shares of Baldwin Common Stock, by
delivering shares of Baldwin Common Stock to be received upon exercise of an
Option or by a combination of these. The principal difference between ISOs and
NQSOs is their tax treatment. See "--Federal Income Tax Consequences."
Stock Appreciation Rights. The Omnibus Plan authorizes the Committee to
grant SARs. A holder of SARs is entitled upon exercise to receive a number of
shares of Baldwin Common Stock, or cash or a combination of both, as the
Committee may determine, equal in value on the date of exercise to the amount by
which the Fair Market Value of one share of Common Stock on the date of exercise
exceeds the exercise price fixed by the Committee on the date of grant
multiplied by the number of shares in respect of which the SARs are exercised.
The SAR will be exercisable at such time as the Committee determines and the
term of any SAR will not exceed ten years.
Restricted Stock. The Omnibus Plan authorizes the Committee to grant
restricted stock to individuals with such Periods of Restriction as the
Committee may designate. The Committee may
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<PAGE> 22
condition the grant of restricted stock or lapse of such Periods of Restriction
upon the attainment of one or more performance goals established by the
Committee within the time period prescribed by Section 162(m) of the Code. These
performance goals must be based on the attainment, by the Company, a Subsidiary
or a division of the Company, of certain objective performance measures, which
shall include one or more of the following: total shareholder return, return on
equity, return on capital, earnings per share, cash flow per share, market
share, stock price, revenues, costs, net income, cash flow, retained earnings
and economic value added performance (the "Performance Goals"). Such Performance
Goals may also be based upon the attainment of specified levels of performance
of the Company or one or more Subsidiaries relative to the performance of other
corporations. For a grant of restricted stock to meet the performance-based
compensation exclusion under Section 162(m) of the Code, all Performance Goals
shall be objective performance goals satisfying the requirements for
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code.
Each grant of restricted stock will be evidenced by a restricted stock
agreement that shall specify the Period of Restriction, the number of shares of
restricted stock granted and such other provisions determined by the Committee.
Generally, all rights with respect to the restricted stock granted to a
participant under the Omnibus Plan shall be exercisable only during his lifetime
and only by the participant. Restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. During the Period of Restriction,
participants holding restricted stock may exercise full voting rights with
respect to the shares and are entitled to all dividends and other distributions
paid on those shares. Upon the lapse of the applicable Period of Restriction,
the shares of restricted stock will become freely transferrable.
Performance Units and Performance Shares. The Omnibus Plan authorizes the
Committee to grant performance units and performance shares which may be earned
if specified long-term corporate goals are achieved over a period of time
selected by the Committee (a "Performance Period"). Prior to the grant of
performance units or performance shares, the Committee must establish the
Performance Goals (from among the objective performance measures described above
relating to restricted stock) that must be satisfied before a payout of such
awards is made. At the conclusion of a particular Performance Period, the
Committee will determine the extent to which the Performance Goals have been
met. It will then determine the applicable percentage (which may exceed 100%) to
be applied to, and will apply such percentage to, the value of the performance
units or performance shares awarded to determine the payout to be received by
the participant; provided that no payout will be made thereunder except upon
written certification by the Committee that the applicable Performance Goal(s)
have been satisfied to a particular extent. As a result, depending upon the
Company's performance in relation to the Performance Goals, a participant may
earn less or more than the number of performance shares or performance units
initially awarded. In addition, to the extent that the value of a performance
share or performance unit is related to a share of Baldwin Common Stock, the
value of any payout will be dependent upon the changing value of the Baldwin
Common Stock. Payments may be made in cash, Baldwin Common Stock or a
combination as determined by the Committee. With respect to Covered Employees,
all Performance Goals will be objective performance goals satisfying the
requirements for "performance-based compensation" within the meaning of Section
162(m)(4)(C).
Change in Control. Upon a Change in Control of the Company, all stock-based
awards, such as ISOs, NQSOs, SARs and restricted stock shall vest 100%, and all
performance-based awards, such as performance units and performance shares,
shall immediately be paid out in cash, based upon the extent, as determined by
the Committee, to which the Performance Goals have been met through the
effective date of the change in control or based upon the assumed achievement of
such goals, whichever is higher.
Limits on Transferability and Exercisability. No award granted under the
Omnibus Plan may be sold, transferred, assigned, pledged or hypothecated, other
than by will, by the laws of descent and distribution or by designations
permitted by the terms of the Omnibus Plan. All rights to any award granted to
an employee shall be exercisable during the employee's lifetime only by the
employee or the employee's guardian, legal representative or permitted designee.
All awards granted under the
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<PAGE> 23
Omnibus Plan will be forfeited immediately if the employee is terminated for
cause. Generally, upon termination of any employee due to death or disability,
all options and SARs will be immediately exercisable at any time prior to their
expiration date or within one year after such date of termination of employment,
whichever period is shorter. Upon termination of any employee due to retirement,
all options and SARs will become immediately exercisable at any time prior to
their expiration date. Generally, upon termination of any employee due to death,
disability or retirement, any Restricted Period with respect to restricted stock
will lapse and restricted stock will become freely transferrable, and
outstanding performance units and performance shares will entitle the employee
to receive pro-rated payments based upon the full months of service during the
Performance Period. Upon the termination of any employee for any other reason
(other than for cause), the employee generally may exercise then exercisable
options or SARs for 90 days or until their expiration date and restricted stock,
performance units and performance shares will be forfeited (subject, in each
case, to the discretion of the Committee).
Amendment and Discontinuance. The Omnibus Plan may be amended, altered or
discontinued by the Board of Directors, but except as specifically provided
therein, no amendment, alteration or discontinuance may be made which would in
any manner adversely affect any award theretofore granted under the plan,
without the written consent of the participant. Except as expressly provided in
the Omnibus Plan, the plan may not be amended without shareholder approval to
the extent such approval is required by law or rules of an exchange on which the
Company is listed.
Federal Income Tax Consequences. The following discussion is intended only
as a brief discussion of the federal income tax rules relevant to stock options,
SARs, restricted stock, performance units and performance shares. The laws
governing the tax aspects of awards are highly technical and such laws are
subject to change.
