SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[X] Filed by the Registrant
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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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BALDOR ELECTRIC COMPANY
P. O. Box 2400
5711 R. S. Boreham, Jr. Street
Fort Smith, Arkansas 72902
March 28, 2003
To our Shareholders:
You are cordially invited to attend Baldor's 2003 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 include a review of 2002 activities and a discussion of the
opportunities and challenges ahead of us. We believe you will find it interesting.
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. Your vote is important. You can 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.
We appreciate your continuing support.
Sincerely,
R. S. Boreham, Jr.
Chairman
BALDOR ELECTRIC COMPANY
NOTICE OF
2003 ANNUAL MEETING OF SHAREHOLDERS
Date: Saturday, May 3, 2003
Time: 10:30 a.m., local time
Location: Fort Smith Convention Center
800 Rogers Avenue
Fort Smith, Arkansas
Items of Business: 1. To elect directors; and
2. To transact such other business as may properly come before the meeting and all
adjournments thereof.
Record Date: Only Baldor shareholders of record as of the close of business on March 19, 2003, are entitled
to notice of, and to vote at, the 2003 Annual Shareholders' Meeting and all adjournments (the
"2003 Annual Meeting").
Annual Report: Baldor's 2002 Annual Report to Shareholders for the fiscal year ended December 28, 2002, is
available and may be included in the mailing of this Proxy Statement. This 2002 Annual Report
is not a part of the proxy soliciting material. To request copies of any Baldor literature,
please contact us at:
Mail: Baldor Electric Company
Phone: 479-646-4711 Attn: Shareholder Relations
Fax: 479-648-5752 P O Box 2400
Website: www.baldor.com Fort Smith AR 72902
Proxy Voting: Baldor's shareholders of record can vote by one of the following methods and a proxy may be
revoked as described in the following Proxy Statement:
1. By telephone,
2. By Internet, or
3. By proxy card.
By order of the Board of Directors
Ronald E. Tucker
Secretary
March 28, 2003
TABLE OF CONTENTS
Page
General Information ........................................................................................... 1
Date, time, and place of meeting ...................................................................... 1
Company location and proxy mailing .................................................................... 1
Voting ....................................................................................................... 1
Shareholders entitled to vote ......................................................................... 1
Quorum ................................................................................................ 1
Vote required ........................................................................................ 1
Voting methods ........................................................................................ 1
Vote at the Annual Meeting ........................................................................... 1
Voting by employee-participants ....................................................................... 2
Proxies ............................................................................................... 2
Cost of proxy solicitation ............................................................................ 2
Householding .......................................................................................... 2
Proposal 1 - Election of Directors ............................................................................. 2
Nominees .............................................................................................. 3
Other directors ....................................................................................... 3
General information about the Board of Directors ...................................................... 4
Committees of the Board of Directors .................................................................. 4
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
Compensation Committee interlocks and insider participation ........................................... 10
Change of control and employment arrangements ......................................................... 10
Report of the Board of Directors on executive compensation ............................................ 11
Performance graph ..................................................................................... 13
Audit Committee Report ......................................................................................... 14
Statement of director independency .................................................................... 15
Independent Auditors ........................................................................................... 16
Shareholder Proposals and Nomination Deadlines ................................................................. 16
Other Matters .................................................................................................. 16
BALDOR ELECTRIC COMPANY
PROXY STATEMENT
2003 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 ("Baldor") for use at the 2003 Annual Meeting of its shareholders. The meeting will be held as follows:
Time: 10:30 a.m., local time Location: Fort Smith Convention Center
800 Rogers Avenue
Date: Saturday, May 3, 2003 Fort Smith, Arkansas
Company location and proxy mailing...Baldor'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 our
shareholders on or about March 28, 2003.
VOTING
Shareholders entitled to vote...Only the holders of record of Baldor's common stock, par value $0.10 per share (the
"Common Stock"), at the close of business on March 19, 2003, will be entitled to notice of and to vote at the 2003 Annual
Meeting. There were 32,670,737 shares of Common Stock outstanding as of the close of business on March 19, 2003. Each
share of Common Stock entitles the holder to one vote on each item of business to be presented for shareholder vote at
the 2003 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 2003 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 only be
considered as present and entitled to vote for that particular matter.
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. Shares represented by proxies that 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 that 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 and 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 card, date and sign it, and return it in the enclosed postage-paid envelope.
