SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ]Filed by a Party other than the Registrant
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule14a-12
BALDOR ELECTRIC COMPANY
-----------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
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offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
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BALDOR ELECTRIC COMPANY
P. O. Box 2400
5711 R. S. Boreham, Jr. Street
Fort Smith, Arkansas 72902
March 23, 2001
To our Shareholders:
You are cordially invited to attend our 2001 Annual Shareholders' Meeting.
On the following pages you will find the Notice of Meeting, which lists the matters to be conducted at the meeting, and the Proxy
Statement. Our Shareholders' Meeting will also include a review of 2000 activities with an audio-visual presentation and a
discussion of the opportunities and challenges ahead of us. We believe you will find it interesting.
If you plan on attending the Annual Meeting and need information such as directions to the Annual Meeting location or lodging
suggestions, please contact the Company's Investor Relations at (501) 646-4711. All shareholders are invited to attend the meeting
in person. However, to assure your representation at the meeting, you are urged to vote your proxy as soon as possible.
You can now vote electronically over the Internet or by telephone. You may also vote by using a traditional proxy card and mailing
it to us in the enclosed postage-paid return envelope. Detailed voting instructions can be found on your proxy card. Your vote is
important. We appreciate your continuing support.
Sincerely,
R. S. Boreham, Jr.
Chairman
BALDOR ELECTRIC COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
Time: 10:30 a.m., local time
Date: Saturday, April 28, 2001
Location: Breedlove Auditorium of Westark College
5210 Grand Avenue
Fort Smith, Arkansas
Items of Business: 1. To elect directors;
2. To consider and act upon a proposal to approve the Baldor Electric Company Stock Option Plan
for Non-Employee Directors; and
3. To transact such other business as may properly come before the meeting and all adjournments
thereof.
Record Date: Only shareholders of record as of the close of business on March 14, 2001, are entitled to notice
of, and to vote at, the Annual Meeting and all adjournments.
Annual Report: Our 2000 Annual Report to Shareholders for the fiscal year ended December 30, 2000, is enclosed.
This Annual Report is not a part of the proxy soliciting material.
Proxy Voting: Shareholders of record can vote by one of the following methods:
1. By telephone
2. By Internet, or
3. By proxy card
You may revoke your proxy as described in the following Proxy Statement.
By order of the Board of Directors
Lloyd G. Davis
Secretary
March 23, 2001
TABLE OF CONTENTS
Page
General Information ........................................................................................... 1
Voting .......................................................................................................1
Shareholders entitled to vote ......................................................................... 1
Quorum ................................................................................................ 1
Vote required ........................................................................................ 1
Voting methods ........................................................................................ 1
Vote at annual meeting ............................................................................... 2
Voting by employee-participants ....................................................................... 2
Proxies ............................................................................................... 2
Cost of proxy solicitation ............................................................................ 2
Proposal 1 - Election of Directors ............................................................................. 2
Nominees .............................................................................................. 3
Other directors ....................................................................................... 3
General information about the Board of Directors ...................................................... 4
Board of Directors .................................................................................... 4
Committees of the Board of Directors .................................................................. 5
Director compensation ................................................................................. 5
Security Ownership of Certain Beneficial Owners and Management ................................................. 6
Executive Compensation ........................................................................................ 8
Summary compensation table ............................................................................ 8
Option grants in last fiscal year ..................................................................... 9
Aggregated option exercises in last fiscal year and FY-end option values .............................. 10
Change of control arrangements ........................................................................ 10
Compensation committee interlocks and insider participation ........................................... 10
Report of the Board of Directors on Executive Compensation ............................................ 11
Performance graph ..................................................................................... 13
Proposal 2 - Stock Option Plan for Non-Employee Directors ...................................................... 14
General ............................................................................................... 14
Stock option grants ................................................................................... 14
Federal tax consequences .............................................................................. 15
Adjustments upon changes in common stock .............................................................. 15
Amendment and termination ............................................................................. 15
Death or termination of service ....................................................................... 15
Audit Committee Report ......................................................................................... 16
Statement of director independency .................................................................... 17
Independent Auditors ........................................................................................... 18
Shareholder Proposals and Nomination Deadlines ................................................................. 18
Other Matters .................................................................................................. 18
Stock Option Plan for Non-Employee Directors ............................................................ Exhibit A
Audit Committee Charter .................................................................................. Exhibit B
BALDOR ELECTRIC COMPANY
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Date, time, and place of meeting...The enclosed proxy is solicited on behalf of the Board of Directors of Baldor Electric Company
(the "Company") for use at the Annual Meeting of its shareholders. The meeting will be held as follows:
Time: 10:30 a.m., local time Location: Breedlove Auditorium of Westark College
Date: Saturday, April 28, 2001 5210 Grand Avenue
Fort Smith, Arkansas
Company location and proxy mailing...The Company's principal executive offices are located at 5711 R. S. Boreham, Jr. Street, Fort
Smith, Arkansas 72901. This Proxy Statement and the accompanying form of proxy are first being sent to shareholders on or about
March 23, 2001.
VOTING
Shareholders entitled to vote...Only the holders of record of the Company's Common Stock, par value $0.10 per share (the "Common
Stock"), at the close of business on March 14, 2001, will be entitled to notice of and to vote at the Annual Meeting. There were
33,900,823 shares of Common Stock of the Company outstanding as of the close of business on March 14, 2001. Each share of Common
Stock entitles the holder to one vote on each item of business to be presented for shareholder vote at the Annual Meeting.
Quorum...A majority of the issued and outstanding shares entitled to vote and represented in person or by proxy will constitute a
quorum for the transaction of business at the Annual Meeting. Shares represented by properly executed proxies will be counted for
determining whether a quorum exists. If a broker indicates on the proxy that it does not have discretionary authority to vote on a
particular matter (a "broker non-vote"), the related shares will not be considered as present and entitled to vote except to the
extent that such shares are voted on any other matter presented at the meeting.
Vote required...The affirmative vote of the holders of a majority of the shares constituting the quorum is required for the election
of directors as set forth in Proposal 1 and for the approval of the Baldor Electric Company Stock Option Plan for Non-Employee
Directors as set forth in Proposal 2. Shares represented by proxies which direct that the shares be voted to abstain or to withhold
a vote on a matter, and broker non-votes deemed to be present, will have the effect of a vote against each such proposal. Shares
represented by proxies that are marked to deny discretionary authority on other matters will be treated as shares present and
entitled to vote on those matters, which will have the same effect as a vote against approval of such proposals.
Voting methods...You may vote your shares by telephone, over the Internet, or by mail as indicated on the attached proxy card. If
you vote by telephone or Internet, you do not need to return your proxy card. If you choose to vote by mail, simply mark your proxy,
date and sign it, and return it in the enclosed postage-paid envelope.
Vote at the Annual Meeting...Your vote by telephone, Internet, or mail will not limit your right to vote at the Annual Meeting. If
you are not a shareholder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at
the meeting.
Voting by employee-participants... The Company maintains the Baldor Electric Company Employees' Profit Sharing and Savings Plan (the
"Profit Sharing and Savings Plan"). One of the investment alternatives for employee-participants is the Baldor Stock Fund.
Employee-participants have the right to direct the trustee of the Profit Sharing and Savings Plan how to vote the shares of Common
Stock that are allocated to their accounts. Employee-participants may also use the methods above - telephone, Internet, or mail - to
direct the trustee on how to vote their shares. Instructions on the various voting methods can be found on the employee-participants
direction card. The Profit Sharing and Savings Plan requires the trustee to vote the shares of Common Stock not yet allocated to the
accounts of employee-participants in proportion to the votes cast by employee-participants.
Proxies...The persons named in the proxy are authorized to vote the shares of the shareholders giving the proxy for any nominee
except those nominees with respect to whom authority has been withheld. All shares that have been properly voted - whether by
telephone, Internet, or mail - and not revoked will be voted at the Annual Meeting in accordance with the instructions received. If
the form of proxy is signed and returned without any direction given, shares of the Company's Common Stock will be voted FOR the
election of the Board's slate of nominees and FOR the approval of the Baldor Electric Company Stock Option Plan for Non-Employee
Directors. A properly voted proxy - whether by telephone, Internet, or mail - may be revoked at any time before it is exercised
either by written notice to the Secretary of the Company or by attending the meeting and voting in person.