NQSOs and SARs. Upon the grant of an NQSO or a SAR, the recipient will not
recognize any taxable income and the Company will not be required to record an
expense. Upon the exercise of an NQSO or a SAR, the excess of the fair market
value of the shares acquired on the exercise of the option over the purchase
price (the "spread"), or the consideration paid to the recipient upon the
exercise of the SAR, will constitute compensation taxable to the recipient as
ordinary income. In determining the amount of the spread or the amount of
consideration paid, the fair market value of the stock on the date of exercise
is used, except that in the case of an recipient subject to the six month
short-swing profit recovery provisions of Section 16(b) of the Exchange Act
(generally executive officers), the fair market value will generally be
determined at the expiration of the six-month period, unless such optionee
elects to be taxed based on the fair market value at the date of exercise. Any
such election (a "Section 83(b) election") must be made and filed with the
Internal Revenue Service within 30 days after exercise in accordance with the
regulations under Section 83(b) of the Code. The Company, in computing its
federal income tax, will generally be entitled to a deduction in an amount equal
to the compensation taxable to the optionee in the Company's taxable year in
which the amount is included as income to the recipient.
ISOs. An optionee will not recognize taxable income on the grant or
exercise of an ISO. However, the spread at exercise will constitute an item
includible in alternative minimum tax. Such alternative minimum tax may be
payable even though the optionee receives no cash upon the exercise of his ISO
with which to pay such tax. Upon the disposition of shares of stock acquired
pursuant to the exercise of an ISO after the later of (i) two years from the
date of grant of the ISO or (ii) one year after the transfer of the shares to
the optionee (the "ISO Holding Period"), the optionee will recognize capital
gain or loss, as the case may be, measured by the difference between the stock's
selling price and the exercise price. If the optionee disposes of the shares of
stock acquired pursuant to the exercise of an ISO before the expiration of the
ISO Holding Period, the optionee will recognize ordinary income at the time of
disposition of the shares acquired on exercise. The amount of ordinary income
recognized will be equal to the excess, if any, of the fair market value of the
shares on the exercise date or the amount realized, if less, over the exercise
price of the shares. The Company is not entitled to any tax deduction by reason
of the grant or exercise of an ISO, or by reason of a disposition of stock
received upon exercise of an ISO if the ISO Holding Period is satisfied. If the
ISO Holding Period is not satisfied,
20
<PAGE> 24
the Company may deduct an amount equal to the taxable income recognized by the
optionee in the taxable year of the disposition. Option grants for shares which
are exercisable for the first time by an optionee during any calendar year
(under all plans of the Company and any parent corporation or Subsidiary of the
Company), which have a fair market value in excess of $100,000, shall be treated
as options which are not ISOs, and will be subject to the same tax treatment as
for the grant of NQSOs, as discussed above.
Restricted Stock. A participant who is granted restricted stock may make a
Section 83(b) election to have the grant taxed as compensation income at the
date of receipt, with the result that any future appreciation (or depreciation)
in the value of the shares of stock granted shall be taxed as capital gain (or
loss) upon a subsequent sale of the shares. However, if the participant does not
make a Section 83(b) election, the grant will be taxed as compensation income at
the full fair market value on the date that the restrictions imposed on the
shares expire. Unless a participant makes a Section 83(b) election, any
dividends paid on stock subject to the restrictions are compensation income to
the participant and compensation expense to the Company. The Company is
generally entitled to a tax deduction for any compensation income taxed to the
participant, subject to the provisions of Section 162(m) of the Code.
Performance Unit and Performance Shares. A participant who has been granted
a performance unit or performance share will not realize taxable income until
the units or shares vest and the participant is in receipt of the Baldwin Common
Stock and/or cash distributed in payment of the award, at which time such
participant will realize ordinary income equal to the fair market value of the
shares delivered or the amount of cash paid. At that time, the Company generally
will be allowed a corresponding tax deduction equal to the compensation taxable
to the award recipient, subject to the provisions of Section 162(m) of the Code.
NEW PLAN BENEFITS
It cannot be determined at this time what benefits or amounts, if any, will
be received by or allocated to any persons or group of persons under the Omnibus
Plan if the plan is adopted. Such determinations are subject to the discretion
of the Committee.
VOTE REQUIRED
The affirmative vote of a majority of the votes entitled to be cast by the
holders of the Company's Common Stock present or represented at the Annual
Meeting and entitled to vote thereon is required to approve the Omnibus Plan
with respect to Section 162(m) of the Code. Abstentions from voting on this
particular proposal are treated as votes against, while shares not voted by
brokers on any matters presented to shareholders will have no effect on the
adoption of this proposal. Such vote will also satisfy the shareholder approval
requirements of Section 422 of the Code with respect to the grant of ISOs.
Proxies received by the Company and not revoked prior to or at the Annual
Meeting will be voted FOR this Proposal and the adoption of the Omnibus Plan.
THE BOARD OF DIRECTORS HAS ADOPTED OMNIBUS PLAN AND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THIS PROPOSAL.
INDEPENDENT AUDITORS
The Company has not yet selected or recommended an independent auditor for
the year ending December 31, 1998, pending completion of a review by management
and the Audit Committee of competitive proposals. KPMG Peat Marwick LLP served
as the independent auditors of the Company for the year ended December 31, 1997,
and has served as the Company's independent auditors since the Company's
inception in 1984. Representatives of KPMG Peat Marwick LLP are expected to be
present at the 1998 Annual Meeting. They will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
21
<PAGE> 25
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any Shareholder proposal intended for inclusion in the proxy material for
the 1999 Annual Meeting must be received in writing by the Company on or before
December 26, 1998. The inclusion of any proposal will be subject to applicable
rules of the Securities and Exchange Commission.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
MAILED WITHOUT CHARGE TO SHAREHOLDERS UPON REQUEST. REQUESTS SHOULD BE ADDRESSED
TO THE COMPANY, 422 WARDS CORNER ROAD, LOVELAND, OHIO 45140-8390, ATTENTION: MR.
RONALD W. KRUSE, SECRETARY. THE FORM 10-K INCLUDES CERTAIN EXHIBITS, WHICH WILL
BE PROVIDED ONLY UPON PAYMENT OF A FEE COVERING THE COMPANY'S REASONABLE
EXPENSES.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy intend to vote the proxy according to
their best judgment.
You are urged to complete, sign, date and return the proxy card to make
certain your shares will be voted at the 1998 Annual Meeting. For your
convenience in returning the proxy, an addressed envelope is enclosed, requiring
no additional postage if mailed in the United States.