Vote at the Annual Meeting...Your choice of voting method will not limit your right to vote at the 2003 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...Baldor maintains 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 individually 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 individual accounts. Employee-participants may
use the 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
and not revoked will be voted at the 2003 Annual Meeting in accordance with the instructions received. If the form of
proxy is signed and returned without any direction, shares of Baldor's Common Stock will be voted FOR the election of the
Board's slate of nominees. A shareholder may revoke a properly voted proxy at any time before it is exercised either by
attending the meeting and voting in person or by notifying the Secretary of Baldor in writing at the address found on
page 1 of this proxy statement under the caption "Company location and proxy mailing".
Cost of proxy solicitation...Baldor will pay for the cost of the solicitation of proxies. Regular employees of Baldor,
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 Baldor'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.
Householding...The Securities and Exchange Commission permits companies to reduce the costs of printing and mailing
shareholder communications, including Annual Reports and Proxy Statements, by sending only one copy of the materials to
an address where multiple shareholders reside. In the future, Baldor will participate in this practice and you may elect
out of householding at any time by writing or calling Baldor or Baldor's transfer agent as described in the "Householding
Notice" mailed with this Proxy Statement.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Baldor'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 2003. Each member elected in 2003 will serve for a term of three years.
The persons named in the enclosed proxy intend to vote the proxy for the election of the three nominees named below as
directors of Baldor. 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 declines or is 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 2003 for Terms Ending in 2006
Merlin J. Augustine, Jr. ... Assistant Vice Chancellor for Finance and Administration and Director of Customer Relations
at the University of Arkansas in Fayetteville for more than five years; Member of the Board of Arkansas Science and
Technology Authority since 2000; Founder and Chief Executive Officer of M&N Augustine Foundation for Human Development,
Inc. established in 1992.
John A. McFarland ... Baldor'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 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
previously provided investment banking services to Baldor (retired March 2001); Former Director, Vice President, and
Chief Financial Officer of A.G. Edwards, Inc. (NYSE), and of various subsidiaries (retired March 2001).
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 2003
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) since
1992; Director of Zing Wireless, Inc. since 1999.
R. S. Boreham, Jr. ... Baldor's Chairman of the Board since 1981 and Chief Executive Officer from 1978 through 1992;
Director of USA Truck, Inc. (NASDAQ) since 1992.
Richard E. Jaudes ... Partner at Thompson Coburn LLP, a law firm that provides legal counsel to Baldor, since 1997.
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 (Sverdrup Corporation merged with Jacobs Engineering Group, Inc. in
1999).
R. L. Qualls ... Independent Business and Financial Consultant, providing assistance to corporations, including Baldor;
Baldor's Vice Chairman of the Board from 1996 through 2000, Chief Executive Officer from 1993 through 1997, and President
from 1990 through 1996 (retired December 2001); Director of Bank of the Ozarks, Inc. (NASDAQ) since 1997.
Barry K. Rogstad...Former 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 (retired 2002).
General Information Regarding
Current Directors and Nominees for Election
Year of Director Current Term
Name Birth Since Expires
-------------------------------- ------------------ -------------------- --------------------
Jefferson W. Asher, Jr. 1924 1973 2005
Merlin J. Augustine, Jr. 1943 2000 2003
R. S. Boreham, Jr. 1924 1961 2004
Richard E. Jaudes 1943 1999 2005
John A. McFarland 1951 1996 2003
Robert J. Messey 1946 1993 2005
Robert L. Proost 1937 1988 2003
R. L. Qualls 1933 1987 2004
Barry K. Rogstad 1940 2001 2004
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, has historically
approved executive compensation, including the executive compensation for fiscal year 2002. In August 2002, the Board of
Directors established a Compensation Committee (see caption "Compensation Committee"). During the fiscal year ended
December 28, 2002 ("fiscal year 2002"), the Board of Directors held four meetings. Each director attended at least 75%
of the board meetings. Below are the current committee memberships and other information about the committees of the
Board of Directors.
Executive Audit Stock Option Nominating Compensation
Name Committee Committee Committee Committee Committee
- -------------------------------- ---------------- --------------- ----------------- ----------------- -------------------
- -------------------------------- ---------------- --------------- ----------------- ----------------- -------------------
Jefferson W. Asher, Jr. Chairman *
Merlin J. Augustine, Jr. * Chairman
R. S. Boreham, Jr. Chairman
Richard E. Jaudes *
John A. McFarland *
Robert J. Messey * Chairman
Robert L. Proost * *
R. L. Qualls * Chairman
Barry K. Rogstad * *
- -------------------------------- ---------------- --------------- ----------------- ----------------- -------------------
- -------------------------------- ---------------- --------------- ----------------- ----------------- -------------------
Meetings held during 6 8 4 1 1
fiscal year 2002
* 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 Baldor'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 also administers the Stock Option Plan for
Non-Employee Directors (the "Director Plan") that was approved by Baldor's shareholders in 2001. The Executive Committee
is comprised of two directors who are executive officers and employees of Baldor and a non-employee director.