Cost of proxy solicitation... The Company will pay for the cost of the solicitation of proxies. Regular employees of the Company,
without additional compensation, may personally solicit proxies or use mail systems, facsimile, telephone, or other reasonable means
to solicit proxies. Brokerage firms, banks, nominees, and others will be requested to forward proxy materials to the beneficial
owners of the Company's Common Stock held of record by them. Currently, there is no plan to solicit proxies by specially engaged
employees or other paid solicitors. However, this may be done if deemed necessary later.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation and Bylaws, as amended, provide for a classified Board of Directors. The Board is
divided into three classes. Each class expires at different times. Three members are to be elected to the Board of Directors in
2001. Each member elected in 2001 will serve for a term of three years.
The persons named in the enclosed proxy intend to vote such proxy for the election of the three nominees named below as directors of
the Company. Each nominee listed below will be voted FOR unless the shareholder indicates on the proxy that the vote for any one or
more of the nominees should be withheld or contrary directions are indicated.
The Board of Directors has no reason to doubt the availability of the nominees and each has indicated a willingness to serve if
elected. If any nominee shall decline or be unable to serve, the Board of Directors, in its discretion, may either reduce the size
of the Board or the proxies will be voted for a substitute nominee designated by the Board of Directors.
Information Regarding the Nominees for Directors
to be Elected in 2001 for Terms Ending in 2004
R. S. Boreham, Jr. ... The Company's Chairman of the Board since 1981 and Chief Executive Officer from 1978 through 1992; Director of
USA Truck, Inc. (NASDAQ).
R. L. Qualls ... The Company's Vice Chairman of the Board since November 1996, Chief Executive Officer from 1993 through 1997, and
President from 1990 through 1996; Director of Bank of the Ozarks, Inc. (NASDAQ).
Barry K. Rogstad...President of the American Business Conference, a coalition of mid-size fast-growing firms, which promotes public
policies to encourage growth, job creation, and a higher standard of living for all Americans, for more than five years.
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 2001 or Expire during 2001
Jefferson W. Asher, Jr. ... Independent Management Consultant, providing assistance to corporations, attorneys, banking institutions,
and other creditors, for more than five years; Director of California Beach Restaurants, Inc. (OTC).
Merlin J. Augustine, Jr. ... Associate Vice Chancellor for Finance and Administration at the University of Arkansas in Fayetteville
for more than five years; Chairman of the Board of Arkansas Science and Technology Authority since 2000; Founder and Chief Executive
Officer of the M & N Augustine Foundation for Human Development, Inc. since 1992.
Fred C. Ballman ... The Company's former Chairman and Chief Executive Officer (retired).
Richard E. Jaudes ... Partner at Thompson Coburn LLP, a law firm which provides legal counsel to the Company, since 1997; a partner
at Peper, Martin, Jensen, Maichel and Hetlage, a law firm, prior to 1997.
John A. McFarland ... The Company's Chief Executive Officer since January 2000, President since November 1996, Executive Vice
President - Sales and Marketing from August 1996 to November 1996, and Vice President - Sales from May 1991 to August 1996.
Robert J. Messey ... Senior Vice President and Chief Financial Officer of Arch Coal, Inc. (NYSE), the nation's second largest coal
producer, since December 2000; Vice President - Financial Services of Jacobs Engineering Group, Inc. (NYSE), one of the nation's
largest engineering firms, from 1999 thru December 2000; Senior Vice President and Chief Financial Officer of Sverdrup Corporation
from 1993 to 1999.
Robert L. Proost ... Financial Consultant and Lawyer; Former Director, Corporate Vice President, Chief Financial Officer, and
Director of Administration of A.G. Edwards & Sons, Inc., a securities brokerage and investment banking firm which has historically
provided investment banking services to the Company (retired March 2001); Former Director, Vice President, and Chief Financial
Officer of A. G. Edwards, Inc. (NYSE), and of various subsidiaries (retired March 2001).
General Information Regarding
Current Directors and Nominees for Election
Year of Director Current Term
Name Birth Since Expires
-------------------------------- ------------------ -------------------- --------------------
Jefferson W. Asher, Jr. 1924 1973 2002
Merlin J. Augustine, Jr. 1943 2000 2003
Fred C. Ballman 1912 1992 * 2001
R. S. Boreham, Jr. 1924 1961 2001
Richard E. Jaudes 1943 1999 2002
John A. McFarland 1951 1996 2003
Robert J. Messey 1946 1993 2002
Robert L. Proost 1937 1988 2003
R. L. Qualls 1933 1987 2001
Barry K. Rogstad 1940 N/A N/A
* Mr. Ballman was also a Director of the Company from 1944 to 1982.
Information About the Board of Directors
and Committees of the Board
Board of Directors ... In addition to its normal responsibilities, the Board of Directors, as a whole, approves executive
compensation. During the fiscal year ended December 30, 2000 ("fiscal year 2000"), the Board of Directors held four meetings. Below
are the current committee memberships and other information about the committees of the Board of Directors.
Executive Audit Stock Option Nominating
Name Committee Committee Committee Committee
-------------------------------- ---------------- --------------- ------------------- -------------------
Jefferson W. Asher, Jr. Chairman
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
Merlin J. Augustine, Jr. *
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
Fred C. Ballman
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
R. S. Boreham, Jr. Chairman *
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
Richard E. Jaudes *
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
John A. McFarland * Chairman
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
Robert J. Messey * Chairman
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
Robert L. Proost * *
-------------------------------- ---------------- --------------- ------------------- -------------------
-------------------------------- ---------------- --------------- ------------------- -------------------
R. L. Qualls *
================================ ================ =============== =================== ===================
================================ ================ =============== =================== ===================
Meetings held during
fiscal year 2000 4 2 4 2
-------------------------------- ---------------- --------------- ------------------- -------------------
* Committee membership
Executive Committee ... Between meetings of the Board, the Executive Committee is empowered to act in lieu of the Board of Directors
except on those matters for which the Board of Directors has specifically reserved authority to itself or as set forth in the
Company's Bylaws, as amended. The Executive Committee administers the 1989 Stock Option Plan for Non-Employee Directors (the "1989
Plan") and the 1996 Stock Option Plan for Non-Employee Directors (the "1996 Plan") both of which have expired except for options
outstanding. The Executive Committee is comprised of directors who are also executive officers and employees of the Company and a
non-employee director.
Audit Committee ... The Audit Committee performs the following functions: assists in the selection of independent auditors, directs
and supervises investigations into matters relating to audit functions, reviews with independent auditors the plans and results of
the audit engagement, reviews the degree of independence of the auditors, considers the range of audit and non-audit fees, and
reviews the adequacy of the Company's system of internal accounting controls. More information regarding the Audit Committee can be
found in this proxy statement under the captions "The Audit Committee Report" and "Statement of Director Independency". The Audit
Committee is comprised of non-employee independent directors.
Stock Option Committee ... The Stock Option Committee administers the Company's 1987 Incentive Stock Plan (the "1987 Plan") and 1994
Incentive Stock Plan (the "1994 Plan"). These plans are employee stock plans. The Stock Option Committee also administers the 1990
Stock Plan for District Managers (the "1990 Plan"). The 1987 Plan has expired except for outstanding options. Awards can be made
from the 1994 Plan and the 1990 Plan. The Stock Option Committee has the exclusive authority to determine which of the eligible
participants are to receive awards and to determine the amount and the terms and conditions of the awards made to each participant.
The Stock Option Committee is comprised of non-employee independent directors.
Nominating Committee ... The Nominating Committee is responsible for searching for and reviewing possible candidates for the Board
of Directors. The Committee is also responsible for proposing to the Board of Directors a slate of directors for election by the
shareholders at each annual meeting and proposing candidates to fill any vacancies on the Board.
Director Compensation ... Under the terms of the 1996 Plan, each non-employee director received an option grant on January 31,
2000. Each grant included: (1) an option to purchase 3,240 shares of the Company's Common Stock having an exercise price of
$17.0625 (the composite closing price of the Common Stock on that date), and (2) an option to purchase 2,160 shares of the Company's
Common Stock having an exercise price of $8.53125 (50% of the composite closing price of the Common Stock on that date). The annual
option grants become exercisable immediately and all options expire ten years after the grant date. Only non-employee independent
directors are compensated for their services on the Board of Directors. A summary of the quarterly fees paid for board and committee
service for fiscal year 2000 follows.