For the Board of Directors,
/s/ KAREN L. HENDRICKS
----------------------
KAREN L. HENDRICKS
Chairman of the Board
22
<PAGE> 26
ANNEX 1
BALDWIN PIANO & ORGAN COMPANY
1998 OMNIBUS STOCK PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1. Establishment of the Plan. On March 4, 1998, the Board of Directors of
Baldwin Piano & Organ Company (the "Company") adopted, subject to the approval
of shareholders, an incentive stock compensation plan known as the "1998 Omnibus
Stock Plan" (hereinafter referred to as the "Plan"), which permits the grant of
Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Units and Performance Shares. The Plan is designed
to comply with the performance-based compensation exclusion under Internal
Revenue Code Section 162(m) and Treasury Regulations issued by the Department of
Treasury thereunder.
1.2. Purpose of the Plan. The purpose of the Plan is to promote the success
of the Company and its Subsidiaries by providing incentives to Key Employees and
directors of the Company and its Subsidiaries that will link their personal
interests to the long-term financial success of the Company and its Subsidiaries
and to growth in stockholder value. The Plan is designed to provide flexibility
to the Company and its Subsidiaries in their ability to motivate, attract, and
retain the services of Key Employees and directors upon whose judgment,
interest, and special effort the successful conduct of their operations is
largely dependent.
1.3. Duration of the Plan. The Plan commences on May 18, 1998, and shall
remain in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Article 13 herein, until all Shares subject to
it shall have been purchased or acquired according to the provisions herein.
However, in no event may an Award be granted under the Plan on or after May 18,
2003, which is the fifth (5th) anniversary of the effective date of the Plan.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1. Definitions. Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant under this Plan of
Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Units, or Performance Shares.
(b) "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Exchange Act.
(c) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(d) "Cause" shall mean the occurrence of any one of the following:
(i) The willful and continued failure by a Participant to
substantially perform his/her duties (other than any such failure
resulting from the Participant's disability), after a written
demand for substantial performance is delivered to the Participant
that specifically identifies the manner in which the Company or
any of its Subsidiaries, as the case may be, believes that the
Participant has not substantially performed his/her duties, and
the Participant has failed to remedy the situation within ten (10)
business days of receiving such notice; or
(ii) the Participant's conviction for committing a felony in connection
with the employment relationship; or
(iii) the willful engaging by the Participant in gross misconduct
materially and demonstrably injurious to the Company or any of its
Subsidiaries. However, no act, or failure to act, on the
Participant's part shall be considered "willful" unless done, or
omitted to be done,
1
<PAGE> 27
by the Participant not in good faith and without reasonable belief
that his/her action or omission was in the best interest of the
Company or any of its Subsidiaries.
(e) "Change in Control" shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been
satisfied:
(i) any Person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of
its Subsidiaries, or a corporation owned directly or indirectly by
the common shareholders of the Company in substantially the same
proportions as their ownership of Stock of the Company) is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding
securities; or
(ii) individuals who at the beginning of any one-year period constitute
the Board and any new director, whose election by the Board or
nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the
Board at the end of such period; or
(iii) the shareholders of the Company approve (A) a plan of complete
liquidation of the Company; or (B) an agreement for the sale or
disposition of all or substantially all the Company's assets; or
(C) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) at least 50% of the combined voting power
of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger or consolidation.
However, in no event shall a Change in Control be deemed to have
occurred, with respect to a Participant, if the Participant is part of a
purchasing group which consummates the Change in Control transaction.
The Participant shall be deemed "part of a purchasing group. . ." for
purposes of the preceding sentence if the Participant is an equity
participant or has agreed to become an equity participant in the
purchasing company or group (except for (i) passive ownership of less
than 5% of the voting securities of the purchasing company or (ii)
ownership of equity participation in the purchasing company or group
which is otherwise not deemed to be significant, as determined prior to
the Change in Control by a majority of the nonemployee continuing
members of the Board).
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(g) "Committee" means the committee appointed by the Board to administer
the Plan pursuant to Article 3 herein.
(h) "Company" means Baldwin Piano & Organ Company, a Delaware corporation,
or any successor thereto as provided in Article 15 herein.
(i) "Covered Employee" means any Participant designated prior to the grant
of Restricted Stock, Performance Units or Performance Shares by the
Committee who is or may be a "covered employee" within the meaning of
Section 162(m)(3) of the Code in the year in which such Restricted
Stock, Performance Units or Performance Shares are taxable to such
Participant.
(j) "Director" means an Employee Director and a Non-employee Director,
including without limitation, an Outside Director.
(k) "Employee Director" means a director who is also an employee of the
Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2
<PAGE> 28
(m) "Fair Market Value" means the last price at which the Stock was traded
on the relevant date, or on the most recent date on which the Stock was
traded prior to such date, as reported on Nasdaq National Market.
(n) "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Article 6 herein, which is designated as an incentive
stock option and is intended to meet the requirements of Section 422 of
the Code.
(o) "Key Employee" means an employee of the Company or any of its
Subsidiaries, including an employee who is an officer or a director of
the Company or any of its Subsidiaries, who, in the opinion of the
Committee, can contribute significantly to the growth and profitability
of the Company and its Subsidiaries.
"Key Employee" also may include any other employee, identified by the
Committee, in special situations involving extraordinary performance,
promotion, retention, or recruitment. The granting of an Award under
this Plan shall be deemed a determination by the Committee that such
employee is a Key Employee, but shall not create a right to remain a
Key Employee.
(p) "Non-employee Director" shall have the meaning assigned to such term in
Rule 16b3(b)(3), as amended from time to time, promulgated by the
Securities and Exchange Commission under the Exchange Act.
(q) "Non-employee Subsidiary Director" means a director of a Subsidiary who
is not also an employee of the Company or any Subsidiary or a director
or officer of the Company.
(r) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Stock, granted under Article 6 herein, which is not intended to be an
Incentive Stock Option.
(s) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
(t) "Outside Director" means any director who qualifies as an "outside
director" as that term is defined in Code Section 162(m) and the
regulations issued thereunder.
(u) "Participant" means a Key Employee, Director or a Non-employee
Subsidiary Director who has been granted an Award under the Plan.
(v) "Performance Share" means an Award, designated as a performance share,
granted to a Participant pursuant to Article 9 herein.