Audit Committee ... The Audit Committee performs the following functions: selects the 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 Baldor'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 three independent directors.
Stock Option Committee ... The Stock Option Committee administers Baldor'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 may still 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 three
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. The
Nominating Committee is comprised of one independent director and two non-employee directors.
Compensation Committee ... The Compensation Committee was established by Baldor's Board of Directors in August 2002.
This Committee is responsible for approving the salary and contingent compensation arrangements for the Named Executive
Officers. This Committee, in combination with the Stock Option Committee, also approves any stock options granted to the
Named Executive Officers. The Compensation Committee is comprised of three independent directors.
Director Compensation ... Under the terms of the Director Plan, eligible directors received an option grant on April 22,
2002. Each grant included: (1) an option to purchase 3,240 shares of Baldor's Common Stock having an exercise price of
$23.27 (the composite closing price of the Common Stock on that date), and (2) an option to purchase 2,160 shares of
Baldor's Common Stock having an exercise price of $11.635 (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 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 2002 follows.
Executive Audit Stock Option Nominating Compensation
Director Committee Committee Committee Committee Committee
- ----------------- ------------ ---------------- --------------- ------------------- ----------------- --------------------
- ----------------- ------------ ---------------- --------------- ------------------- ----------------- --------------------
Chairman $ 0 $ 0 $ 3,250 $ 800 $ 400 $ 400
Member $ 4,250 $ 1,500 $ 2,200 $ 800 $ 400 $ 400
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 19, 2003, regarding all persons known to Baldor to be the
beneficial owners of more than five percent of Baldor's Common Stock. The table also includes security ownership for
each director of Baldor, 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.
Amount and Nature of Percent of
Name Beneficial Ownership Class (1)
- ------------------------------------------------ -------------------- ---------------
Baldor Electric Company
Profit Sharing and Savings Plan 3,435,891 (2) 10.5 %
P. O. Box 2400
Fort Smith, Arkansas 72902
Mackenzie Financial Corporation 1,792,650 (3) 5.5 %
150 Bloor Steet West - Suite M 111
Toronto, Ontario M5S 3B5 (Canada)
R. S. Boreham, Jr. 1,572,186 (4) 4.8 %
Lloyd G. Davis 334,532 (5) 1.0 %
John A. McFarland 331,107 (6) 1.0 %
R. L. Qualls 195,307 (7) *
Charles H. Cramer 176,525 (8) *
Gene J. Hagedorn 128,733 (9) *
Jefferson W. Asher, Jr. 102,984 (10) *
Robert L. Proost 85,860 (11) *
Robert J. Messey 70,334 (12) *
Randal G. Waltman 56,182 (13) *
Richard E. Jaudes 17,341 (14) *
Merlin J. Augustine, Jr. 15,939 (15) *
Barry K. Rogstad 11,800 (16) *
All executive officers and directors
as a group (19 persons) 3,006,311 (17) 9.0 %
- ---------------
* 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 Baldor's Common Stock owned by each individual
(including "options" defined on this page to include shares issuable upon exercise of stock options which are or
will be exercisable within 60 days of March 19, 2003). The denominator consists of all issued and outstanding
shares of Baldor's Common Stock plus those shares that are issuable upon the exercise of stock options for that
individual or group of individuals.
(2) Based on correspondence dated March 19, 2003, received from the trustee of Baldor's Profit Sharing and Savings
Plan, Participants in such Plan have sole voting and shared investment power over 3,435,891 shares.
(3) Based on the Schedule 13G filed with the Securities and Exchange Commission dated December 31, 2002; sole voting
and investment power.
(4) Sole voting and investment power over 1,161,364 shares; shared voting and shared investment power over 236,487
shares; sole voting and shared investment power over 2,769 shares in the Profit Sharing and Savings Plan; includes
options to purchase 171,566 shares.
(5) Sole voting and investment power over 112,287 shares; shared voting and investment power over 13,334 shares; sole
voting and shared investment power over 20,287 shares and shared voting and investment power over 2,858 shares in
the Profit Sharing and Savings Plan; includes options to purchase 154,033 shares directly and 31,733 indirectly.
(6) Shared voting and investment power over 127,422 shares; sole voting and shared investment power over 29,685 shares
in the Profit Sharing and Savings Plan; includes options to purchase 174,000 shares.
(7) Sole voting and investment power over 175,145 shares; shared voting and investment power over 9,362 shares;
includes options to purchase 10,800 shares.