Executive Audit Stock Option Nominating
Director Committee Committee Committee Committee
---------------- ------------ ---------------- --------------- ------------------- ----------------
Chairman $ 0 $ 0 $ 3,100 $ 800 $ 0
---------------- ------------ ---------------- --------------- ------------------- ----------------
---------------- ------------ ---------------- --------------- ------------------- ----------------
Member $ 4,125 $ 0 $ 2,100 $ 800 $ 0
---------------- ------------ ---------------- --------------- ------------------- ----------------
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 14, 2001, regarding all persons known to the Company to be the beneficial
owners of more than five percent of the Company's Common Stock. The table also includes security ownership for each director of the
Company, each nominee for election as a director, each of the executive officers named in the Summary Compensation Table (the "Named
Executive Officers"), and all executive officers and directors as a group.
Number of Percent of
Name Shares Class (1)
- ------------------------------------------------ ------------------- ---------------
The Baldor Electric Company
Profit Sharing and Savings Plan 3,930,766 (2) 11.6 %
P. O. Box 2400
Fort Smith, Arkansas 72902
Fred C. Ballman 3,052,904 (3) 9.0 %
P. O. Box 6638
Fort Smith, Arkansas 72906
R. S. Boreham, Jr. 1,620,893 (4) 4.8 %
Lloyd G. Davis 306,030 (5) *
John A. McFarland 286,404 (6) *
James R. Kimzey 237,012 (7) *
R. L. Qualls 202,907 (8) *
Jefferson W. Asher, Jr. 101,059 (9) *
Robert L. Proost 84,040 (10) *
Robert J. Messey 69,489 (11) *
Richard E. Jaudes 11,866 (12) *
Merlin J. Augustine, Jr. 5,139 (13) *
Barry K. Rogstad 0 *
All executive officers and directors
as a group (21 persons) 6,652,571 (14) 18.9 %
- ---------------
* Less than 1%.
(1) Percentage is calculated in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended. The
numerator consists of the number of shares of the Company's Common Stock owned by each individual (including shares issuable
upon exercise of stock options which are currently exercisable or exercisable within 60 days of March 14, 2001). The
denominator consists of all issued and outstanding shares of the Company's Common Stock plus those shares that are issuable
upon the exercise of stock options for that individual or group of individuals. All "exercisable" options as defined on this
page includes shares issuable upon exercise of stock options which are currently exercisable or exercisable within 60 days of
March 14, 2001.
(2) Based on correspondence dated March 14, 2001, received from the trustee of the Company's Profit Sharing and Savings Plan,
participants in such Plan have sole voting power and shared investment power over 3,930,766 shares.
(3) Shared voting and shared investment power over 3,020,504 shares; includes exercisable options to purchase 32,400 shares.
(4) Shared voting and shared investment power over 184,899 shares; sole voting and sole investment power over 1,253,743 shares;
sole voting and shared investment power over 2,019 shares in the Profit Sharing and Savings Plan; includes exercisable
options to purchase 180,232 shares.
(5) Sole voting and sole investment power over 88,687 shares; shared voting and shared investment power over 13,334 shares; sole
voting and shared investment power over 19,534 shares and shared voting and shared investment power over 2,809 shares in the
Profit Sharing and Savings Plan; includes exercisable options to purchase 149,933 shares directly and 31,733 indirectly.
(6) Sole voting and sole investment power over 13,695 shares; shared voting and shared investment power over 103,637 shares; sole
voting and shared investment power over 29,072 shares in the Profit Sharing and Savings Plan; includes exercisable options to
purchase 140,000 shares.
(7) Shared voting and shared investment power over 91,876 shares; sole voting and sole investment power over 13,862 shares; sole
voting and shared investment power over 10,141 shares in the Profit Sharing and Savings Plan; includes exercisable options to
purchase 121,133 shares.
(8) Sole voting and sole investment power over 175,145 shares; shared voting and shared investment power over 9,362 shares;
includes exercisable options to purchase 18,400 shares.
(9) Sole voting and sole investment power over 74,059 shares; includes exercisable options to purchase 27,000 shares.
(10) Sole voting and sole investment power over 14,100 shares; shared voting and shared investment power over 17,020 shares;
includes exercisable options to purchase 52,920 shares.
(11) Sole voting and sole investment power over 2,762 shares; shared voting and shared investment power over 1,927 shares;
includes exercisable options to purchase 64,800 shares.
(12) Sole voting and sole investment power over 1,066 shares; includes exercisable options to purchase 10,800 shares.
(13) Shared voting and shared investment power over 1,899 shares; includes exercisable options to purchase 3,240 shares.
(14) Sole voting and sole investment power over 1,744,483 shares; shared voting and shared investment power over 3,538,232 shares;
sole voting and shared investment power over 128,723 shares in the Profit Sharing and Savings Plan; includes exercisable
options to purchase 1,241,133 shares.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid during each of the Company's last three fiscal years
to each of the Company's Named Executive Officers.
Summary Compensation Table
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
----------------------------------- --------------------- --------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation (1)
----------------------------- ---- ------ ------- ------------- ------- ------- ------- --------------
($) ($) ($) ($) (#) ($) ($)
John A. McFarland 2000 250,000 247,500 0 0 26,000 0 26,129
President and 1999 215,000 215,000 0 0 26,000 0 26,903
Chief Executive Officer 1998 190,000 171,108 0 0 25,000 0 19,230
R. S. Boreham, Jr. 2000 270,000 267,300 0 0 19,500 0 57,186
Chairman 1999 363,000 362,000 0 0 23,400 0 53,975
1998 350,000 332,710 0 0 25,000 0 58,657
Lloyd G. Davis 2000 200,000 198,000 0 0 14,300 0 27,401
Executive Vice President, 1999 190,000 150,000 0 0 14,300 0 29,367
Chief Operating Officer, and 1998 160,000 129,282 0 0 17,000 0 21,113
Secretary
James R. Kimzey 2000 168,000 130,680 0 0 6,500 0 22,214
Executive Vice President - 1999 163,000 127,000 0 0 14,300 0 23,215
Research and Reliability 1998 157,000 118,825 0 0 17,000 0 19,061
R. L. Qualls 2000 120,000 118,800 0 0 13,000 0 16,624
Vice Chairman 1999 188,000 187,000 0 0 15,600 0 33,879
1998 175,000 166,355 0 0 17,000 0 34,256
--------------
(1) The amounts disclosed in this column include contributions by the Company Profit Sharing and Savings Plan, a defined contribution
plan. This is comprised of two plans: profit sharing plan and 401(k) savings. The Company makes a contribution to the profit
sharing plan equal to 12% of pre-tax earnings for participating companies. The matching contribution is allocated among eligible
employees in proportion to their total compensation. The Company makes matching contributions to the savings plan at a rate no
greater than 25% of the first 6% of the participating employee's compensation. Due to the limits on the total amount of Company
and employee contributions, the above Named Executive Officers did not receive their full allocation amounts to the Profit Sharing
and Savings Plan. The Company also maintains a split-dollar life insurance plan for all executive officers. The Company makes
the premium payments on the split-dollar life insurance policies that vary according to age and insurance coverage for each
officer. Each executive officer reimburses the Company for a portion of the premium that represents the full value attributable
to term life coverage. The amounts included as compensation for each Named Executive Officer were calculated using the
interest-foregone method that more accurately reflects the benefit received by the participant. The fiscal year 2000 amounts in
this column represent Company contributions consisting of the following:
Contributions Contributions Split-Dollar
to the to the Life Insurance
Name Profit Sharing Plan 401(k) Savings Premiums
---------------------------- ----------------------- ------------------ --------------
($) ($) ($)
John A. McFarland 14,824 2,000 9,305
R. S. Boreham, Jr. 14,824 2,259 40,103
Lloyd G. Davis 14,824 2,250 10,327
James R. Kimzey 14,824 1,767 5,623
R. L. Qualls 14,824 1,800 0
Option Grants in Last Fiscal Year
Individual Grants
------------------------------------------------------------------------
Number of % of Total Market
Securities Options Price
Underlying Granted to Exercise on Grant Date
Options Employees in or Base Grant Expiration Present
Name Granted Fiscal Year Price Date Date Value (1)
---------------------- ---------- ------------- --------- -------- --------- ----------
(#) ($/sh) ($/sh) ($)
John A. McFarland 20,000 (2) 5.6% 17.06 17.06 2/6/2010 73,200
6,000 (3) 1.7% 8.53 17.06 2/6/2010 51,900
R. S. Boreham, Jr. 15,000 (2) 4.2% 17.06 17.06 2/6/2010 54,900
4,500 (3) 1.3% 8.53 17.06 2/6/2010 38,925
Lloyd G. Davis 11,000 (2) 3.1% 17.06 17.06 2/6/2010 40,260
3,300 (3) 0.9% 8.53 17.06 2/6/2010 28,545
James R. Kimzey 5,000 (2) 1.4% 17.06 17.06 2/6/2010 18,300
1,500 (3) 0.4% 8.53 17.06 2/6/2010 12,975
R. L. Qualls 10,000 (2) 2.8% 17.06 17.06 2/6/2010 36,600
3,000 (3) 0.8% 8.53 17.06 2/6/2010 25,950
---------------
(1) The Company used the Black-Scholes option pricing model to determine grant date present value. Calculations are based on a
ten-year option term and the following weighted average variables assumptions: expected option life of 8 years; interest rate of
6.7%; annual dividend yield of 2.8%; and volatility of 3.5%. Because the present values are based on estimates and assumptions,
the amounts reflected in this table may not be achieved.