(w) "Performance Unit" means an Award, designated as a performance unit,
granted to a Participant pursuant to Article 9 herein.
(x) "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is restricted, during which the Participant
is subject to a substantial risk of forfeiture, pursuant to Article 8
herein.
(y) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
(z) "Plan" means this 1998 Omnibus Stock Plan of Baldwin Piano & Organ
Company, as herein described and as hereafter from time to time
amended.
(aa) "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Article 8 herein.
(bb) "Stock" or "Shares" means the common stock, $.01 par value, of the
Company.
(cc) "Stock Appreciation Right" or "SAR" means an Award, designated as a
Stock appreciation right, granted to a Participant pursuant to Article
7 herein.
(dd) "Subsidiary" shall mean any corporation which is a subsidiary
corporation of the Company, as that term is defined in Section 424(f)
of the Code.
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(ee) "Voting Stock" shall mean securities of any class or classes of stock
of a corporation, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate
directors.
2.2. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
2.3. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1. The Committee. The Plan shall be administered by a committee (the
"Committee") consisting of not less than two directors who shall be appointed
from time to time by, and shall serve at the discretion of, the Board of
Directors. To the extent required to comply with Rule 16b-3 under the Exchange
Act, each member of the Committee shall qualify as a Non-employee Director. To
the extent required to comply with Code Section 162(m), each member of the
Committee also shall be an Outside Director.
3.2. Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have full power to construe and interpret the Plan; to
establish, amend or waive rules and regulations for its administration; to
accelerate the exercisability of any Award or the end of a performance period or
the termination of any Period of Restriction or any award agreement, or any
other instrument relating to an Award under the Plan; and (subject to the
provisions of Article 13 herein) to amend the terms and conditions of any
outstanding Option, Stock Appreciation Right or other Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. Notwithstanding the foregoing, the Committee shall have no authority
to adjust upwards the amount payable to a Covered Employee with respect to a
particular Award or to take any of the foregoing actions to the extent that such
action or the Committee's ability to take such action would cause any Award
under the Plan to any Covered Employee to fail to qualify as "performance-based
compensation" within the meaning of Code Section 162(m)(4) and the regulations
issued thereunder. Also notwithstanding the foregoing, no action of the
Committee (other than pursuant to Section 4.3 hereof or Section 9.4 hereof) may,
without the consent of the person or persons entitled to exercise any
outstanding Option or Stock Appreciation Right or to receive payment of any
other outstanding Award, adversely affect the rights of such person or persons.
3.3. Selection of Participants. The Committee shall have the authority to
grant Awards under the Plan, from time to time, to such Key Employees (including
officers and directors who are employees), Directors and Non-employee Subsidiary
Directors as may be selected by it. The Committee shall select Participants from
among those who they have identified as being Key Employees and Directors and
Non-employee Subsidiary Directors.
3.4. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive and binding on
all persons, including the Company and its Subsidiaries, its shareholders,
employees, and Participants and their estates and beneficiaries, and such
determinations and decisions shall not be reviewable.
3.5. Delegation of Certain Responsibilities. The Committee may, subject to
the terms of the Plan and applicable law, appoint such agents as it deems
necessary or advisable for the proper administration of the Plan under this
Article 3; provided, however, that the Committee may not delegate its authority
to grant Awards under the Plan or to correct errors, omissions or
inconsistencies in the Plan. All authority delegated by the Committee under this
Section 3.5 shall be exercised in accordance with the provisions of the Plan and
any guidelines for the exercise of such authority that may from time to time be
established by the Committee.
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3.6. Procedures of the Committee. All determinations of the Committee shall
be made by not less than a majority of its members present at the meeting (in
person or otherwise) at which a quorum is present. A majority of the entire
Committee shall constitute a quorum for the transaction of business. If only two
members serve on the Committee, all determinations of the Committee must be made
unanimously. Any action required or permitted to be taken at a meeting of the
Committee may be taken without a meeting if a unanimous written consent, which
sets forth the action, is signed by each member of the Committee and filed with
the minutes for proceedings of the Committee. Service on the Committee shall
constitute service as a director of the Company so that members of the Committee
shall be entitled to indemnification, limitation of liability and reimbursement
of expenses with respect to their services as members of the Committee to the
same extent that they are entitled under the Company's Articles of
Incorporation, as amended from time to time, and Ohio law for their services as
directors of the Company.
3.7. Award Agreements. Each Award under the Plan shall be evidenced by an
award agreement which shall be signed by an authorized officer of the Company
and by the Participant, and shall contain such terms and conditions as may be
approved by the Committee. Such terms and conditions need not be the same in all
cases.
3.8. Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Board or the Committee may impose such conditions on any Award
(including, without limitation, the right of the Board or the Committee to limit
the time of exercise to specified periods) as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule), under the Exchange Act
("Rule 16b-3").
ARTICLE 4. STOCK SUBJECT TO THE PLAN
4.1. Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the aggregate number of Shares that may be delivered under the Plan at
any time shall not exceed Two Hundred Thousand (200,000) Shares of common stock
of the Company, provided that no more than Fifty Thousand (50,000) Shares shall
be issued as Restricted Stock under Article 8 of the Plan in the aggregate. The
Committee, in its sole discretion and from time to time, may make awards
pursuant to the Plan of Options, SARs, Restricted Stock, Performance Units
and/or Performance Shares in such amounts as it deems appropriate, provided,
that, in the aggregate, the total number of shares issuable upon payment of all
Awards shall not exceed that number of Shares specified by the preceding
sentence. Stock delivered under the Plan may consist, in whole or in part, of
authorized and unissued Shares or treasury Shares. The exercise of a Stock
Appreciation Right, whether paid in cash or Stock, shall be deemed to be an
issuance of Stock under the Plan. The payment of Performance Shares or
Performance Units shall not be deemed to constitute an issuance of Stock under
the Plan unless payment is made in Stock, in which case only the number of
Shares issued in payment of the Performance Share or Performance Unit Award
shall constitute an issuance of Stock under the Plan.
4.2. Lapsed Awards. If any Award (other than Restricted Stock) granted
under this Plan terminates, expires, or lapses for any reason, any Stock subject
to such Award again shall be available for the grant of an Award under the Plan.