(8) Sole voting and investment power over 47,312 shares; shared voting and investment power of 31,106 shares; sole
voting and shared investment power over 16,608 shares in the Profit Sharing and Savings Plan; includes options to
purchase 81,499 shares.
(9) Shared voting and investment power over 46,658 shares; sole voting and shared investment power over 6,242 shares in
the Profit Sharing and Savings Plan; includes options to purchase 75,833 shares.
(10) Sole voting and investment power over 70,584 shares; includes options to purchase 32,400 shares.
(11) Sole voting and investment power over 14,100 shares; shared voting and investment power over 23,160 shares;
includes options to purchase 48,600 shares.
(12) Sole voting and investment power over 362 shares; shared voting and investment power over 8,712 shares; includes
options to purchase 61,260 shares.
(13) Sole voting and investment power over 16,532 shares; sole voting and shared investment power over 4,984 shares in
the Profit Sharing and Savings Plan; includes options to purchase 34,666 shares.
(14) Sole voting and investment power over 1,141 shares; includes options to purchase 16,200 shares.
(15) Shared voting and investment power over 2,100 shares; includes options to purchase 13,839 shares.
(16) Shared voting and investment power over 3,160 shares; includes options to purchase 8,640 shares.
(17) Sole voting and investment power over 1,490,365 shares; shared voting and investment power over 542,901 shares;
sole voting and shared investment power over 73,564 shares in the Profit Sharing and Savings Plan; includes options
to purchase 899,481 shares.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid during each of Baldor's last three fiscal
years to each of Baldor'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 Award(s) Options Payouts Compensation (1)
($) ($) ($) ($) (#) ($) ($)
John A. McFarland 2002 270,000 222,152 0 0 26,000 0 15,015
President and Chief Executive 2001 270,000 221,704 0 0 26,000 0 25,489
Officer 2000 250,000 247,500 0 0 26,000 0 26,129
R. S. Boreham, Jr. 2002 200,000 164,557 0 0 13,000 0 10,885
Chairman 2001 210,000 172,436 0 0 13,000 0 52,457
2000 270,000 267,300 0 0 19,500 0 57,186
Gene J. Hagedorn 2002 125,000 69,937 0 0 6,500 0 11,596
Vice President - Materials 2001 125,000 53,373 0 0 6,500 0 19,628
2000 120,000 59,400 0 0 6,500 0 19,555
Randal G. Waltman 2002 115,000 69,937 0 0 6,500 0 11,690
Vice President - 2001 115,000 61,584 0 0 6,500 0 18,270
Motor Engineering and 2000 110,000 54,450 0 0 6,500 0 17,657
Operations
Charles H. Cramer 2002 126,000 51,835 0 0 6,500 0 11,543
Vice President - Personnel 2001 126,000 51,731 0 0 6,500 0 21,709
2000 122,000 59,400 0 0 6,500 0 19,805
Lloyd G. Davis (1) 2002 180,250 169,494 0 0 14,300 0 27,092
Executive Vice President, 2001 206,000 169,152 0 0 14,300 0 26,739
Chief Operating Officer, and 2000 200,000 198,000 0 0 14,300 0 27,401
Secretary
--------------
(1) The amounts disclosed in this column include: (a) contributions to Baldor Profit Sharing and Savings Plan, a
defined contribution plan, (b) premium payments on a split-dollar life insurance policy, and (c) with regards to
Mr. Davis, indicates payments made pursuant to the Employment Transition and Resignation Agreement effective
November 16, 2002, between Baldor and Mr. Davis, who resigned as Baldor's Executive Vice President, Chief Operating
Officer, and Secretary effective November 15, 2002. The Baldor Profit Sharing and Savings Plan is comprised of two
components: Profit Sharing and 401(k) Savings. Baldor makes a contribution to the profit sharing plan equal to
12% of pre-tax earnings for participating companies. The profit sharing contribution is allocated among eligible
employees in proportion to their total compensation. Baldor 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 Baldor and employee contributions, the above Named Executive Officers did not receive their full
allocation amounts to the Profit Sharing and Savings Plan. Baldor also maintains a split-dollar life insurance
plan for all executive officers. Baldor 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 Baldor 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 2002 amounts in this column represent
Baldor contributions and payments made as follows:
(a) (b)
Contributions Contributions Split-Dollar
to the to the Life Insurance
Name Profit Sharing Plan 401(k) Savings Premiums Other
($) ($) ($) ($)
John A. McFarland 8,510 2,075 4,430 0
R. S. Boreham, Jr. 8,510 2,375 0 0
Gene J. Hagedorn 8,510 1,875 1,211 0
Randal G. Waltman 8,510 1,653 1,527 0
Charles H. Cramer 8,510 1,844 1,189 0