(2) Incentive stock options to purchase shares of Common Stock of the Company were granted at the composite closing price of the
Common Stock on the date of grant and are 100% exercisable six months and one day following the grant date.
(3) Non-qualified options to purchase shares of restricted Common Stock of the Company were granted at 50% of the composite closing
price of the Common Stock on the date of grant with full vesting occurring on the fifth anniversary date. Vesting may be
accelerated by early exercise or when certain events relating to change of the Company's ownership occur. Until vesting occurs,
the restricted shares acquired on exercise of such options: (a) have dividend rights, (b) may be voted, (c) cannot be sold or
transferred until they are vested, and (d) are forfeitable under certain circumstances. The options are 100% exercisable six
months and one day following the grant date.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of
Securities Underlying Value of
Shares Unexercised Unexercised
Acquired on Value Options In-the-Money Options
Name Exercise Realized (1) at FY-End (#) at FY-End ($) (2)
-------------------- ------------ ---------- ----------------------------- -----------------------------
(#) ($) (Exercisable) (Unexercisable) (Exercisable) (Unexercisable)
------------- --------------- ------------- ---------------
John A. McFarland 14,266 203,458 154,534 0 917,901 0
R. S. Boreham, Jr. 16,300 171,599 180,232 0 1,122,798 0
R. L. Qualls 0 0 115,406 0 803,709 0
Lloyd G. Davis 16,000 224,010 181,666 0 1,358,574 0
James R. Kimzey 20,520 360,098 121,133 0 916,197 0
---------------
(1) Represents the difference between the option exercise price and the composite closing price of the Common Stock on the date of
exercise multiplied by the number of shares acquired upon exercise.
(2) Represents the difference between the $21.125 composite closing price of the Common Stock as reported by the New York Stock
Exchange on December 29, 2000, the last trading day of fiscal year 2000, and the exercise price of the options multiplied by the
number of shares of Common Stock underlying the options. The numbers shown reflect the value of options accumulated over a
nine-year period.
Change-of-Control Arrangements
Pursuant to agreements under the 1987 Plan and the 1994 Plan, outstanding restricted Common Stock of the Company acquired by an early
exercise of a non-qualified stock option will fully vest and be free of restrictions without the requirement of any further act by the
Company or shareholder in the event of a "Change-of-Control" of the Company as defined in those agreements.
Compensation Committee Interlocks and Insider Participation
Although the Company has no standing compensation committee of the Board of Directors, the Executive Committee performs functions
similar to those customarily performed by such committee by making recommendations to the Board; however, the Board of Directors, as a
whole, approves the salary and bonus remuneration arrangements for directors and executive officers. The Stock Option Committee
administers the 1981 Plan, the 1987 Plan, and the 1994 Plan, all Plans relating to employees. The Executive Committee administers the
1989 Plan and the 1996 Plan, both relating to non-employee directors. The 1981 Plan, the 1987 Plan, and the 1989 Plan have expired
except for options outstanding. The members of the Executive Committee are the following directors who were, during fiscal year 2000,
executive officers: R. S. Boreham, Jr., John A. McFarland, and R. L. Qualls. The members of the Stock Option Committee are the
following non-employee independent directors: Richard E. Jaudes, Robert J. Messey, and Robert L. Proost.
Report of the Board of Directors on Executive Compensation
The Company applies a consistent philosophy to compensation for all employees, including senior management. This philosophy is based
on the premise that the achievements of the Company result from the coordinated efforts of all individuals working toward common
objectives. The Company strives to achieve those objectives through teamwork that is focused on meeting the expectations of customers
and shareholders.
The Company's Officers' Compensation Plan (the "Plan") is objective, formula driven, and has been consistently applied since 1973. The
Plan is designed to ensure that an appropriate relationship exists between executive pay and the creation of shareholder value. The
primary goals of the Plan are to ensure that total compensation is fair internally, is competitive externally, and offers performance
motivation. For purposes of this report, total compensation is defined as salary plus bonus. The Plan combines annual base
compensation with a bonus based upon the Company's performance. The Company believes that the goals of the Plan are met by providing
competitive compensation that will motivate and retain key employees.
Total compensation for all executive officers is established within the range of salaries and bonuses for persons holding similar
positions at other comparably-sized manufacturing companies, utilizing independent salary survey data. The survey data is a composite
of all manufacturing companies that are comparably sized based upon sales volume. The independent survey does not provide a detailed
list of all participating companies; however, many of the participating companies are listed, some of which are included in the
Performance Graph. In general, the total compensation for all executive officers is expected to be slightly below the median for
similar positions compared to the independent survey data. This is accomplished by establishing the annual base portion of
compensation at the low end of the survey with the potential incentive portion being slightly above the median. This results in a
greater emphasis being placed upon the Company's performance.
The total compensation individual officers may earn is subjective based upon the individual's position, experience, and ability to
affect the Company's performance. In establishing each officer's annual base and potential bonus portion of compensation, additional
consideration includes the individual's past performance, initiative and achievement, and future potential, as well as the Company's
performance.
The potential bonus pool is based upon the sales and earnings performance of the Company and the relative weights are 75% sales and 25%
earnings. Compensation attributable to the sales component increases or decreases in relation to sales. Compensation attributable to
the earnings component increases if earnings exceed a percentage of shareholders' equity as determined by the Board of Directors and
decreases if earnings are less than such amount. Each individual executive officer's participation in the potential bonus pool is
determined as described above and is assigned such that if the Company achieves its sales and earnings objectives, the salary and bonus
combined will be competitive with the industry and will remain consistent with the Company's philosophy and the Plan. The outcome of
the Company's sales and earnings for fiscal year 2000 resulted in actual bonuses equaling 44% to 50% of total compensation for the
Named Executive Officers.
The factors considered in determining the compensation package for the Chief Executive Officer for fiscal year 2000 were the same as
those described above for executive officers. The total compensation for the Chief Executive Officer is considerably below the median
of comparably sized manufacturing companies. This median was obtained from independent salary survey data that was utilized in the
same manner for all executive officers. With 50% of the compensation at risk available in the form of a performance bonus, the CEO's
total compensation was competitive, reflected the increase in responsibilities, and reflective of the Company's performance. In fiscal
year 2000, 48% of the combined increase in the CEO's total compensation over 1999 total compensation was the result of improved sales
and earnings.
The Company also maintains stock option plans to provide additional incentives to executive officers and other employees to work to
maximize shareholder value. The Stock Option Committee has granted incentive options to purchase shares of Common Stock of the Company
(at the composite closing price of the Common Stock on the date of grant) and non-qualified options to purchase shares of restricted
stock (at 50% of the composite closing price of the Common Stock on the date of grant) to executive officers and other employees.