However, if an Option or Stock Appreciation Right is canceled, the canceled
Option or Stock Appreciation Right shall continue to be counted against the
maximum number of Shares for which Options or Stock Appreciation Rights may be
granted to any individual Participant under the Plan. If, after the grant of an
Option or Stock Appreciation Right, the exercise price of such Option is reduced
or, in the case of a Stock Appreciation Right, the base amount on which stock
appreciation is measured is reduced, the reduction in the exercise price or base
amount is treated as a cancellation of the Option or Stock Appreciation Right
and a grant of a new Option or Stock Appreciation Right; provided, however, that
nothing in this Plan shall authorize or permit the cancellation of Options or
Stock Appreciation Rights which have an exercise price or base amount greater
than the then current Fair Market Value of the Common Stock and the grant of
replacement Options or Stock Appreciation Rights having an exercise price or
base amount less than the original exercise price or base amount.
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4.3. Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, Stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Stock, such adjustment shall be made in
the number and class of shares which may be delivered under the Plan, and in the
number and class of and/or price of shares subject to outstanding Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Shares, and
Performance Units granted under the Plan, as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; and provided that the number of shares subject to any
Award shall always be a whole number. Any adjustment of an Incentive Stock
Option under this paragraph shall be made in such a manner so as not to
constitute a modification within the meaning of Section 424(h)(3) of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Persons eligible to participate in this Plan include all
employees of the Company and its Subsidiaries who, in the opinion of the
Committee, are Key Employees. Directors and Non-employee Subsidiary Directors
may also participate in this Plan.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may from time to time select those Key Employees, Directors and
Non-employee Directors to whom Awards shall be granted and determine the nature
and amount of each Award. No employee, Director or Non-employee Subsidiary
Director shall have any right to be granted an Award under this Plan even if
previously granted an Award.
ARTICLE 6. STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees and Directors at any time and from time
to time as shall be determined by the Committee. Subject to adjustments as set
forth in Section 4.3, the maximum number of Shares subject to Options granted to
any individual Participant in any calendar year shall be twelve thousand
(12,000) Shares. The Committee shall have the sole discretion, subject to the
requirements of the Plan, to determine the actual number of Shares subject to
Options granted to any Participant. The Committee may grant any type of option
to purchase Stock that is permitted by law at the time of grant including, but
not limited to, ISOs and NQSOs. However, no Participant may receive an Award of
ISOs to the extent that the aggregate Fair Market Value of the Stock with
respect to which the ISOs (determined at the time the options are granted) are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company or any of its parent or Subsidiaries) exceeds
$100,000. Nothing in this Article 6 shall be deemed to prevent the grant of
NQSOs in excess of the maximum set forth in the preceding sentence. Further, no
Non-employee Director may receive an Award of ISOs. Unless otherwise expressly
provided at the time of grant, Options granted under the Plan will be ISOs.
6.2. Option Agreement. Each Option grant shall be evidenced by an Option
agreement that shall specify the type of Option granted, the Option price, the
duration of the Option, the number of Shares to which the Option pertains, and
such other provisions as the Committee shall determine. The Option agreement
shall specify whether the Option is intended to be an ISO within the meaning of
Section 422 of the Code, or an NQSO whose grant is not intended to be subject to
the provisions of Code Section 422.
6.3. Option Price. The purchase price per share of Stock covered by an
Option shall be determined by the Committee but shall not be less than 100% of
the Fair Market Value of such Stock on the date the option is granted.
An Incentive Stock Option granted to an employee who, at the time of grant,
owns (within the meaning of Section 424(d) of the Code) Stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or of any of its parent or subsidiary corporations, shall
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have an exercise price which is at least 110% of the Fair Market Value of the
Stock subject to the Option.
6.4. Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary date of its grant
and that no ISO granted to an employee who, at the time of grant, has (within
the meaning of Section 424(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
parent or subsidiary corporations, shall be exercisable later than the fifth
(5th) anniversary date of its grant.
6.5. Exercise of Options. Subject to Section 3.8 herein, Options granted
under the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance approve,
which need not be the same for all Participants.
6.6. Payment. Options shall be exercised by the delivery of a written
notice to the Company setting forth the number of Shares with respect to which
the Option is to be exercised, accompanied by full payment for the Shares. The
Option price upon exercise of any Option shall be payable to the Company in full
either (a) in cash or its equivalent, (b) by tendering shares of previously
acquired Stock having a Fair Market Value at the time of exercise equal to the
total Option price, (c) the exchange in successive steps of Stock to be received
from the exercise of the Option, with the result that the Option grantee will
receive from the exercise a net number of shares of Stock equal to the
difference between the total number of shares of Stock for which the Option is
being exercised and the number of shares of Stock having a Fair Market Value
(determined as of the date of exercise) equal to that portion of the exercise
price being paid by delivery of shares of Stock subject to the Option, or (d) by
a combination of (a), (b), or (c). The proceeds from such a payment shall be
added to the general funds of the Company and shall be used for general
corporate purposes. As soon as practicable, after receipt of written
notification and payment, the Company shall deliver to the Participant Stock
certificates in an appropriate amount based upon the number of Options
exercised, issued in the Participant's name.
6.7. Restrictions on Stock Transferability. The Committee shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as it may deem advisable, including, without limitation, restrictions
under applicable Federal securities law, under the requirements of any stock
exchange upon which such Shares are then listed and under any blue sky or state
securities laws applicable to such Shares.
6.8. Termination of Employment Due to Death, Disability, or Retirement. In
the event the employment of a Participant is terminated by reason of death, any
of such Participant's outstanding Options shall become immediately exercisable
at any time prior to the expiration date of the Options or within one year after
such date of termination of employment, whichever period is shorter, by such
person or persons as shall have acquired the Participant's rights under the
Option pursuant to Article 10 hereof or by will or by the laws of descent and
distribution. In the event the employment of a Participant is terminated by
reason of disability (as defined under the then established rules of the Company
or any of its Subsidiaries, as the case may be), any of such Participant's
outstanding Options shall become immediately exercisable, at any time prior to
the expiration date of the Options or within one year after such date of
termination of employment, whichever period is shorter. In the event the
employment of a Participant is terminated by reason of retirement (as defined
under the then established rules of the Company or any of its Subsidiaries, as
the case may be), any of such Participant's outstanding Options shall become
immediately exercisable (subject to Section 3.8 herein) at any time prior to the
expiration date of the Options. In the case of ISOs, the favorable tax treatment
prescribed under Section 422 of the Code may not be available if the Options are
not exercised within the Code Section 422 prescribed time period after
termination of employment for death, disability, or retirement.