Lloyd G. Davis 8,510 2,750 4,470 11,362 (1)(c)
Option Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------------------
Number of % of Total Market
Securities Options Price
Underlying Granted to on Grant Date
Options Employees in Exercise Grant Expiration Present
Name Granted Fiscal Year Price Date Date Value (1)
---------------------- ---------- ------------- --------- -------- --------- -----------
(#) ($/sh) ($/sh) ($)
John A. McFarland 20,000 (2) 8.6% 21.45 21.45 2/9/2012 68,600
6,000 (3) 2.6% 10.73 21.45 2/9/2012 63,420
R. S. Boreham, Jr. 10,000 (2) 4.3% 21.45 21.45 2/9/2012 34,300
3,000 (3) 1.3% 10.73 21.45 2/9/2012 31,710
Gene J. Hagedorn 5,000 (2) 2.1% 21.45 21.45 2/9/2012 17,150
1,500 (3) 0.6% 10.73 21.45 2/9/2012 15,855
Randal G. Waltman 5,000 (2) 2.1% 21.45 21.45 2/9/2012 17,150
1,500 (3) 0.6% 10.73 21.45 2/9/2012 15,855
Charles H. Cramer 5,000 (2) 2.1% 21.45 21.45 2/9/2012 17,150
1,500 (3) 0.6% 10.73 21.45 2/9/2012 15,855
Lloyd G. Davis 11,000 (2) 4.7% 21.45 21.45 2/16/2004 37,730
3,300 (3) 1.4% 10.73 21.45 2/16/2004 34,881
---------------
(1) Baldor 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 5.1%; annual dividend yield of 2.4%; and volatility of 2.5%. 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 Baldor 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 Baldor 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 Baldor'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 18,000 216,412 174,000 0 483,418 0
R. S. Boreham, Jr. 24,666 313,481 171,566 0 625,732 0
Gene J. Hagedorn 16,000 222,400 75,833 0 313,788 0
Randal G. Waltman 6,000 67,075 38,666 0 85,725 0
Charles H. Cramer 0 0 81,499 0 405,975 0
Lloyd G. Davis 12,500 148,726 154,033 0 773,294 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 $19.92 composite closing price of the Common Stock as reported by the New
York Stock Exchange on December 27, 2002, the last trading day of fiscal year 2002, 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.
Compensation Committee Interlocks and Insider Participation
Baldor's Board of Directors established a Compensation Committee in August 2002. The main responsibility of the
Compensation Committee is to approve the salary and contingent compensation arrangements for the Named Executive
Officers. The Compensation Committee, in combination with the Company's Stock Option Committee, also approves any stock
options granted to the Named Executive Officers. Prior to the establishment of the Compensation Committee, the Company
had no standing compensation committee. The Executive Committee performed functions similar to those customarily
performed by such committee by making recommendations to the Board; however, the Board of Directors, as a whole, approved
the salary and contingent compensation arrangements for executive officers. The Stock Option Committee administers the
1987 Plan and the 1994 Plan, both Plans relating to employees. The Executive Committee administers the 1989 Plan, the
1996 Plan, and the Director Plan, all relating to non-employee directors. The 1987 Plan, the 1989 Plan, and the 1996
Plan have expired except for options outstanding. The members of the Executive, Compensation, and Stock Option
Committees, and descriptions of each committee, are listed in this proxy statement under the caption "Information About
the Board of Directors and Committees of the Board". Of the directors, R. S. Boreham, Jr. and John A. McFarland were
executive officers of Baldor during fiscal year 2002 and R. L. Qualls was an officer of Baldor through 2001. In fiscal
year 2002, Dr. Qualls provided management consulting services for Baldor for which he was paid $44,000. These services
were provided on an as-needed basis and there was no formal arrangement between Baldor and Dr. Qualls as to the terms of
the consulting services.
Change of Control and Employment Arrangements
Pursuant to agreements under the 1987 Plan and the 1994 Plan, outstanding restricted Common Stock of Baldor 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 Baldor or the shareholder in the event of a "Change of Control" of Baldor as defined in those
agreements. In connection with Mr. Davis's resignation as Baldor's Executive Vice President, Chief Operating Officer,
and Secretary, Baldor entered into an Employment Transition and Resignation Agreement with Mr. Davis in order to permit
Baldor to avail itself of Mr. Davis's expertise over a transition period. Under the agreement, Mr. Davis remains
employed by Baldor on a part time basis until November 15, 2003, at which time he will resign. During this period, Mr.