Grants were made in fiscal year 2000 to Named Executive Officers and other employees to continue to encourage long-term growth and
profitability. The number of options granted to each executive officer is subjective based upon individual performance, future
potential, and ability to affect the Company's performance.
The CEO received incentive stock options to purchase 26,000 shares of Common Stock, which represented 7.3% of the total shares
granted. The number of options granted was subjective based upon the CEO's ability to affect the Company's performance as well as
individual performance and future potential.
The Board of Directors, as a whole, and the Board's Executive Committee and Stock Option Committee, as appropriate, continually review
the executive compensation policies in regards to Section 162(m) of the Internal Revenue Code of 1986, as amended, pertaining to the
Company's $1,000,000 deductibility limitation for applicable compensation paid to Named Executive Officers. In fiscal year 2000, the
deductibility of the Company's executive compensation was not affected by the limitation under Section 162(m).
BOARD OF DIRECTORS
R. S. Boreham, Jr.Chairman
Jefferson W. Asher, Jr. Richard E. Jaudes
Merlin J. Augustine, Jr. Robert J. Messey
Fred C. Ballman Robert L. Proost
John A. McFarland R. L. Qualls
Performance Graph
Comparison of Five-Year Cumulative Total Return
Among Baldor Electric Company, the S&P 500 Index, and the
Dow Jones Electrical Components & Equipment Group Index
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Baldor 100.00 124.59 148.84 141.46 129.68 155.24
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
S&P 500 100.00 122.96 163.98 210.85 255.21 231.98
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
DJ ELQ 100.00 124.56 141.47 158.34 233.34 157.47
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Assumes $100 invested at year-end 1995 in
Baldor Electric Company, the S&P 500 Index, and the
Dow Jones Electrical Components & Equipment Group Index
- ---------------------------------------------------------------------------------------------------------------------------
Compound Annual Growth Rate
- ---------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------ --------------------------------------- ----------------------------------------
Baldor $155 9.2%
- ------------------------------------------ --------------------------------------- ----------------------------------------
- ------------------------------------------ --------------------------------------- ----------------------------------------
S&P 500 $232 18.3%
- ------------------------------------------ --------------------------------------- ----------------------------------------
- ------------------------------------------ --------------------------------------- ----------------------------------------
DJ ELQ $157 9.5%
- ------------------------------------------ --------------------------------------- ----------------------------------------
PROPOSAL 2
TO CONSIDER AND ACT UPON A PROPOSAL TO ADOPT THE
BALDOR ELECTRIC COMPANY
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In 1990 the shareholders of the Company approved the Baldor Electric Company 1989 Stock Option Plan for Non-Employee Directors (the
"1989 Plan"). The 1989 Plan expired in 1996 and no more grants have been made under the 1989 Plan. In 1996 the shareholders of the
Company approved the Baldor Electric Company 1996 Stock Option Plan for Non-Employee Directors (the "1996 Plan"). The 1996 Plan
expired in 2001 and no more grants will be made under the 1996 Plan. On February 5, 2001, the Board of Directors of the Company
approved the Baldor Electric Company Stock Option Plan for Non-Employee Directors (the "Director Plan") and directed that it be
submitted to the shareholders for their approval.
The purpose of the Director Plan is to increase the ownership interest in the Company of non-employee directors whose services are
considered essential to the Company's continued progress and to provide a further incentive to serve as a director of the Company.
Your Board of Directors believes that this Director Plan is in your and the Company's best interests since it will better align the
non-employee Directors' compensation with creating and sustaining shareholder value and assist in attracting and retaining highly
qualified individuals to serve as Directors of the Company. The Director Plan is very similar to the 1996 Plan and the 1989 Plan. The
following summary description of the Director Plan is qualified in its entirety by reference to the full text of the Director Plan,
which is attached to this Proxy Statement as Exhibit "A".
General ... The Director Plan provides for the issuance of stock options to directors of the Company who are not employees of the
Company or any of its affiliates on the date of a grant from the Director Plan. The maximum number of shares of Common Stock which
currently may be issued under the Director Plan is 200,000. The Director Plan will be administered by a committee of nonparticipating
directors who will be authorized to interpret the Director Plan but will have no discretion with respect to the eligibility or
selection of directors to receive options, the number of shares of stock subject to the Director Plan or any grant thereunder, or the
purchase price for such shares. The Committee shall have no authority to materially increase the benefits under the Director Plan.
Stock Option Grants ... The Director Plan provides for annual grants on the first trading day following the Company's annual
shareholders' meeting beginning in 2001. Options granted under the Director Plan become exercisable immediately and will expire ten
years after the date they were granted, or earlier under certain conditions as set forth in the Director Plan. Options are exercised
upon payment to the Company in cash, Common Stock of the Company, or a combination thereof, as may be provided in the agreement, for
the full exercise price of the option. Each grant will currently consist of options to purchase 5,400 shares. The exercise price for
2,160 shares will be 50% of the fair market value of the Company's Common Stock on the date of grant and the exercise price for 3,240
shares will be the fair market value of the Company's common stock on the date of the grant. The "fair market value" will be the
closing per share price of the Company's Common Stock based upon its consolidated trading as generally reported for New York Stock
Exchange listed stocks. Any director who received a grant from the 1996 Plan in the calendar year 2001 shall not be eligible to
receive a grant from this Director Plan in 2001 unless the director first became a director during the calendar year 2000. There are
currently seven non-employee directors of the Company. Of those seven directors, only one director would be eligible to receive a
grant from the Director Plan in calendar year 2001.
Federal Tax Consequences ... The options granted under the Director Plan will be non-qualified under Section 422 of the Internal
Revenue Code of 1986, as amended. The grant of options will not result in taxable income to the non-employee director or a tax
deduction for the Company. The exercise of an option will result in taxable ordinary income to the non-employee director and a
corresponding tax deduction for the Company equal to the difference between the fair market value of the shares on the date the option
was exercised and the exercise price of the option.
Adjustments Upon Changes in Common Stock ... If any change is made in the shares of the Common Stock of the Company by reason of any
merger, consolidation, reorganization, recapitalization, stock dividend, stock split, exchange of stock, or other change in the
corporate structure, appropriate adjustments will be made to the aggregate number and kind of shares under the Director Plan and to the
kind and number of shares and price per share of options outstanding and to subsequent option grants and in the purchase price of
outstanding options to reflect such change.
Amendment and Termination ... The Board of Directors may suspend or terminate the Director Plan or revise or amend it. However, any
revision or amendment that changes the selection or eligibility of directors to receive options, the number of shares of Common Stock
subject to the Director Plan or any option thereunder, the exercise price for options, or that materially increases benefits under the
Director Plan, will require the approval of the shareholders of the Company. The Director Plan shall terminate when the Company's
Board of Directors determines that the Director Plan is inadequate for sustaining the Director Plan's purpose as stated in Section 1 of
the Director Plan and/or when additional shares for issuance upon the exercise of options granted under the Director Plan are not
approved by the Company's shareholders.
Death or Termination of Service ... In the event of death of the holder of any option, each of the then outstanding options of such
holder will become exercisable by the holder's legal representative at any time within a period of five years after death, but in no
event after the expiration date of the term of the option. If the holder dies within five years following termination of service on
the Board, such option shall only be exercisable for two years after the holder's death or five years after termination of service,
whichever is longer, or until the expiration date of the term of the option, if earlier. In the event of termination of service on the
Board by a holder of an option, each of the then outstanding options of such holder will be exercisable and the holder may exercise the
options at any time within five years after such termination of service but in no event after the expiration date of the term of the
option.
Market Value of the Company's Common Stock ... The last reported sale price of the Company's Common Stock as reported by the New York
Stock Exchange on March 14, 2001, was $21.15.