6.9. Termination of Employment for Other Reasons. If the employment of a
Participant shall terminate for any reason other than death, disability,
retirement or for Cause, the Participant shall have the right to exercise such
Participant's outstanding Options within the 90 days after the date of
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<PAGE> 33
his termination, but in no event beyond the expiration of the term of the
Options and only to the extent that the Participant was entitled to exercise the
Options at the date of his termination of employment. In its sole discretion,
the Committee may extend the 90 days to up to one year but, however, in no event
beyond the expiration date of the Option. In the event the Committee elects to
extend such 90-day period, the favorable tax treatment associated with ISOs,
pursuant to Section 422 of the Code, may not be available.
If the employment of the Participant shall terminate for Cause, all of the
Participant's outstanding Options shall be immediately forfeited back to the
Company.
6.10. Nontransferability of Options. No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan, Stock Appreciation Rights may be granted to Key
Employees and Directors, at the discretion of the Committee. Subject to
adjustment as set forth in Section 4.3, the maximum number of Shares subject to
SARs granted to any individual Participant in any calendar year shall be twelve
thousand (12,000) Shares. Subject to the immediately preceding sentence, the
Committee shall have the sole discretion, subject to the requirements of the
Plan, to determine the actual number of Shares subject to SARs granted to any
Participant.
7.2. Exercise of SARs. Subject to Section 3.8 herein and Section 7.3
herein, SARs may be exercised upon whatever terms and conditions the Committee,
in its sole discretion, imposes upon the SARs.
7.3. Payment of SAR Amount. Upon exercise of the SAR, the holder shall be
entitled to receive payment of an amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the price fixed by the Committee at the date of grant
(which price shall not be less than 100% of the market price of a Share
on the date of grant) (the Exercise Price); by
(b) The number of Shares with respect to which the SAR is exercised.
7.4. Form and Timing of Payment. Payment to a Participant, upon SAR
exercise, will be made in cash or Stock, at the discretion of the Committee,
within ten calendar days of the exercise.
7.5. Term of SAR. The term of an SAR granted under the Plan shall not
exceed ten years.
7.6. Termination of Employment. In the event the employment of a
Participant is terminated by reason of death, disability, retirement, or any
other reason, the exercisability of any outstanding SAR shall terminate in the
manner provided under Sections 6.8 and 6.9 hereof.
7.7. Nontransferability of SARs. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
SARs granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock under the Plan to Key Employees and Directors in such amounts
as it shall determine. The Committee may condition the grant of Shares of
Restricted Stock or lapse of the Period of Restriction established pursuant to
Section 8.3 upon the attainment of one or more of the performance goals utilized
for purposes of Performance Units and Performance Shares pursuant to Article 9
hereof; provided, before the grant of Shares of Restricted
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Stock or lapse of the Period of Restriction pursuant to the attainment of a
performance goal, the Committee shall certify in writing that such performance
goal has been satisfied. Subject to adjustment as set forth in Section 4.3, the
maximum number of Shares of Restricted Stock granted to any individual
Participant in any calendar year shall be twelve thousand (12,000) Shares.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or periods, the number of Shares of Restricted Stock granted, and
such other provisions as the Committee shall determine.
8.3. Transferability. Except as provided in this Article 8 or in Section
3.8 herein, the Shares of Restricted Stock granted hereunder may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
termination of the applicable Period of Restriction or for such period of time
as shall be established by the Committee and as shall be specified in the
Restricted Stock Agreement, or upon earlier satisfaction of other conditions
(including any performance goals) as specified by the Committee in its sole
discretion and set forth in the Restricted Stock Agreement.
8.4. Other Restrictions. The Committee shall impose such other restrictions
on any Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable including, without limitation, restrictions under applicable Federal
or state securities laws, and the Committee may legend certificates representing
Restricted Stock to give appropriate notice of such restrictions.
8.5. Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the 1998
Long-Term Incentive Stock Plan of Baldwin Piano & Organ Company in the
rules and administrative procedures adopted pursuant to such Plan, and
in a Restricted Stock Agreement dated . A copy of the Plan,
such rules and procedures, and such Restricted Stock Agreement may be
obtained from the Secretary of Baldwin Piano & Organ Company."
8.6. Removal of Restrictions. Except as otherwise provided in this Article,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Participant after the last day of
the Period of Restriction. Once the Shares are released from the restrictions,
the Participant shall be entitled to have the legend required by Section 8.5
removed from his Stock certificate.
8.7. Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless otherwise specified in the applicable
Restricted Stock Agreement.
8.8. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares while they are so held. If any such dividends or distributions are
paid in Shares, the Shares shall be subject to the same restrictions on
transferability as the Shares of Restricted Stock with respect to which they
were paid.
8.9. Termination of Employment Due to Retirement. In the event that a
Participant terminates his employment with the Company or any of its
Subsidiaries because of normal retirement (as defined under the then established
rules of the Company or any of its Subsidiaries, as the case may be), any
remaining Period of Restriction applicable to the Restricted Stock pursuant to
Section 8.3 hereof shall automatically terminate and, except as otherwise
provided in Section 8.4 or Section 3.8 hereof or as otherwise determined to be
appropriate by the Committee in its sole discretion to prevent such compensation
from failing to qualify as performance based compensation under Section 162(m)
of the Code, the Shares of Restricted Stock shall thereby be free of
restrictions and be freely transferable. In the event that a Participant
terminates his employment with the Company or any of its Subsidiaries
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<PAGE> 35
because of early retirement (as defined under the then established rules of the
Company or any of its Subsidiaries, as the case may be), the Committee in its
sole discretion (subject to Section 3.8 herein) may waive the restrictions
remaining on any or all Shares of Restricted Stock pursuant to Section 8.3
herein and add such new restrictions to those Shares of Restricted Stock as it
deems appropriate.