Davis receives a base annual salary of approximately $91 thousand. Under the agreement, Mr. Davis also receives certain
bonus payments he would have received had he remained employed in his executive officer position by Baldor through the
end of 2002 (which payments have been made and are reflected under Mr. Davis's 2002 compensation in the "Summary
Compensation Table"). For a period of 18 months beginning November 16, 2003, Mr. Davis will be paid approximately $18
thousand per month and agrees not to compete with or solicit employees or customers of Baldor. In addition, any shares
received by Mr. Davis pursuant to the exercise of his stock options will be unrestricted.
Report of the Board of Directors on Executive Compensation
Baldor applies a consistent philosophy to compensation for all employees, including senior management. This philosophy
is based on the premise that the achievements of Baldor result from the coordinated efforts of all individuals working
toward common objectives. Baldor strives to achieve those objectives through teamwork that is focused on meeting the
expectations of customers and shareholders.
Baldor'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 contingent compensation. The Plan combines annual base compensation with contingent compensation, both of
which are based upon the individual officer's performance and Baldor's performance. Baldor 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 publicly traded, 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 an individual officer's performance and Baldor's performance.
The total compensation individual officers may earn is subjective based upon the individual's position, experience, and
ability to affect Baldor's performance. In establishing each officer's annual base and potential contingent portion of
compensation, additional consideration includes the individual's past performance, initiative and achievement, and future
potential, as well as Baldor's performance.
The potential contingent compensation pool is based upon the sales and earnings performance of Baldor 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 contingent compensation pool is determined as described
above and is assigned such that if Baldor achieves its sales and earnings objectives, the salary and contingent
compensation combined will be competitive with the industry and will remain consistent with Baldor's philosophy and the
Plan. The outcome of Baldor's sales and earnings for fiscal year 2002 resulted in actual bonuses equaling 29% to 45% of
total compensation for the Named Executive Officers.
The factors considered in determining the compensation package for the Chief Executive Officer ("CEO") for fiscal year
2002 were the same as those described above for executive officers. The total compensation for the CEO 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 performance contingent compensation, the CEO's total compensation was competitive, reflected the increase in
responsibilities and experience, and reflective of Baldor's performance. In fiscal year 2002, the CEO's contingent
compensation increased 0% as a result of Baldor's performance in sales and earnings.
Baldor 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 Baldor (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 2002 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 Baldor's
performance.
The CEO received incentive stock options to purchase 26,000 shares of Common Stock, which represented 11.2% of the total
shares granted. The number of options granted was subjective based upon the CEO's ability to affect Baldor'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,
reviewed the executive compensation policies in regards to Section 162(m) of the Internal Revenue Code of 1986, as
amended, pertaining to Baldor's $1,000,000 deductibility limitation for applicable compensation paid to Named Executive
Officers. In fiscal year 2002, the deductibility of Baldor's executive compensation was not affected by the limitation
under Section 162(m).
BOARD OF DIRECTORS
------------------
R. S. Boreham, Jr. ..............Chairman Executive Committee
-------------------
Jefferson W. Asher, Jr. R. S. Boreham, Jr. ..............Chairman
Merlin J. Augustine, Jr. John A. McFarland
Richard E. Jaudes R. L. Qualls
John A. McFarland
Robert J. Messey Stock Option Committee
----------------------
Robert L. Proost Robert J. Messey ................Chairman
R. L. Qualls Merlin J. Augustine, Jr.
Barry K. Rogstad Barry K. Rogstad
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-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Baldor 100.00 95.00 87.04 104.08 104.81 103.11
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
S&P 500 100.00 128.58 155.63 141.46 127.12 97.44
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
DJ ELQ 100.00 114.39 166.63 112.45 80.27 46.53
------------------ ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Assumes $100 invested at year-end 1997 in
Baldor Electric Company, the S&P 500 Index, and the
Dow Jones Electrical Components & Equipment Group Index
- ----------------------------------------- --------------------------------------- ---------------------------------------
Compound Annual Growth Rate
- ----------------------------------------- --------------------------------------- ---------------------------------------
- ----------------------------------------- --------------------------------------- ---------------------------------------
Baldor $103 0.6%
- ----------------------------------------- --------------------------------------- ---------------------------------------
- ----------------------------------------- --------------------------------------- ---------------------------------------
S&P 500 $97 -0.5%
- ----------------------------------------- --------------------------------------- ---------------------------------------
- ----------------------------------------- --------------------------------------- ---------------------------------------
DJ ELQ $47 -14.2%
- ----------------------------------------- --------------------------------------- ---------------------------------------
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Baldor oversees Baldor'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
and discussed 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 (1);
o The Audit Committee is comprised of directors that Baldor's Board of Directors has determined to be "independent of
management" (2);
o The Audit Committee has reviewed and discussed the annual audited financial statements with management;
o The Audit Committee has discussed with the independent auditors the matters required by Statement on Auditing
Standards No. 61, Communications with Audit Committees;
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, Independence Discussions
with Audit Committees;
o The Audit Committee has considered the compatibility of non-audit services with the auditors' independence; 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 Baldor's Annual Report on Form 10-K for filing with the Securities and
Exchange Commission.