Your Board of Directors recommends a vote "FOR" this proposal 2.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Company oversees the Company's financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the
systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial
statements in the Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit
Committee makes the following statements:
o The Audit Committee is governed by a formal written charter; (a copy of the formal written charter is included in this Proxy
Statement as Exhibit B)
o The Audit Committee is comprised of directors that the Company's Board of Directors has determined to be "independent of
management"; (a detailed determination of member independency is included in this Proxy Statement under the sub-caption
"Statement of Director Independency")
o The Audit Committee has reviewed the annual audited financial statements with management;
o The Audit Committee has discussed with the independent auditors the matters required by SAS No. 61;
o The Audit Committee has received from the independent auditors the required written communication and discussed with them their
independence as required by Independence Standards Board Standard No. 1; and
o The Audit Committee, based on the above reviews and discussions, recommended to the Board of Directors that the audited
financial statements be included in the Company's Form 10-K for filing with the SEC.
AUDIT COMMITTEE
Jefferson W. Asher, Jr. .....................................Chairman
Robert J. Messey Robert L. Proost
Statement of Director Independency
The Company's Board of Directors, as a whole, strongly believes that the Audit Committee and its function are extremely important to
the integrity of the Company. All members of this Committee are appointed, in substantial part, because they are financially astute,
having the experience, education, and ability to read and understand financial information and regulations. The independence of each
member of the Audit Committee is critically reviewed for the following requirements:
o There is not, and has not been in the last five years, any known family relationship between any member of the Audit Committee
and any other member of the Board of Directors or any employee of the Company.
o No member of the Audit Committee accepts compensation from the Company other than for board service and committee membership
service.
o Members of the Audit Committee are appointed because of their qualifications of being "financially literate" and knowledgeable
of securities regulations.
The Company's Board of Directors has paid close attention to the independency of the members of the Company's Audit Committee. Based
on the factors mentioned above, it is the opinion of the Board of Directors, as a whole, that each member of the Audit Committee has
no relationship which would interfere with the exercise of independent judgment as an Audit Committee member, provides services and
qualifications that are in the best interests of the Company and its shareholders, and is "independent of management" so that the
members participation on the Company's Audit Committee does not violate 3.03 of the Listed Company Manual of the New York Stock
Exchange.
BOARD OF DIRECTORS
R. S. Boreham, Jr.Chairman
Jefferson W. Asher, Jr. Richard E. Jaudes
Merlin J. Augustine, Jr. Robert J. Messey
Fred C. Ballman Robert L. Proost
John A. McFarland R. L. Qualls
INDEPENDENT AUDITORS
The Company is presently utilizing the services of Ernst & Young LLP, which has been the Company's independent auditor and principal
accountant since 1972. The Audit Committee and the Board of Directors will consider the reappointment of Ernst & Young LLP as the
Company's independent auditors and principal accountant for the fiscal year ending December 29, 2001, at the Company's next regular
Board of Directors meeting in April. The Company has no reason to believe that Ernst & Young LLP will not be reappointed; however,
no final determination has yet been made by the Board of Directors. Representatives of Ernst & Young LLP will be present at the
Annual Meeting with an opportunity to make a statement if they desire to do so and will be available to respond to appropriate
questions. A summary of the fees associated with the services performed by Ernst & Young LLP for fiscal year 2000 follows. All
"other" fees primarily relate to audit related services, tax return compilations, and tax consultations.
Type of Fee Amount of Fee
- ----------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------- ---------------------
Audit $ 150,000
Other $ 102,000
Financial information systems design and implementation $ 0
SHAREHOLDER PROPOSALS
Any shareholder of the Company eligible to vote in an election may make shareholder proposals and nominations for the 2002 Annual
Meeting. In order to be considered for inclusion in the 2002 Proxy Statement and considered at the Annual Meeting to be held in
2002, all shareholder proposals, nominations, and notifications must: (1) comply with the Company's Bylaws, as amended, and (2) be
appropriately received by the Secretary of the Company on or after September 24, 2001, and on or before November 23, 2001. The
Nominating Committee of the Company's Board of Directors will consider candidates for Board membership proposed by shareholders who
have complied with these procedures.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for consideration at the meeting by the Board of Directors or by
shareholders who have requested inclusion of proposals in the Proxy Statement. If any other matter shall properly come before the
meeting, the persons named in the accompanying form of proxy intend to vote on such matters in accordance with their judgment.
March 23, 2001
A - 5
EXHIBIT A
A - 1
BALDOR ELECTRIC COMPANY
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
As approved by the
Company's Board of Directors
February 5, 2001
1. Purpose
The purpose of this Stock Option Plan for Non-Employee Directors (the "Director Plan") of Baldor Electric Company (the
"Company") is to increase the ownership interest in the Company of non-employee directors whose services are considered
essential to the Company's continued progress and to provide a further incentive to serve as a director of the Company. Your
Board of Directors believes that this Director Plan is in your and the Company's best interests since it will better align the
non-employee Directors' compensation with creating and sustaining shareholder value. The Director Plan will also assist in
attracting and retaining highly qualified individuals to serve as Directors of the Company.
2. Administration
The Director Plan shall be administered by a committee consisting of directors who are not eligible to participate in the
Director Plan (the "Committee"). Subject to the provisions of the Director Plan:
a. the Committee shall be authorized to interpret the Director Plan, to establish, amend, and rescind any rules and regulations
relating to the Director Plan, and to make all other determinations necessary or advisable for the administration of the
Director Plan;
b. the Committee shall have no discretion with respect to the eligibility or selection of directors to receive options under
the Director Plan, the number of shares of stock subject to any such options under the Director Plan, or the purchase
price thereunder; and the Committee shall not have the authority to take any action or make any determination that would
materially increase the benefits accruing to participants under the Director Plan;
c. the determination of the Committee in the administration of the Director Plan, as described herein, shall be final and
conclusive and binding upon all persons including, without limitation, the Company, its shareholders, and persons granted
options under the Director Plan;
d. the Secretary of the Company shall be authorized to implement the Director Plan in accordance with its terms and to take
such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof; and
e. the validity, construction, and effect of the Director Plan and any rules and regulations relating to the Director Plan
shall be determined in accordance with the laws of the State of Missouri.
3. Participation in the Director Plan
Directors of the Company who are not employees of the Company or any affiliate of the Company on an Option Grant Date shall be
eligible to participate in the Director Plan ("Eligible Directors") on that Option Grant Date.
4. Shares Subject to the Director Plan
Subject to adjustment as provided in Section 7:
a. an aggregate of 200,000 shares of Company common stock ("Stock") shall be available for issuance upon the exercise of
options granted under the Director Plan and may be increased from time to time as approved by the Company's shareholders;
b. the shares of Stock deliverable upon the exercise of options may be made available from authorized but unissued shares or
shares reacquired by the Company, including shares purchased in the open market or in private transactions; and
c. if any option granted under the Director Plan shall expire or terminate for any reason without having been exercised in
full, the shares subject to, but not delivered under, such option may again become available for the grant of other
options under the Director Plan.
5. Non-Statutory Stock Options
All options granted under the Director Plan will be non-statutory options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended.
6. Terms, Conditions, and Form of Options
Each option granted under this Director Plan may be evidenced by a written agreement in such form as the Committee shall from
time to time approve, which agreements shall comply with and be subject to the following terms and conditions:
a. Option Grant Dates. Options shall be granted automatically to each Eligible Director on the first trading day of Stock on
the New York Stock Exchange following the Company's annual shareholders' meeting beginning in the year 2001. Any
Eligible Director who received an Annual Grant from the Company's 1996 Stock Option Plan for Non-Employee Directors in
the calendar year 2001 shall not be eligible to receive a grant from this Director Plan in 2001 unless the Eligible
Director first became an Eligible Director during the calendar year 2000.
b. Option Grant Shares. Options to purchase 5,400 shares of Stock (as adjusted pursuant to Section 7) shall be granted
automatically to each Eligible Director pursuant to the terms in this Section 6.
c. Purchase Price. The purchase price per share of Stock for which each option is exercisable will be as follows:
i) for 60% of the Annual Grant (i.e. 3,240 of the 5,400 shares), the purchase price per share of Stock shall be the fair market
value per share of Stock on the date the option is granted (the closing price per share of the Stock based upon its
consolidated trading as generally reported for New York Stock Exchange listed stocks); and
ii) for 40% of the Annual Grant (i.e. 2,160 of the 5,400 shares), the purchase price per share of Stock shall be 50% of the fair
market value per share of Stock on the date the option is granted (the closing price per share of the Stock based
upon its consolidated trading as generally reported for New York Stock Exchange listed stocks).
d. Exercisability and Term of Options. Each option granted under the Director Plan will become exercisable immediately. Each
option granted under the Director Plan shall expire ten years from the date of the grant, and shall be subject to earlier
termination as hereinafter provided.
e. Death or Termination of Service. In the event of death of the holder of any option, each of the then outstanding options of
such holder will immediately mature in full and become exercisable by the holder's legal representative at any time
within a period of five years after death, but in no event after the expiration date of the term of the option. However,
if the holder dies within five years following termination of service on the Board, such option shall only be exercisable
for two years after the holder's death or five years after termination of service, whichever is longer, or until the
expiration date of the term of the option, if earlier. In the event of termination of service on the Board by a holder
of an option, each of the then outstanding options of such holder will continue to mature and become exercisable in
accordance with paragraph c. above and the holder may exercise the matured installments at any time within five years
after such termination of service but in no event after the expiration date of the term of the option.
f. Payment. Options may be exercised only upon payment to the Company in full of the purchase price of the shares to be
delivered. Such payment shall be made in cash, in Stock, or in a combination of cash and Stock. The sum of the cash and
the fair market of such Stock shall be at least equal to the aggregate price of the shares to be delivered.