8.10. Termination of Employment Due to Death or Disability. In the event a
Participant's employment is terminated because of death or disability (as
defined under the then established rules of the Company or any of its
Subsidiaries, as the case may be) during the Period of Restriction, any
remaining Period of Restriction applicable to the Restricted Stock pursuant to
Section 8.3 herein shall automatically terminate and, except as otherwise
provided in Section 8.4. herein or as otherwise determined to be appropriate by
the Committee in its sole discretion to prevent such compensation from failing
to qualify as performance based compensation under Section 162(m) of the Code,
the shares of Restricted Stock shall thereby be free of restrictions and be
fully transferable.
8.11. Termination of Employment for Other Reasons. In the event that a
Participant terminates his employment with the Company or any of its
Subsidiaries for any reason other than for death, disability, or retirement, as
set forth in Sections 8.9 and 8.10 herein, during the Period of Restriction,
then any shares of Restricted Stock still subject to restrictions as of the date
of such termination shall automatically be forfeited and returned to the
Company; provided, however, that in the event of an involuntary termination of
the employment of a Participant by the Company or any of its Subsidiaries other
than for Cause, the Committee, in its sole discretion (subject to Section 3.8
herein), may waive the automatic forfeiture of any or all such Shares and may
add such new restrictions to such Shares of Restricted Stock as it deems
appropriate.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. Grant of Performance Units or Performance Shares. Subject to the terms
and provisions of the Plan, Performance Units or Performance Shares may be
granted to Participants at any time and from time to time as shall be determined
by the Committee. The Committee shall have complete discretion in determining
the number of Performance Units or Performance Shares granted to each
Participant.
9.2. Value of Performance Units and Performance Shares. The Committee shall
set performance goals over certain periods to be determined in advance by the
Committee ("Performance Periods"). Prior to each grant of Performance Units or
Performance Shares, the Committee shall establish an initial value for each
Performance Unit and an initial number of Shares for each Performance Share
granted to each Participant for that Performance Period. Prior to each grant of
Performance Units or Performance Shares, the Committee also shall set the
performance goals that will be used to determine the extent to which the
Participant receives a payment of the value of the Performance Units or number
of Shares for the Performance Shares awarded for such Performance Period. These
goals will be based on the attainment, by the Company or its Subsidiaries, of
certain objective performance measures, which shall include one or more of the
following: total stockholder return, return on equity, return on capital,
earnings per share, market share, stock price, revenues, costs, net income, cash
flow, retained earnings and economic value added performance of the Company, a
Subsidiary or a division of the Company. Such performance goals also may be
based upon the attainment of specified levels of performance of the Company or
one or more Subsidiaries under one or more of the measures described above
relative to the performance of other corporations. With respect to each such
performance measure utilized during a Performance Period, the Committee shall
assign percentages to various levels of performance which shall be applied to
determine the extent to which the Participant shall receive a payout of the
values of Performance Units and number of Performance Shares awarded. With
respect to Covered Employees, all performance goals shall be objective
performance goals satisfying the requirements for "performance-based
compensation" within the meaning of Section 162(m)(4) of the Code, and shall be
set by the Committee within the time period prescribed by Section 162(m) of the
Code and related regulations.
9.3. Payment of Performance Units and Performance Shares. After a
Performance Period has ended, the holder of a Performance Unit or Performance
Share shall be entitled to receive the value thereof as
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determined by the Committee. The Committee shall make this determination by
first determining the extent to which the performance goals set pursuant to
Section 9.2 have been met. It will then determine the applicable percentage
(which may exceed 100%) to be applied to, and will apply such percentage to, the
value of Performance Units or number of Performance Shares to determine the
payout to be received by the Participant. In addition, with respect to
Performance Units and Performance Shares granted to any Covered Employee, no
payout shall be made hereunder except upon written certification by the
Committee that the applicable performance goal or goals have been satisfied to a
particular extent. The maximum amount payable in cash to any Covered Employee
with respect to any Performance Period pursuant to any Performance Unit or
Performance Share award shall be $30,000, and the maximum number of Shares that
may be issued to any Covered Employee with respect to any Performance Period
pursuant to any Performance Unit or Performance Share award is twelve thousand
(12,000) (subject to adjustment as provided in Section 4.3).
9.4. Committee Discretion to Adjust Awards. Subject to Section 3.2
regarding Awards to Covered Employees, the Committee shall have the authority to
modify, amend or adjust the terms and conditions of any Performance Unit award
or Performance Share award, at any time or from time to time, including but not
limited to the performance goals.
9.5. Form and Timing of Payment. The payment described in Section 9.3
herein shall be made in cash, Stock, or a combination thereof as determined by
the Committee. Payment may be made in a lump sum or installments as prescribed
by the Committee. If any payment is to be made on a deferred basis, the
Committee may provide for the payment of dividend equivalents or interest during
the deferral period. Any stock issued in payment of a Performance Unit or
Performance Share shall be subject to the restrictions on transfer in Section
3.8 herein.
9.6. Termination of Employment Due to Death, Disability, or Retirement. In
the event a Participant's employment is terminated because of death, disability,
or retirement (each of disability and retirement as defined under the
established rules of the Company or any of its Subsidiaries, as the case may
be), the holder of a Performance Unit or Performance Share shall receive a
prorated payment based on the Participant's number of full months of service
during the Performance Period, further adjusted based on the achievement of the
performance goals during the entire Performance Period, as computed by the
Committee. Payment shall be made at the time payments are made to Participants
who did not terminate service during the Performance Period.
9.7. Termination of Employment for Other Reasons. In the event that a
Participant terminates employment with the Company or any of its Subsidiaries
for any reason other than death, disability, or retirement, all Performance
Units and Performance Shares shall be forfeited; provided, however, that in the
event of an involuntary termination of the employment of the Participant by the
Company or any of its Subsidiaries other than for Cause, the Committee in its
sole discretion may waive the automatic forfeiture provisions and pay out on a
pro rata basis.
9.8. Nontransferability. No Performance Units or Performance Shares granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution until the termination of the applicable Performance Period.
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively and
who may include a trustee under a will or living trust) to whom any benefit
under the Plan is to be paid in case of his death before he receives any or all
of such benefit. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Participant in writing with the Committee
during his lifetime. In the absence of any such designation or if all designated
beneficiaries predecease the Participant, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
11
<PAGE> 37
ARTICLE 11. RIGHTS OF EMPLOYEES
11.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any of its Subsidiaries to terminate any
Participant's employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company or any of its Subsidiaries.