------------
(1) There have been no amendments to Baldor's Audit Committee Charter that was adopted by Baldor's Board of Directors
on February 5, 2001, and included in Baldor's Proxy Statement issued in March 2001.
(2) A detailed determination of member independency is included in this Proxy Statement under the sub-caption
"Statement of Director Independency".
Audit Committee
---------------
Jefferson W. Asher, Jr. .........Chairman
Robert J. Messey
Robert L. Proost
Statement of Director Independency
Baldor's Board of Directors, as a whole, strongly believes that the Audit Committee and its function are extremely
important to the integrity of Baldor. 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 Baldor.
o No member of the Audit Committee accepts compensation from Baldor 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.
Baldor's Board of Directors has paid close attention to the independency of the members of Baldor'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 Baldor and its shareholders, and is
"independent of management" so that the member's participation on Baldor's Audit Committee does not violate Section 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.
Merlin J. Augustine, Jr.
Richard E. Jaudes
John A. McFarland
Robert J. Messey
Robert L. Proost
R. L. Qualls
Barry K. Rogstad
INDEPENDENT AUDITORS
Baldor is presently utilizing the services of Ernst & Young LLP, which has been Baldor's independent auditor and
principal accountant since 1972. The Audit Committee will consider the reappointment of Ernst & Young LLP as Baldor's
independent auditors and principal accountant for the fiscal year ending January 3, 2004, at Baldor's next regular Audit
Committee meeting in May. Representatives of Ernst & Young LLP will be present at the 2003 Annual Meeting with an
opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. The
Audit Committee considered whether the provision of non-audit services by its auditors is compatible with maintaining its
auditor's independence. A summary of the fees associated with the services performed by Ernst & Young LLP for fiscal
years 2002 and 2001 follows. Audit fees include fees related to: (a) the annual audit of the consolidated financial
statements, (b) reviews of the financial statements included in quarterly reports on Form 10-Q ($191,985 for 2002 and
$174,066 for 2001), and (c) statutory audits required for foreign affiliates ($92,457 for 2002 and $59,878 for 2001).
Audit-related fees principally include agreed upon procedures. Tax fees include: (a) U.S. tax planning ($85,000 for 2002
and $0 for 2001), and (b) tax compliance for foreign affiliates ($29,153 for 2002 and $25,842 for 2001).
Type of Fee 2002 Fees 2001 Fees
----------------------------- -------------------- -------------------
----------------------------- -------------------- -------------------
Audit $ 284,442 $ 233,944
Audit-Related $ 2,400 $ 5,750
Tax $ 114,153 $ 25,842
All Other $ 0 $ 0
SHAREHOLDER PROPOSALS and NOMINATION DEADLINES
Any shareholder of Baldor eligible to vote in an election may make shareholder proposals and nominations for the 2004
Annual Meeting. In order to be considered for inclusion in the 2004 Proxy Statement and considered at the 2004 Annual
Meeting to be held in 2004, all shareholder proposals, nominations, and notifications must: (1) comply with Baldor's
Bylaws, as amended, and (2) be appropriately received by the Secretary of Baldor on or after September 29, 2003, and on
or before November 28, 2003. The Nominating Committee of Baldor'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 28, 2003
FRONT OF DIRECTION CARD
[ LOGO ]
PROFIT SHARING AND SAVINGS PLAN PROFIT SHARING AND SAVINGS PLAN
BALDOR ELECTRIC COMPANY
Annual Meeting of Shareholders on May 3, 2003
The undersigned, a participant in the Baldor Electric Company Profit Sharing and Savings Plan (the "Plan"), hereby
directs AMVESCAP, as Trustee (the "Trustee") of the Plan Trust (the "Trust"), at the Annual Meeting of Shareholders of
Baldor Electric Company, to be held at the Fort Smith Convention Center located at 800 Rogers Avenue, Fort Smith,
Arkansas, on Saturday, May 3, 2003, 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.
In order for the Trustee to vote the shares of the Plan, your voting direction must be received
no later than 12:00 noon, local time (CST), on May 1, 2003.
PLEASE VOTE YOUR SHARES PROMPTLY USING THE INTERNET, MAIL, OR TELEPHONE.