7. Adjustment upon Changes in Stock
If there shall be any change in the Stock subject to the Director Plan or to any option granted thereunder through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split, exchange of stock or other change in the
corporate structure, appropriate adjustments shall be made in the aggregate number and kind of shares or other securities or
property subject to the Director Plan, and the number and kind of shares or other securities or property subject to
outstanding and to subsequent option grants and in the purchase price of outstanding options to reflect such changes.
8. Options Non-Assignable and Non-Transferable
Each option and all rights thereunder shall be non-assignable and non-transferable other than by will or the laws of descent
and distribution and shall be exercisable during the holder's lifetime only by the holder or the holder's guardian or legal
representative (the "Optionee").
9. Tax Obligations
The Optionee may direct that the Company pay on his or her behalf any and all tax obligations, sufficient to satisfy the
minimum required federal, state, and local withholding taxes, if any, incurred by the Optionee due to the exercise of the
Options (the "Tax Obligation"). To pay for the Tax Obligation, the Optionee may remit cash, surrender shares previously owned
by the Optionee, or the Optionee may direct the Company to withhold shares of stock issuable from the exercise. If the
Optionee so directs, then the Optionee shall reimburse the Company with that number of shares of the Company's common stock
that are necessary to reimburse the Company for the amount of the Tax Obligation. The number of shares necessary will be
based on the fair market value on the day immediately preceding the date of exercise.
10. Limitation of Rights
a. No Right to Continue as a Director. Neither the Director Plan, nor the granting of an option, nor any other action taken
pursuant to the Director Plan, shall constitute or be evidence of any agreement or understanding, express or implied,
that the Eligible Director has a right to continue as a director for any period of time, or at any particular rate of
compensation.
b. No Shareholders' Right for Options. An Optionee shall have no rights as a shareholder with respect to the shares covered by
options granted hereunder until the date of the issuance of a stock certificate therefore, and no adjustment will be made
for dividends or other rights for which the record date is prior to the date such certificate is issued.
11. Effective Date and Duration of the Director Plan
The Director Plan shall become effective immediately following approval by the shareholders at the 2001 Annual Meeting of
Shareholders. The Director Plan shall terminate when the Company's Board of Directors determines that the Director Plan is
inadequate for sustaining the Director Plan's Purpose as stated in Section 1 and/or when additional shares for issuance upon
the exercise of options granted under the Director Plan are not approved by the Company's shareholders. Such termination
shall not affect the terms of any then outstanding options.
12. Amendment, Suspension, or Termination of the Director Plan
The Board of Directors may suspend or terminate the Director Plan or revise or amend it in any respect whatsoever; provided,
however, that without approval of the Shareholders, no revision or amendment shall change the selection or eligibility of
directors to receive options under the Director Plan, the number of shares of Stock subject to any such options or the
Director Plan, the purchase price thereunder, or materially increase the benefits accruing to participants under the Director
Plan.
13. Notice
Any written notice to the Company required by any of the provisions of this Director Plan shall be addressed to the Secretary
of the Company and shall become effective when it is received.
14. Use of Proceeds
Proceeds from the sale of Stock pursuant to options granted under the Director Plan shall constitute general funds of the
Company.
15. Fractional Shares
No fractional shares of Stock shall be issued pursuant to options granted hereunder, but in lieu thereof, the cash value of
such fraction shall be paid.
B - 2
EXHIBIT B
B - 1
BALDOR ELECTRIC COMPANY
AUDIT COMMITTEE
CHARTER
As amended and restated
by the Board of Directors
at the meeting on February 5, 2001
This Charter governs the purpose and operations of the Audit Committee of the Board of Directors of Baldor Electric Company. The
Committee shall review and reassess the Charter annually and submit it to the Board for approval. The Committee shall be appointed
by the Board and shall be comprised of at least three Directors, each of whom are independent of Management and the Company. All
Committee members shall be financially literate and at least one member shall have accounting or related financial management
expertise.
The Audit Committee shall provide assistance to the Board of Directors in fulfilling its oversight responsibility to the
shareholders, potential shareholders, the investment community, and others relating to Baldor's financial statements and the
financial reporting process, the systems of internal accounting and financial controls, the internal audit function, the annual
independent audit of Baldor's financial statements, and the legal compliance and ethics programs as established by Management and the
Board. In so doing, it is the responsibility of the Committee to maintain free and open communication with the independent auditors,
the internal auditors, and Management of Baldor. In discharging this oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records, facilities, and personnel of Baldor and, if deemed necessary
by the Committee, to retain outside counsel or other experts for this purpose.
The primary responsibility of the Audit Committee is to oversee Baldor's financial reporting process on behalf of the Board and to
report the results of its activities to the Board. Management is responsible for preparing Baldor's financial statements and the
independent auditor is responsible for auditing those financial statements. In carrying out its responsibilities, the Committee's
procedures should be flexible in order to react best to changing conditions and circumstances. The Committee should take appropriate
actions to set the overall corporate "tone" for quality financial reporting, sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit Committee in carrying out its oversight responsibilities. The
processes are set forth as a guide with the understanding that the Committee may supplement them as appropriate.
1. The Committee shall have a clear understanding with Management and the independent auditors that the independent auditors are
ultimately accountable to the Board and the Audit Committee, as representatives of Baldor's shareholders. The Committee shall
have the ultimate authority and responsibility to evaluate and, where appropriate, recommend to the Board the replacement of the
independent auditors. The Committee shall discuss with the auditors all matters included in the written disclosures required by
the Independence Standards Board. It will also discuss with the auditors their independence from Management and the Company.
Annually, the Committee shall review and recommend to the Board the selection of Baldor's independent auditors.
2. The Committee shall discuss with both the internal and independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the Committee shall discuss with Management, the internal
auditors and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including Baldor's
system to monitor and manage business risk, legal and ethical compliance programs. Further, the Committee shall meet separately
with the internal auditors and the independent auditors, with and without Management present, to discuss the results of their
examinations.
3. The Committee shall review the interim financial statements with Management and the independent auditors prior to the filing of
Baldor's Quarterly Report on Form 10-Q. Also, the Committee shall discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards.
The Chairman of the Committee or his designee may represent the entire Committee for the purpose of this discussion and review.
4. The Committee shall review with Management and the independent auditors the financial statements to be included in Baldor's
Annual Report on Form 10-K (or the annual report to shareholders if distributed prior to the filing of Form 10-K), including
their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments
and the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the annual
audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted
auditing standards.
FRONT OF PROXY CARD
[ LOGO ]
COMMON STOCK COMMON STOCK
BALDOR ELECTRIC COMPANY
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of Shareholders on April 28, 2001
The undersigned hereby appoints R. S. Boreham, Jr. and R. L. Qualls, and each of them, with power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Shareholders of Baldor Electric Company, to be held in the Breedlove Auditorium of
Westark College, 5210 Grand Avenue, Fort Smith, Arkansas, on Saturday, April 28, 2001, at 10:30 a.m., local time, and all
adjournments thereof, and there to vote, as indicated on the reverse side of this proxy card, the shares of Common Stock of Baldor
Electric Company which the undersigned is entitled to vote with all the powers the undersigned would possess if present at the
meeting.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. In their discretion,
the proxies are authorized to vote upon such other business as may properly come before the meeting and all adjournments thereof.