11.2. Participation. No employee, Director or Non-employee Subsidiary
Director shall have a right to be selected as a Participant, or, having been so
selected, to be selected again as a Participant.
11.3. No Implied Rights; Rights on Termination of Service. Neither the
establishment of the Plan nor any amendment thereof shall be construed as giving
any Participant, beneficiary, or any other person any legal or equitable right
unless such right shall be specifically provided for in the Plan or conferred by
specific action of the Committee in accordance with the terms and provisions of
the Plan. Except as expressly provided in this Plan, neither the Company nor any
of its Subsidiaries shall be required or be liable to make any payment under the
Plan.
11.4. No Right to Company Assets. Neither the Participant nor any other
person shall acquire, by reason of the Plan, any right in or title to any
assets, funds or property of the Company or any of its Subsidiaries whatsoever
including, without limiting the generality of the foregoing, any specific funds,
assets, or other property which the Company or any of its Subsidiaries, in its
sole discretion, may set aside in anticipation of a liability hereunder. Any
benefits which become payable hereunder shall be paid from the general assets of
the Company or the applicable subsidiary. The Participant shall have only a
contractual right to the amounts, if any, payable hereunder unsecured by any
asset of the Company or any of its Subsidiaries. Nothing contained in the Plan
constitutes a guarantee by the Company or any of its Subsidiaries that the
assets of the Company or the applicable subsidiary shall be sufficient to pay
any benefit to any person.
ARTICLE 12. CHANGE IN CONTROL
12.1. Stock Based Awards. Notwithstanding any other provisions of the Plan,
in the event of a Change in Control, all Stock based awards granted under this
Plan shall immediately vest 100% in each Participant (subject to Section 3.8
herein), including Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, and Restricted Stock.
12.2. Performance Based Awards. Notwithstanding any other provisions of the
Plan, in the event of a Change in Control, all performance based awards granted
under this Plan shall be immediately paid out in cash, including Performance
Units and Performance Shares. The amount of the payout shall be based on the
higher of: (i) the extent, as determined by the Committee, to which performance
goals, established for the Performance Period then in progress have been met up
through and including the effective date of the Change in Control or (ii) 100%
of the value on the date of grant of the Performance Units or number of
Performance Shares.
ARTICLE 13. AMENDMENT, MODIFICATION, AND TERMINATION
13.1. Amendment, Modification, and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan, subject to the
approval of the shareholders of the Company if required by the Code, by the
insider trading rules of Section 16 of the Exchange Act, by any national
securities exchange or system on which the Stock is then listed or reported, or
by any regulatory body having jurisdiction with respect hereto.
13.2. Awards Previously Granted. No termination, amendment or modification
of the Plan other than pursuant to Section 4.3 hereof shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.
12
<PAGE> 38
ARTICLE 14. WITHHOLDING
14.1. Tax Withholding. The Company and any of its Subsidiaries shall have
the power and the right to deduct or withhold, or require a Participant to remit
to the Company or any of its Subsidiaries, an amount sufficient to satisfy
Federal, state and local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any grant, exercise, or payment
made under or as a result of this Plan.
14.2. Stock Delivery or Withholding. With respect to withholding required
upon the exercise of Nonqualified Stock Options, or upon the lapse of
restrictions on Restricted Stock, participants may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or
in part, by tendering to the Company shares of previously acquired Stock or by
having the Company withhold Shares of Stock, in each such case in an amount
having a Fair Market Value equal to the amount required to be withheld to
satisfy the tax withholding obligations described in Section 14.1. The value of
the Shares to be tendered or withheld is to be based on the Fair Market Value of
the Stock on the date that the amount of tax to be withheld is to be determined.
All Stock withholding elections shall be irrevocable and made in writing, signed
by the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.
Stock withholding elections made by Participants who are subject to the
short-swing profit restrictions of Section 16 of the Exchange Act must comply
with the additional restrictions of Section 16 and Rule 16b-3 in making their
elections.
ARTICLE 15. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 16. REQUIREMENTS OF LAW
16.1. Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
16.2. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Ohio.
13
<PAGE> 39
BALDWIN PIANO & ORGAN COMPANY
422 WARDS CORNER ROAD - LOVELAND, OHIO 45140-8390
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Perry H. Schwartz, Ronald W. Kruse
and Thomas W. Kahle, or any of them, each with power of substitution, as
P
Proxies of the undersigned to attend the Annual Meeting of Shareholders
of Baldwin Piano & Organ Company (the "Company") to be held on Monday,
May 18, 1998, at 11:00 a.m., Cincinnati time, at Fifth Third Center, 38
Fountain Square Plaza, Cincinnati, Ohio, on the fifth floor in the Board
Room, and any adjournment or adjournments thereof, and to vote the number
of shares of the Company's Common Stock (par value $.01 per share) which
the undersigned would be entitled to vote if personally present on the
R
following matters:
1. ELECTION OF DIRECTORS
Vote for Six (6) Nominees to Serve as Directors of the Company
for the one-year term ending at the 1999 Annual Meeting of
Shareholders.
O
<TABLE>
<CAPTION>
WITHHOLD AUTHORITY
NOMINEE FOR TO VOTE
------- --- ------------------
<S> <C> <C>
George E. Castrucci [ ] [ ]
William B. Connell [ ] [ ]
X
John H. Gutfreund [ ] [ ]
Joseph H. Head, Jr. [ ] [ ]
Karen L. Hendricks [ ] [ ]
Roger L. Howe [ ] [ ]
</TABLE>
Y
2. APPROVAL OF 1998 OMNIBUS STOCK PLAN
For [ ] Against [ ] Abstain [ ] the approval of the 1998
Omnibus Stock Plan, including the issuance of up to 200,000 shares of
Common Stock thereunder.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting including any
motion to adjourn.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ALL NOMINEES LISTED IN PROPOSAL 1, "FOR"
PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING INCLUDING ANY MOTION TO ADJOURN.
Dated...................., 1998
[Shareholder's Name and Address
as on Record Books]
-------------------------------
-------------------------------
(Please sign exactly as your
name or names appear hereon.
When shares are held by joint
tenants, both should sign. If
signing as an attorney,
executor, administrator,
trustee or guardian, give your
full title as such. If signing
on behalf of a corporation, the
full name of the corporation
should be set forth accompanied
by the signature on its behalf
of a duly authorized officer.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE
ENVELOPE PROVIDED