-------- ---- ---------
ADDRESS CHANGES OR COMMENTS? _________________________________________________________________________
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- -------------------------------------------------------------------------------------------------------------
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- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
AMVESCAP is the trustee for the
Baldor Electric Company Profit Sharing and Savings Plan.
Access to your Baldor investment elections
are available on the Internet at
www.invescoretirement.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 AMVESCAP at 800-881-8520 as soon as possible to request a new PIN.
AMVESCAP 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: Merlin J. Augustine, Jr.
John A. McFarland To withhold authority to vote for any nominee listed above,
Robert L. Proost mark the "For All Except" box and write the name(s)of the
nominee(s)from whom you wish to withhold authority to vote
in the space provided below.
---------------------------------------------------
Mark the box to the right if you plan to attend the Annual Meeting on May 3, 2003. [ ]
IF YOU WISH TO VOTE ELECTRONICALLY, COMPANY NUMBER:
PLEASE READ THE INSTRUCTIONS BELOW. PROXY NUMBER:
ACCOUNT NUMBER:
Please be sure to sign and date this Direction Card.
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 follow the instructions indicated on each card.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
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 until 12:00 noon CST on May 1, 2003.
o Voting electronically 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 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.
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 May 3, 2003
The undersigned hereby appoints R. S. Boreham, Jr. and John A. McFarland, 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 at the Fort Smith Convention Center located at 800 Rogers Avenue, Fort Smith, Arkansas, on Saturday, May 3, 2003,
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 of directors.
PLEASE VOTE YOUR SHARES PROMPTLY USING THE INTERNET, MAIL, OR TELEPHONE.
-------- ---- ---------
ADDRESS CHANGES OR COMMENTS? _________________________________________________________________________
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- -------------------------------------------------------------------------------------------------------------
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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 at
www.continentalstock.com
------------------------
To access this service, visit the website above.
You will be asked for your 4 digit Personal Identification Number (PIN).
If you do not know your PIN, or need assistance with Internet access or any other shareholder service,
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: Merlin J. Augustine, Jr.
John A. McFarland To withhold authority to vote for any nominee listed above,
Robert L. Proost mark the "For All Except" box and write the name(s) of the
nominee(s) from whom you wish to withhold authority to
vote in the space provided below.
---------------------------------------------------
Mark the box to the right if you plan to attend the Annual Meeting on May 3, 2003. [ ]
IF YOU WISH TO VOTE ELECTRONICALLY, COMPANY NUMBER:
PLEASE READ THE INSTRUCTIONS BELOW. PROXY NUMBER:
ACCOUNT NUMBER:
Please be sure to sign and date this Proxy Card.
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 follow the instructions indicated on each card.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
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 until 12:00 noon CST on May 1, 2003.
o Voting electronically 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 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.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
BALDOR ELECTRIC COMPANY
Householding Notice
The Securities and Exchange Commission has issued rules regarding the delivery of single copies of certain shareholder
documents to more than one shareholder residing in the same household.
Currently, Baldor Electric Company mails its Annual Report and Proxy Statement, and other shareholder communications, in
separate envelopes to each person residing at the same address. If certain conditions are met, Baldor Electric Company
is permitted to mail a single copy of each of these documents in one envelope to all shareholders residing at the same
address. This is called "householding".
Baldor Electric Company intends to household all annual reports, proxy statements, and other shareholder communications
including, but not limited to, press releases, quarterly reports, and presentation reprint booklets. This householding
will not affect mailings related to dividend payments or tax related documents. Baldor Electric Company will begin
householding for communications to be mailed after the 2003 Annual Meeting to be held May 3, 2003.
If you consent to the householding of your Baldor communications...
o You do not need to do anything.
o Your consent will be effective 60 days after the mailing of this notice.
o Your consent will remain in effect until you revoke it.
o You will help reduce the printing and mailing costs incurred by Baldor Electric Company.
If you do not consent to the householding of your Baldor communications...
o You should check the box on the proxy card.
o You will continue to receive separate annual reports for each account at this address.
If you are a shareholder of record who prefers to receive a separate copy of shareholder communications, or if you wish to
revoke a previous consent to household, please notify us or our transfer agent by writing or calling:
Baldor Electric Company Transfer Agent
----------------------- --------------
Baldor Electric Company Continental Stock Transfer & Trust Company
Attn: Shareholder Relations Attn: Proxy Services
P O Box 2400 17 Battery Pl - Fl 8
Fort Smith AR 72902 New York NY 10004
Phone: 479-648-5763 Phone: 800-509-5586 or 212-509-4000
Fax: 479-648-5752 Fax: 212-509-5150
Internet: www.baldor.com Internet: www.continentalstock.com