If no direction is made, this proxy will be voted FOR the election directors and FOR proposal 2.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
HAS YOUR ADDRESS CHANGED? ______________________________________________________________________________
=============================================================================================================
DO YOU HAVE ANY COMMENTS? ______________________________________________________________________________
=============================================================================================================
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FOLD AND DETACH HERE
Continental Stock Transfer & Trust Company
is the transfer agent for Baldor Electric Company.
Access to your Baldor shareholder account information and
other shareholder services are available on the Internet!
WWW.CONTINENTALSTOCK.COM
------------------------
Baldor shareholders can select a Personal Identification Number or "PIN" to secure access to personal shareholder records. With a
PIN, shareholders can change addresses, receive electronic forms, and view account transaction and dividend history. To access these
services, visit the website listed above. From the home page, select "ContinentaLink Full Service". From there, you can either Test
Drive the service (choose the "Test Drive" button) or you can Sign-Up (choose the "Sign-Up" button).
If you have already signed-up, you will be asked for your taxpayer identification number or social security number as your ID Number
and your Personal Identification Number (PIN). If your PIN does not work or you cannot remember your PIN, please contact Continental
at 1-800-509-5586 for assistance.
If you have not already signed-up and choose to sign-up now, enter your taxpayer identification number or social security number as
your ID Number. Your personal Security Code can be found on the reverse side of this card in the bottom left corner. Enter any four
alphanumeric characters you would like to use for your PIN. Re-enter the same PIN in the PIN Verification field. Your PIN will be
activated overnight, and you will be able to access your shareholder records the following day. If you need assistance with this
process, please contact Continental at 1-800-509-5586.
BACK OF PROXY CARD
Proxy by Mail
Please mark your votes like this [ X ]
BALDOR ELECTRIC COMPANY COMMON STOCK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR":
1. Election of Directors For All Nominees Withhold For All Except
[ ] [ ] [ ]
Nominees: R. S. Boreham, Jr.
R. L. Qualls To withhold authority to vote for any nominees listed, mark the "For All Except"
Barry K. Rogstad box and write the name(s) of the nominee(s) from whom you wish to withhold
authority to vote in the space provided below.
---------------------------------------------------
2. Approval of the Baldor Electric Company For Against Abstain
Stock Option Plan for Non-Employee Directors [ ] [ ] [ ]
Mark box at right if you plan to attend the Annual Meeting on April 28, 2001. [ ] Please be sure to sign and date this
Proxy Card.
IF YOU WISH TO VOTE ELECTRONICALLY COMPANY NUMBER:
PLEASE READ THE INSTRUCTIONS BELOW PROXY NUMBER:
ACCOUNT NUMBER:
Signature __________________________________ Signature ___________________________________ Date ___________________
Please sign exactly as your name(s) appear(s) hereon. When signing as Attorney, Executor, Trustee, Guardian, or Officer of a
Corporation, please give title as such. For joint accounts, all named holders should sign. If you receive more than one proxy card,
please sign all cards and return in the accompanying postage-paid envelopes.
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- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
VOTE BY TELEPHONE OR INTERNET
[ TELEPHONE GRAPHIC ] [ COMPUTER GRAPHIC ]
QUICK * * * EASY * * * IMMEDIATE
BALDOR ELECTRIC COMPANY
o You can vote your shares electronically through the Internet or the telephone.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed,
dated, and returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET www.continentalstock.com
- ------------------------------
Have your proxy card in hand when you access the above website. Select "ContinentaLink Proxy Voting". You will be prompted to enter
the company number, proxy number, and account number to create an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign, and date your proxy card above, detach it, and return it in the postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE 1-800-293-8533
- ---------------------------
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. You will be prompted to enter the
company number, proxy number, and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED ELECTRONICALLY
SECURITY CODE:
FRONT OF DIRECTION CARD
[ LOGO ]
PROFIT SHARING AND SAVINGS PLAN PROFIT SHARING AND SAVINGS PLAN
BALDOR ELECTRIC COMPANY
Annual Meeting of Shareholders on April 28, 2001
The undersigned, a participant in the Baldor Electric Company Profit Sharing and Savings Plan (the "Plan") hereby directs Wachovia
Bank of North Carolina, N.A., as Trustee (the "Trustee") of the Plan Trust (the "Trust"), at the Annual Meeting of Shareholders of
Baldor Electric Company, to be held in the Breedlove Auditorium of Westark College, 5210 Grand Avenue, Fort Smith, Arkansas, on
Saturday, April 28, 2001, at 10:30 a.m., local time, and all adjournments thereof, to vote, as indicated on the reverse side of this
direction card, the shares of Common Stock of Baldor Electric Company which the undersigned is entitled to vote with all the powers
the undersigned would possess if present at the meeting.
This direction card, when properly executed, will be voted in the manner directed herein by the undersigned participant. As Trustee,
you are authorized to vote the shares of the undersigned upon such other business as may properly come before the meeting and all
adjournments thereof.
If no direction is made, voting will be controlled by the terms of the Plan and the Trust.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
HAS YOUR ADDRESS CHANGED? ______________________________________________________________________________
=============================================================================================================
DO YOU HAVE ANY COMMENTS? ______________________________________________________________________________
=============================================================================================================
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
Wachovia Bank of North Carolina, N.A. is the trustee for the
Baldor Electric Company Profit Sharing and Savings Plan.
Access to your Baldor investment elections
are available on the Internet!
WWW.WACHOVIARETIREMENT.COM
--------------------------
To access this service, visit the website above. You will be asked for your Social Security Number and your 4 digit Personal
Identification Number (PIN). If you do not know your PIN, you should call Wachovia at 888-367-7526 as soon as possible to request a
new PIN. Wachovia will mail a new PIN directly to your home.
BACK OF DIRECTION CARD
Proxy by Mail
Please mark your votes like this [ X ]
BALDOR ELECTRIC COMPANY PROFIT SHARING AND SAVINGS PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR":
1. Election of Directors For All Nominees Withhold For All Except
[ ] [ ] [ ]
Nominees: R. S. Boreham, Jr.
R. L. Qualls To withhold authority to vote for any nominees listed, mark the "For All Except"
Barry K. Rogstad box and write the name(s) of the nominee(s) from whom you wish to withhold
authority to vote in the space provided below.
---------------------------------------------------
2. Approval of the Baldor Electric Company For Against Abstain
Stock Option Plan for Non-Employee Directors [ ] [ ] [ ]
Mark box at right if you plan to attend the Annual Meeting on April 28, 2001. [ ] Please be sure to sign and date this Direction
Card.
IF YOU WISH TO VOTE ELECTRONICALLY COMPANY NUMBER:
PLEASE READ THE INSTRUCTIONS BELOW PROXY NUMBER:
ACCOUNT NUMBER:
Signature __________________________________ Signature ___________________________________ Date ___________________
Please sign exactly as your name(s) appear(s) hereon. When signing as Attorney, Executor, Trustee, Guardian, or Officer of a
Corporation, please give title as such. For joint accounts, all named holders should sign. If you receive more than one proxy card,
please sign all cards and return in the accompanying postage-paid envelopes.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
VOTE BY TELEPHONE OR INTERNET
[ TELEPHONE GRAPHIC ] [ COMPUTER GRAPHIC ]
QUICK * * * EASY * * * IMMEDIATE
BALDOR ELECTRIC COMPANY
o You can vote your shares electronically through the Internet or the telephone.
o This eliminates the need to return the direction card.
o Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed,
dated, and returned the direction card.
TO VOTE YOUR PROXY BY INTERNET www.continentalstock.com
- ------------------------------
Have your direction card in hand when you access the above website. Select "ContinentaLink Proxy Voting". You will be prompted to
enter the company number, proxy number, and account number to create an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign, and date your direction card above, detach it, and return it in the postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE 1-800-293-8533
- ---------------------------
Use any touch-tone telephone to vote your proxy. Have your direction card in hand when you call. You will be prompted to enter the
company number, proxy number, and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED ELECTRONICALLY
SECURITY CODE:
