SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
BALDOR ELECTRIC COMPANY
(Name of Registrant as Specified In Its Charter)
Lloyd G. Davis, Secretary of Baldor Electric Company
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_____________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_____________________________________________________________________
3) Filing Party:
_____________________________________________________________________
4) Date Filed:
_____________________________________________________________________
Notes:
BALDOR ELECTRIC COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1994
To the Shareholders:
The Annual Meeting of Shareholders of Baldor Electric Company, a
Missouri corporation, will be held at the Holiday Inn, Fort Smith
Civic Center, 700 Rogers Avenue, Fort Smith, Arkansas, on
Saturday, May 7, 1994, at 10:30 a.m., local time, for the
following purposes:
1. To elect directors;
2. To consider and act upon a proposal to amend the Restated
Articles of Incorporation as amended of Baldor Electric
Company to increase the authorized shares of Common Stock,
par value $0.10 per share, from 25,000,000 to 50,000,000
shares;
3. To consider and act upon a proposal to adopt the Baldor
Electric Company 1994 Incentive Stock Plan;
4. To consider and act upon a proposal to approve amendments
to the Baldor Electric Company 1989 Stock Option Plan for
Non-Employee Directors to increase the number of shares
available under the Plan from 270,000 to 420,000 shares, to
extend the duration of such Plan from 1996 to 2003, and to
make the exercise price for all options awarded during the
extension period equal to the fair market value of the
Common Stock on the date of the grant; and
5. To transact such other business as may properly come before
the meeting and all adjournments thereof.
The Board of Directors has fixed the close of business on March 23,
1994, as the record date for the determination of the shareholders
entitled to notice of, and to vote at, the Meeting and all
adjournments thereof.
By order of the Board of Directors
Lloyd G. Davis
Chief Financial Officer,
Vice President-Finance,
Secretary, and Treasurer
April 4, 1994
Even if you expect to attend the meeting in person, please mark,
date, and sign the enclosed proxy and return it in the enclosed
return envelope. The return envelope does not require postage if
mailed in the United States. Shareholders who attend the meeting
may revoke their proxies and vote in person if they so desire.
BALDOR ELECTRIC COMPANY
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
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 to be held May 7, 1994, at
10:30 a.m. If the proxy is executed and returned to the Company,
it nevertheless 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. If no contrary
instructions are indicated on the proxy, the proxy will be voted
for the election of the three nominees named herein as directors
and for Proposals 2, 3, and 4. If matters other than those
mentioned herein properly come before the meeting, the proxy will
be voted by the persons named therein in a manner which they
consider to be in the best interests of the Company.
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 April 4, 1994.
The cost of the solicitation of proxies will be borne by the
Company. In addition to the use of the mails, proxies may be
solicited personally or by telephone or facsimile, by regular
employees of the Company, without additional compensation.
Brokerage firms, banks, nominees and others will be requested to
forward proxy material to the beneficial owners of Common Stock
held by them of record. No solicitation is to be made by
specially engaged employees or other paid solicitors.
VOTING
Only the holders of record of the Common Stock of the Company as
of the close of business on March 23, 1994, are entitled to vote,
either in person or by proxy, at the Annual Meeting and all
adjournments thereof. At the close of business on March 10,
1994, 18,118,094 shares of Common Stock of the Company were
issued and outstanding. Each share of Common Stock is entitled
to one vote on each item of business to be presented for voting
at the Annual Meeting, except for the election of directors, in
which case cumulative voting is authorized as described in the
herein under "Election of Directors".
A majority of the outstanding shares of Common Stock present in
person or by proxy and entitled to vote will constitute a quorum
for the transaction of business at the Annual Meeting. Shares
represented by proxies or ballots which are marked "withhold
authority" with respect to the election of any one or more
nominees for election as directors, abstentions, and "broker non-
votes" (as described below) are counted for purposes of
determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting.
1
Abstentions may be specified on Proposal 2 to amend Article Three
of the Company's Restated Articles of Incorporation, as amended
(the "Restated Articles"), on Proposal 3 to adopt the Baldor
Electric Company 1994 Incentive Stock Plan, and on Proposal 4 to
adopt the amendment to the Baldor Electric Company 1989 Non-
Employee Director Stock Option Plan, but not the election of
directors. However, failure to mark the proxy or the ballot to
either vote for, or to withhold votes for one or more nominees
for election as directors, has the practical effect of an
abstention.
In the election of directors, each shareholder is entitled to
vote cumulatively by classes of directors. There is no condition
precedent to the exercise of these cumulative voting rights. The
affirmative vote of at least a plurality of the votes cast by the
holders of Common Stock represented in person or by proxy at the
Annual Meeting is required to elect directors. "Plurality" means
that the individuals who receive the largest number of votes cast
are elected as directors up to the maximum number of directors to
be elected at the Annual Meeting as described in the above
paragraph. Consequently, any shares present in person or by
proxy at the Annual Meeting, but not voted for any reason, have
no impact in the election of directors except to the extend that
the failure to vote for an individual may result in another
individual receiving a larger number of votes.
Brokers who hold shares in street name for customers have the
authority to vote on certain matters in their discretion (such as
the election of directors) even when they have not received
voting instructions from the beneficial owners of those shares.
However, there are other matters which may be put to shareholder
vote on which brokers are not allowed to vote absent specific
instructions from the beneficial owners. Proxies returned by a
broker on behalf of street name holders which contain items for
which no vote is indicated are referred to as "broker non-votes".
At the Annual Meeting there is a proposal on which brokers may
vote without receiving prior instructions from the beneficial
owners, allowing these shares to be counted as present for quorum
purposes. Because a proxy containing a broker non-vote with
respect to other proposals is not entitled to vote with respect
to those proposals, the broker non-vote is not counted with
respect to, and has no effect on, the determination of whether
the requisite number of shareholders represented in person or by
proxy and entitled to vote at the Annual Meeting has approved the
proposal.
Such broker non-votes are to be contrasted with abstentions,
which are shares which are entitled to vote but which are not
voted at the direction of the beneficial owner, so that they are
counted in determining whether the requisite number of
shareholders represented in person or by proxy and entitled to
vote has approved the proposal. Abstentions, therefore, have the
effect of a vote against the proposal.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Restated Articles of Incorporation and Bylaws of the Company
provide for a classified Board of Directors, with the Board
divided into three classes whose terms expire at different times.
Three members are to be elected to the Board of Directors in
1994, each to serve for a term of three years.
2
The persons named in the enclosed form of proxy intend to vote
such proxy for the election of the three nominees named below as
directors of the Company, unless the shareholder indicates on the
form of proxy that the vote should be withheld or contrary
directions are indicated. If the proxy card is signed and
returned without any direction given, shares will be voted for
the election of the Board's slate of nominees and in their
discretion, the persons named in the Proxy Card are authorized to
cumulate and vote the shares of the shareholders giving the proxy
for any nominee except those nominees with respect to whom
authority has been withheld. 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, it is intended that, in the
discretion of the Board of Directors, either the position will be
left vacant, the size of the Board will be reduced, or the
proxies will vote for a substitute nominee designated by the
Board of Directors.
Information Regarding the Nominees for Directors
to be Elected in 1994 for Terms Ending in 1997
O. A. Baumann ... The Company's manufacturer's sales
representative in St. Louis, Missouri, from 1947 to 1987
(retired); Age 72; Present term expires 1994; Director of the
Company since 1961. (1)
Robert L. Proost ... Corporate Vice President and Director of
Administration, A.G. Edwards & Sons, Inc., securities brokerage
and investment banking, since March 1988; Age 56; Present term
expires 1994; Director of the Company since 1988. (2)(3)
George A. Schock ... Assistant Secretary of the Company since
1978; has served as an officer of the Company since 1944; Age 86;
Present term expires 1994; Director of the Company since 1944.
(4)
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 1994
Jefferson W. Asher, Jr. ... Independent Management Consultant
providing assistance to corporations, attorneys, banking
institutions, and other creditors; Director of California Beach
Restaurants, Inc.; Age 69; Present term expires 1996; Director of
the Company since 1973. (5)(6)
Fred C. Ballman ... Former Chairman and Chief Executive Officer
of the Company (retired); Age 81; Present term expires 1995;
Director of the Company from 1944 to 1982 and since 1992. (6)
3
R. S. Boreham, Jr. ... Chairman of the Board since 1981; Chief
Executive Officer from 1978 through fiscal year 1992; Director of
U.S.A. Truck, Inc.; Age 69; Present term expires 1995; Director
of the Company since 1961. (7)
Robert J. Messey ... Senior Vice President and Chief Financial
Officer of Sverdrup Corporation, engineering and architectural
firm, since January 1, 1993; Partner of Ernst & Young,
international accounting firm, prior to January 1, 1993; Age 48;
Present term expires 1996; Director of the Company since 1993.
(2)
R. L. Qualls ... Chief Executive Officer of the Company beginning
January 3, 1993 and President of the Company since 1990; Chief
Operating Officer from February 1991 through fiscal year 1992;
Executive Vice President-Finance and Planning of the Company from
May 1986 through April 1990; Age 60; Present term expires 1995;
Director of the Company since 1987. (4)
Willis J. Wheat ... Professor of Management and Marketing,
Oklahoma City University, since 1987; Age 68; Present term
expires 1996; Director of the Company since 1991. (1)(8)
_______________
(1) Member of the Stock Option Committee
(2) Member of the Audit Committee
(3) Chairman of the Stock Option Committee
(4) Member of the Executive Committee
(5) Chairman of the Audit Committee
(6) Member of the Nominating Committee
(7) Chairman of the Executive Committee
(8) Chairman of the Nominating Committee
Information About the Board of Directors
and Committees of the Board
Board of Directors ... During the fiscal year ended January 1,
1994 ("fiscal year 1993"), four meetings of the Board of
Directors were held.
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 to the
extent legally permitted. The Executive Committee held five
meetings during fiscal year 1993.
4
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. The Audit Committee held three
meetings during fiscal year 1993.
Stock Option Committee ... The Stock Option Committee administers
three of the Company's four existing stock option plans. Awards
can be made from two plans and the committee has the exclusive
authority to determine the persons eligible to participate and to
determine the amount and the terms and conditions of the awards
made to each participant. The Stock Option Committee held one
meeting during fiscal year 1993.
Nominating Committee ... The Nominating Committee is responsible
for proposing a slate of directors for election by the
shareholders at each annual meeting and proposing candidates to
fill any vacancies on the Board. Pursuant to the Bylaws, any
shareholder of the Company eligible to vote in an election of
directors may nominate a person or persons for election to the
Board of Directors by written notice mailed to the Company not
less than 45 nor more than 90 days prior to the regularly
scheduled date set forth in the Bylaws for the annual meeting of
shareholders. The notification to the Company shall state the
name and residence address of the nominating shareholder and, to
the extent known to the nominating shareholder: the name and
address of the proposed nominee, the total number of shares to be
voted for the proposed nominee, and the number of shares held by
the nominating shareholder. The committee will consider
candidates for Board membership proposed by shareholders who have
complied with the aforementioned procedures. The Nominating
Committee held one meeting during fiscal year 1993.
Director Compensation ... During fiscal year 1993, each member of
the Board of Directors who was not a Company employee received
$2,700 per quarter for services as a director. Each director who
is a member of the Audit Committee received an additional $2,300
per quarter as chairman or $1,500 per quarter as a member. Each
director who is a member of the Stock Option Committee received
an additional $550 per quarter during fiscal year 1993. The
Company also maintains the 1989 Stock Option Plan for Non-
Employee Directors (the "1989 Plan"). Under the terms of the
1989 Plan, all non-employee directors received an annual option
grant on January 29, 1993, to purchase shares of Common Stock of
the Company, consisting of an option to purchase 1,620 shares
having an exercise price of $17.291667 (the fair market value per
share on that date) and an additional option to purchase 1,080
shares having an exercise price of $8.645833 (50% of the fair
market value per share on that date). Annual option grants
become exercisable in five equal installments beginning on the
grant's first anniversary. In addition, one newly appointed non-
employee director received an initial option grant on July 1,
1993, to purchase 8,100 shares of Common Stock of the Company
having an exercise price of $21.250 (the fair market value per
share on that date) and an additional option to purchase 2,700
shares of Common Stock of the Company having an exercise price of
$10.625 (50% of the fair market value per share on that date).
Initial option grants become exercisable in five equal
installments beginning May 31 of the year following the grant
date and January 31 of each subsequent year. All options expire
ten years after the grant date. The 1989 Plan is administered by
a committee of non-participating directors.
5
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 10, 1994,
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, the Company's Chief Executive Officer, each of the
Company's five other most highly compensated executive officers
for fiscal year 1993, and all executive officers and directors as
a group.
Number of Percent of
Name Shares Class (1)
George A. Schock 1,649,941 (2) 9.1%
10473 Bellefontaine Road
St. Louis, Missouri 63137
Fred C. Ballman 1,496,213 (3) 8.3%
P. O. Box 6638
Fort Smith, Arkansas 72906
R. S. Boreham, Jr. 1,232,479 (4) 6.8%
P. O. Box 2400
Fort Smith, Arkansas 72902
The Company's Profit Sharing 1,272,230 (5) 7.0%
and Savings Plan
P. O. Box 2400
Fort Smith, Arkansas 72902
The Putman Companies, Inc. 1,000,141 (6) 5.5%
One Post Office Square
Boston, Massachusetts 02109
O. A. Baumann 306,546 (7) 1.7%
R. L. Qualls 179,902 (8) 1.0%
Theodore W. Atkins 110,817 (9) *
James R. Kimzey 97,474 (10) *
Lloyd G. Davis 63,788 (11) *
Robert L. Null, Jr. 50,941 (12) *
Jefferson W. Asher, Jr. 24,480 (13) *
Robert L. Proost 21,600 (14) *
Willis J. Wheat 7,560 (15) *
Robert J. Messey 3,450 (16) *
All executive officers and directors
as a group (16 persons) 5,440,763 (17) 28.9%
6
_______________
* Less than 1%.
(1) Percentage is calculated with number of shares as the numerator which
includes shares issuable upon exercise of options. The denominator
consists of shares issued and outstanding plus shares issuable upon
exercise of options, if any, awarded to the named individual or group.
(2) Shared voting and shared investment power over 1,621,152 shares;
includes exercisable options to purchase 28,789 shares.
(3) Shared voting and shared investment power; includes exercisable options
to purchase 2,700 shares.
(4) Shared voting and shared investment power over 438,922 shares; sole
voting and sole investment power over 567,978 shares; sole voting and
shared investment power over 109,419 shares in the Company's Profit
Sharing and Savings Plan; includes exercisable options to purchase
116,160 shares.
(5) Sole voting power over 10,876 shares; shared investment power over
1,261,354 shares.
(6) Pursuant to Schedule 13G, dated January 18, 1994, filed with the
Securities and Exchange Commission; shared voting power over 341,208
shares and shared investment power over 1,000,041 shares.
(7) Shared voting and shared investment power over 290,346 shares; includes
exercisable options to purchase 16,200 shares.
(8) Shared voting and shared investment power over 62,634 shares; sole
voting and shared investment power over 598 shares in the Company's
Profit Sharing and Savings Plan; includes exercisable options to purchase
116,670 shares.
(9) Shared voting and shared investment power over 20,586 shares; sole
voting and sole investment power over 26 shares; sole voting and shared
investment power over 2,545 shares in the Company's Profit Sharing and
Savings Plan; includes exercisable options to purchase 87,660 shares.
(10) Shared voting and shared investment power over 8,575 shares; sole voting
and shared investment power over 2,889 shares in the Company's Profit
Sharing and Savings Plan; includes exercisable options to purchase
86,010 shares.
(11) Shared voting and shared investment power over 2,246 shares; sole voting
and sole investment power over 18,347 shares; sole voting and shared
investment power over 6,960 shares in the Company's Profit Sharing and
Savings Plan; includes exercisable options to purchase 36,240 shares.
(12) Shared voting and shared investment power over 6,648 shares; sole voting
and shared investment power over 2,042 shares in the Company's Profit
Sharing and Savings Plan; includes exercisable options to purchase
42,251 shares.
(13) Sole voting and sole investment power; includes exercisable options to
purchase 16,200 shares.
(14) Sole voting and sole investment power; includes exercisable options to
purchase 4,320 shares.
(15) Shared voting and shared investment power over 1,620 shares; includes
exercisable options to purchase 5,940 shares.
(16) Sole voting and sole investment power over 1,620 shares; includes
exercisable options to purchase 2,160 shares.
(17) Includes 141,825 shares in the Company's Profit Sharing and Savings
Plan; includes exercisable options to purchase 716,130 shares.
7
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid
during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's five other most highly compensated
executive officers.
Summary Compensation Table
Long Term Compensation
---------------------------
Annual Compensation Awards Payouts
----------------------------- ------------------ --------
Other Restricted All
Annual Stock LTIP Other
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation <F1>
($) ($) ($) ($) (#) ($) ($)
R. L. Qualls 1993 200,000 219,856 0 0 27,000 0 64,604
President and Chief Executive Officer 1992 170,000 148,918 0 0 27,000 0 39,859
1991 160,000 122,355 0 0 0 0
R. S. Boreham, Jr. 1993 200,000 219,856 0 0 21,000 0 170,382
Chairman of the Board of Directors 1992 217,000 210,633 0 0 0 0 80,208
1991 215,000 183,440 0 0 0 0
Theodore W. Atkins 1993 100,000 52,498 0 0 0 0 21,903
Vice President - Industry Relations 1992 103,000 77,724 0 0 0 0 22,595
and Governmental Affairs 1991 100,000 66,405 0 0 0 0
Lloyd G. Davis <F2> 1993 100,000 32,978 0 0 15,000 0 16,979
Chief Financial Officer, 1992 94,863 16,532 0 0 14,400 0 6,953
Vice President - Finance, 1991
Secretary, and Treasurer
James R. Kimzey 1993 100,000 29,681 0 0 6,000 0 16,291
Vice President - Research and 1992 98,000 23,380 0 0 14,400 0 14,893
Engineering 1991 89,000 18,344 0 0 0 0
Robert L. Null, Jr. 1993 100,000 29,681 0 0 5,400 0 15,116
Vice President - Manufacturing 1992 100,000 21,274 0 0 0 0 13,708
1991 95,000 17,427 0 0 10,800 0
<FN>
_______________
<F1> The amounts disclosed in this column include contributions by the Company to the Baldor Electric Company
Employees' Profit Sharing and Savings Plan the "Plan"), a defined contribution plan. The Plan is two plans
in one: a Profit Sharing Plan and a Profit Sharing Plan which are equal to 12% of pre-tax earnings for
participating companies. The contributions are allocated among eligible employees in proportion to their total
compensation. The Company makes matching contributions to the Savings Plan at a rate equal to 25% of the first
4% of the participating employee's compensation earned and contributed. 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 which vary according to age and insurance coverage for each officer.
Each 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 officer represents the full dollar
value of the premium paid by the Company during the covered fiscal year less the reimbursement received from
each individual. The fiscal year 1993 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 Savings Plan Premiums
($) ($) ($)
R. L. Qualls 15,067 2,249 47,288
R. S. Boreham, Jr. 15,067 2,249 153,066
Theodore W. Atkins 9,460 1,000 11,443
Lloyd G. Davis 9,630 1,303 6,046
James R. Kimzey 7,976 1,000 7,315
Robert L. Null, Jr. 7,976 1,000 6,140
<F2> Mr. Davis became an executive officer during the 1992 fiscal year.
8
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 <F1>
(#) ($/sh) ($/sh) ($)
R. L. Qualls 12,000 <F2> 5.5% 9.43 18.85 05/01/2003 172,080
15,000 <F3> 6.9% 18.85 18.85 05/01/2003 147,600
R. S. Boreham, Jr. 6,000 <F2> 2.7% 9.43 18.85 05/01/2003 86,040
15,000 <F3> 6.9% 18.85 18.85 05/01/2003 147,600
Theodore W. Atkins 0
Lloyd G. Davis 6,000 <F2> 2.7% 9.43 18.85 05/01/2003 86,040
9,000 <F3> 4.1% 18.85 18.85 05/01/2003 88,560
James R. Kimzey 2,400 <F2> 1.1% 9.43 18.85 05/01/2003 34,416
3,600 <F3> 1.6% 18.85 18.85 05/01/2003 35,424
Robert L. Null, Jr. 2,400 <F2> 1.1% 9.43 18.85 05/01/2003 34,416
3,000 <F3> 1.4% 18.85 18.85 05/01/2003 29,520
<FN>
_______________
<F1> The Company used the Black-Scholes option pricing model to determine grant date
present value. Calculations are based on a ten-year option term and
assumptions are: interest rate of 6.0%; annual dividend yield of 1.6%; and
volatility of 20.0%. As indicated, the present values are based on assumptions
and the amounts reflected in this table may not be achieved.
<F2> Non-qualified options to purchase shares of restricted Common Stock of the
Company were granted at 50% of the market value of the Common Stock on the date
of grant with full vesting occurring on the fifth anniversary date. Vesting
may be accelerated by early exercise or when certain events relating to change
of the Company's ownership occurs. The restricted shares purchased on exercise
of such options may be voted but cannot be sold or transferred until they are
vested. The options are 100% exercisable six months and one day following the
grant date.
<F3> Incentive options to purchase shares of Common Stock of the Company were
granted at the market value of the Common Stock on the date of grant and are
100% exercisable six months and one day following the grant date.
9
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of Value of
Shares Unexercised Unexercised
Acquired on Value Options in-the-Money Options
Name Exercise Realized <F1> at FY-End (#) at FY-End ($) <F2>
------------------------------ ---------------------------------
(#) ($) (Exercisable) (Unexercisable) (Exercisable) (Unexercisable)
R. L. Qualls 29,588 399,190 116,670 0 1,738,337 0
R. S. Boreham, Jr. 0 0 116,160 0 1,820,961 0
Theodore W. Atkins 0 0 87,660 0 1,539,740 0
Lloyd G. Davis 600 11,438 36,240 9,000 471,777 79,875
James R. Kimzey 0 0 86,010 0 1,338,836 0
Robert L. Null, Jr. 2,220 40,700 42,250 0 637,086 0
<FN>
_______________
<F1> Represents the difference between the option exercise price and the market
price of the Common Stock on the date of exercise multiplied by the number of
shares to which the exercise relates.
<F2> Represents the difference between the $23.875 closing price of the Common Stock
on January 1, 1994, the last trading day of fiscal year 1993, and the exercise
price of the options multiplied by the number of shares of Common stock
underlying the option. The numbers shown reflect the value of options
accumulated over a six-year period.
Change-of-Control Arrangements
Pursuant to agreements under the 1987 Incentive Stock 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 by the 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 committees. The
Board of Directors, as a whole, approves the remuneration
arrangements for directors and executive officers, compensation
plans for directors and executive officers, and granted the
benefits under such plans. The members of the Executive Committee
include the following executive officers: R. S. Boreham, Jr., R.
L. Qualls, and George A. Schock. The members of the Stock Option
Committee include the following non-employee directors: O. A.
Baumann, Robert L. Proost, and Willis J. Wheat.
10
The report of the Executive and Stock Option Committees and the
Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, and shall not be deemed
filed under such Acts.
Report of the Executive and Stock Option Committees
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 Officer's 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. 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 which will motivate and
retain key employees.
Total compensation for all executive officers is established
within the range of salaries 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 and the companies included may
or may not include those in the performance graph. 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
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
impact the Company's performance. In establishing each officer's
annual base and bonus portion of total compensation, additional
consideration includes the individual's past performance,
initiative and achievement, and future potential, as well as the
Company's performance.
The bonus 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
stockholders' equity as determined by the Board of Directors
(currently 10%) and decreases if earnings are less than such
amount. The bonus is assigned to each individual officer such
that total compensation is competitive with the industry and
remains consistent with the Company's philosophy and Plan. The
Company exceeded planned
11
sales and earnings which resulted in actual bonuses equaling
23% to 52% of total compensation for named executive officers.
The factors considered in determining the compensation package for
the President and Chief Executive Officer for fiscal year 1993
were the same as those described above for executive officers.
The total compensation for the President and the Chief Executive
Officer is expected to be slightly below the median of comparably-
sized manufacturing companies. This median is obtained from
independent salary survey data which is utilized in the same
manner for the CEO as well as all other executive officers. The
CEO's total compensation is competitive and reflective of the
Company's performance with 52% of the CEO's compensation at risk
in the form of a performance bonus. In 1993, 26% of the increase
in the CEO's total compensation over 1992 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 Committee has
granted incentive options to purchase shares of Common Stock of
the Company (at the fair market value of the Common Stock on the
date of grant) and non-qualified options to purchase shares of
restricted stock (at 50% of the fair market value of the Common
Stock on the date of grant) to executive officers and other
employees. Grants were made in fiscal year 1993 to named
executives 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 abilities to impact the
Company's performance.
The President and Chief Executive Officer received an incentive
stock option to purchase 15,000 shares of Common Stock, which
represented 6.9% of total shares granted, and a non-qualified
stock option to purchase 12,000 restricted shares of Common
Stock of the Company, which represented 5.5% of total shares
granted. The number of options granted was subjective based upon
the CEO's ability to impact the Company's performance as
well as individual performance, and future potential.
The Company, the Executive Committee, and the Stock Option
Committee, as appropriate, continually reviews 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. Currently, the
deductibility of the Company's executive compensation is not
affected by the limitation under Section 162(m).
EXECUTIVE COMMITTEE STOCK OPTION COMMITTEE
R. S. Boreham, Jr., Chairman Robert L. Proost, Chairman
R. L. Qualls O. A. Baumann
George A. Schock Willis J. Wheat
12
Performance Graph
1988 1989 1990 1991 1992 1993
Baldor $100.00 $139.22 $111.61 $159.89 $232.60 $307.46
S&P 500 $100.00 $131.69 $127.60 $166.47 $179.15 $197.21
S&P Elec Eqp Grp $100.00 $140.85 $129.52 $171.71 $188.03 $226.86
13
CERTAIN TRANSACTIONS
O. A. Baumann, a director of the Company, was a 20% shareholder
of the O. A. Baumann Company ("Baumann Company"), the
manufacturer's representative for the Company in eastern
Missouri and southern Illinois. Pursuant to a prior agreement,
Mr. Baumann transferred his ownership interest in the Baumann
Company to his son, Mark Baumann, on April 30, 1993. During
fiscal year 1993, the Company paid the Baumann Company sales
commissions and warehouse fees of approximately $488,000.
Each of the Company's manufacturer's representative
organizations (including those mentioned above) is an
independent business. The Company pays sales commissions and
warehouse fees to the manufacturer's representatives who, in
turn, pay all costs associated with maintaining sales offices
and warehouses and employing the various sales and other
personnel required to represent the Company in their respective
territories.
The Company believes that the foregoing transactions were on
terms comparable to those which would have been obtained from
unaffiliated persons.
PROPOSAL 2:
TO AMEND THE RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK,
PAR VALUE $0.10 PER SHARE, FROM 25,000,000 TO 50,000,000 SHARES
The Board of Directors of the Company has unanimously adopted
resolutions setting forth an amendment to Article Three of the
Company's Restated Articles of Incorporation, to increase the
number of shares of Common Stock, $0.10 per share par value,
which the Company is authorized to issue from 25,000,000 to
50,000,000 shares, and has directed that this proposal be
submitted to the vote of the shareholders at the Annual Meeting
of Shareholders. To be adopted, this proposal must receive the
affirmative vote of the holders of at least a majority of the
Company's issued and outstanding Common Stock.
In January 1994, the Company issued 2,993,997 shares of Common
Stock in a six-for-five stock split effected in the form of a
20% stock dividend. In addition, 3,560,292 shares of Common
Stock are reserved for issuance pursuant to stock option plans
of the Company. As of January 29, 1994, 21,604,710 (86.4%)
of the Company's authorized number of shares of Common Stock
were issued and outstanding or reserved for issuance, leaving
the Company 3,395,290 shares of Common Stock currently
authorized for issuance.
The Company has no present intentions to issue additional equity
capital; however, the Board of Directors of the Company believes
it is in the best interests of the Company and its shareholders
to increase the number of authorized but unissued shares of its
Common Stock at this time. This increase will provide a reserve
of shares of Common Stock available for issuance upon
authorization by the Board for any general corporate purpose
without the necessity of soliciting further shareholder approval
unless required by law, the Company's
14
Restated Articles of Incorporation, or the rules of any stock
exchange upon which the stock may be listed or unless the Company
deems it advisable to do so in order to qualify an employee
benefit plan in accordance with Rule 16b-3 under the Securities
Exchange Act of 1934.
Your Board of Directors recommends a vote "FOR" this proposal 2.
PROPOSAL 3:
TO CONSIDER AND ACT UPON A PROPOSAL TO ADOPT THE
BALDOR ELECTRIC COMPANY 1994 INCENTIVE STOCK PLAN
On February 7, 1994, the Board of Directors of the Company
approved the Baldor Electric Company 1994 Incentive Stock Plan
(the "Incentive Stock Plan") and directed that it be submitted
to the shareholders for their approval. The Incentive Stock
Plan will become effective as of February 7, 1994, subject to
the approval at this Annual Meeting by the affirmative vote of
the holders of at least a majority of the Company's issued and
outstanding Common Stock.
The purpose of the Incentive Stock Plan is to aid in maintaining
and developing strong management capable of assuring the future
success of the Company. The Plan is designed to secure for the
Company and its shareholders the benefits of the incentive
inherent in common stock ownership by the employees of the
Company who are largely responsible for the Company's future
growth and continued financial success. It is also designed to
afford those persons the opportunity to obtain or increase a
proprietary interest in the Company on a favorable basis, and,
thereby, to have an opportunity to share in its success. A copy
of the Incentive Stock Plan is attached to this Proxy Statement
as Exhibit "A", and the following description is qualified in
its entirety by reference to the Incentive Stock Plan.
General ... Under the Incentive Stock Plan, the Board of
Directors or one or more committees appointed by the Board, will
act as the administrator of the Incentive Stock Plan (the
"Administrator"), for various purposes, depending on the types
of benefits to be awarded and the class of persons or entities
to whom the benefits are to be awarded. The selection of
"Reporting Persons" (i.e. directors or officers of the Company
or persons or entities who are the beneficial owners of more
than ten per cent of the Company's issued and outstanding common
stock) for participation in the Incentive Stock Plan and
decisions concerning the timing, pricing and amount of a grant
or award to such Reporting Persons, must be made solely by a
committee of two or more directors, each of whom are
"Disinterested Persons." The term "Disinterested Person" has
the meaning set forth in Rule 16b-(c)(2)(i) of the Securities
Exchange Act of 1934, as amended. Awards made to other
employees need not be made by a committee of Disinterested
Persons. Accordingly, references in the Incentive Stock Plan to
the "Administrator" refers to both (i) the committee or
committees of Disinterested Persons with respect to selection of
Reporting Persons for participation in the Plan and decisions
concerning the timing, pricing and amount of a grant or award to
Reporting Persons and (ii) the Board of Directors or another
committee or committees with respect to awards
15
made to other employees and to all other administrative functions
under the Incentive Stock Plan.
The Administrator, except as discussed below, has discretionary
authority with respect to administering the Incentive Stock
Plan, including the selection of persons eligible to participate
in the Plan and the granting of benefits in accordance with the
Plan. Officers (including officers who are members of the Board
of Directors) and salaried employees of the Company and its
subsidiaries are eligible to receive benefits under the
Incentive Stock Plan. The maximum number of shares which can be
issued under the Incentive Stock Plan is 1,000,000 (subject to
adjustments in certain events as described below). Such shares
may be authorized and unissued shares or treasury shares.
Four types of benefits may be granted under the Incentive Stock
Plan: Stock Options, Restricted Shares, Stock Appreciation
Rights and Formula Price Shares, all as described below. The
Administrator may make the award of any benefit subject to any
provisions as it deems appropriate including, without
limitation, (i) provisions for the purchase of Common Stock
under Options in installments, (ii) provisions for the payment
of the purchase price of shares under Options by delivery of
Common Stock, (iii) restrictions on resale or other disposition,
(iv) provisions for compliance with federal or state securities
laws and stock exchange requirements, (v) understandings or
conditions regarding participants' employment, (vi) provisions
for making the grant of benefits conditional upon an election by
a participant to defer payment of a portion of his salary, (vii)
provisions for giving a participant a choice between two
benefits or a combination of benefits and (viii) provisions for
awarding benefits in any combination or combinations.
At present, it is anticipated that the Administrator will award
Stock Options, Restricted Shares, Stock Appreciation Rights and
Formula Price Shares for those officers and employees it
designates. No benefits have yet been awarded under the
Incentive Stock Plan and none will be awarded prior to
Shareholder approval of the Incentive Stock Plan. No more than
50,000 shares may be awarded in any calendar year to an officer
who for such calendar year is the chief executive officer or one
of the four highest compensated officers, as determined for
reporting under the Securities Exchange Act. Except as stated
above, the Incentive Stock Plan does not provide for any maximum
number of shares which may be awarded to any one participant.
In view of the discretionary authority vested in the
Administrator, it is impossible to estimate the number of shares
that will be granted or optioned to any individual or group of
individuals over the life of the Incentive Stock Plan. As of
February 1, 1994, approximately 656 employees were eligible to
participate in the Incentive Stock Plan.
Stock Options ... Two types of stock options (the "Options") may
be awarded by the Administrator under the Incentive Stock Plan:
Incentive Stock Options and Non-Qualified Stock Options. An
Incentive Stock Option entitles the participant to purchase
shares of Common Stock at an option price, determined by the
Administrator, of not less than the fair market value of the
shares on the date of the grant. A Non-Qualified Stock Option
entitles the participant to purchase shares of Common Stock at
an option price, determined by the Administrator, of not less
than 50% of the fair market value of the shares on the date of
the grant.
16
Each Option will be evidenced by an Option agreement containing
such terms and conditions consistent with the Incentive Stock
Plan that are approved by the Administrator. Option agreements
may provide for the exercise of Options in whole or in part from
time to time during the term of the Option, or in such
installments and at such times as the Administrator may
determine. Options granted under the Plan are non-transferable
and nonassignable by the participant other than by will or by
the laws of descent and distribution and are exercisable during
his lifetime only by him. No Option may be exercised after the
expiration of its term. The Option exercise price is payable in
full upon exercise of an Option. No participant shall have any
of the rights or privileges of a shareholder of the Company with
respect to shares issuable upon exercise of an Option until
certificates representing such shares have been issued and
delivered to the participant.
Several additional conditions apply to the award of Incentive
Stock Options. The aggregate fair market value, determined as
of the date of the grant, of the shares of Common Stock covered
by an Incentive Stock Option granted to any participant that
become exercisable for the first time in any calendar year shall
not exceed $100,000 (or any other maximum applicable to
Incentive Stock Options as may be in effect from time to time
under the Internal Revenue Code of 1986 as amended). The
maximum term of an Incentive Stock Option shall be 10 years from
the date it was granted and no Incentive Stock Option shall be
awarded after the day preceding the tenth anniversary of the
effective date of the Incentive Stock Plan.
Restricted Shares ... The Administrator may award Restricted
Shares to any participant in the Incentive Stock Plan. Each
participant who is awarded Restricted Shares must enter into an
agreement containing such terms and conditions, including any
consideration to be paid by a participant for the Restricted
Shares (which consideration may be solely prior services of the
participant), as are permitted by the Plan and as may be
approved by the Administrator. Restricted Shares awarded to a
participant may not be transferred or encumbered during a
restricted period beginning on the date of the award and ending
on such later date designated by the Administrator at the time
of the award. The shares may be forfeited upon the occurrence
of certain events, such as voluntary termination of employment,
as specified in the agreement. The participant is entitled to
delivery of the certificate for the Restricted Shares only upon
expiration of the restricted period. During the restricted
period, the participant will have most of the rights and
privileges of a shareholder, including the right to receive
dividends and the right to vote the Restricted Shares.
Formula Price Shares ... The Administrator may award Formula
Price Shares to any participant in the Incentive Stock Plan.
Each Formula Price Share will be evidenced by a Formula Price
Share agreement containing such terms and conditions consistent
with the terms of the Incentive Stock Plan that are approved by
the Administrator. Formula Price Shares will be subject to the
Company's right of first refusal, on terms and conditions
determined by the Administrator, to purchase such shares. Each
participant receiving an award of a Formula Price Share will pay
an amount for such share of not less than 50% of the fair market
value, as determined as of the date the Formula Price Share is
awarded, of a share of Common Stock, the transferability of
which is not restricted in any way. Holders of Formula Price
Shares may have, subject to the Company's right of first
refusal, all of the rights and privileges of shareholders,
including the right to receive dividends and the right to vote
the Formula Price Shares.
17
Stock Appreciation Rights ... The Administrator may grant Stock
Appreciation Rights to any participant in the Incentive Stock
Plan. A Stock Appreciation Right entitles the participant to
receive, upon exercise, an amount in cash or Common Stock
measured in whole or in part by the appreciation in the Common
Stock, if any, between the date of grant and the date of
exercise. Each Stock Appreciation Right will be evidenced by a
Stock Appreciation Right agreement containing such terms and
conditions consistent with the Incentive Stock Plan that are
approved by the Administrator. The Stock Appreciation Right
agreement may limit the maximum amount of appreciation taken
into account under a Stock Appreciation Right.
Amendment and Termination ... The Board of Directors may
terminate or amend the Incentive Stock Plan at any time or from
time to time without shareholder approval, including amendments
that enlarge the type and value of benefits available under the
Incentive Stock Plan. However, the Board of Directors may not,
without shareholder approval, increase the maximum number of
shares that may be issued under the Incentive Stock Plan (except
for appropriate adjustments as stated below), and may not make
amendments required to be approved by shareholders pursuant to
federal income tax or securities laws.
If any change is made in the shares of common stock of the
Company by reason of any merger, consolidation, reorganization,
recapitalization, stock dividend, split up, combination of
shares, exchange of shares, change in corporate structure or
otherwise, the Administrator shall make appropriate adjustments
to the kind and maximum number of shares subject to the
Incentive Stock Plan and the kind and number of shares and price
per share of stock subject to each outstanding benefit. Any
shares received by participants with respect to any benefit
shall be subject to the same restrictions applicable to
Restricted Shares, Formula Price Shares or shares obtained upon
the exercise of an Option or a Stock Appreciation Right,
whichever are applicable. No fractional shares shall be issued
under the Plan on account of any such adjustment, and rights to
shares shall be limited after such an adjustment to the lower
full share.
Federal Tax Consequences ... A participant will not realize any
income, nor will the Company be entitled to a deduction, at the
time an Incentive Stock Option is granted. If a participant
does not dispose of the shares acquired on the exercise of an
Incentive Stock Option within one year after the transfer of
such shares to him and within two years from the date the
Incentive Stock Option was granted to him, for federal income
tax purposes: (a) the participant will not recognize any income
at the time of exercise of his Incentive Stock Option; (b) the
amount by which the fair market value (determined without regard
to short swing profit restrictions) of the shares at the time of
exercise exceeds the exercise price is an item of tax preference
subject to the alternative minimum tax on individuals; and (c)
the difference between the Incentive Stock Option price and the
amount realized upon sale of the shares of the participant will
be treated as long-term capital gain or loss. The Company will
not be entitled to a deduction upon the exercise of an Incentive
Stock Option.
Except in the case of a disposition following the death of a
participant and certain other very limited exceptions, if the
stock acquired pursuant to an Incentive Stock Option is not held
for the minimum periods described above, the excess of the fair
market value of the stock at the time of exercise over the
amount paid for the stock generally will be taxed as ordinary
income to the participant in the year of disposition. The
Company is generally entitled to a deduction for federal income
tax purposes at the time, and in the amount in which income is
taxed to the
18
participant as ordinary income by reason of the sale of stock
acquired upon the exercise of an Incentive Stock Option.
A participant will not realize any income at the time a Non-
Qualified Stock Option or a Stock Appreciation Right is granted,
nor will the Company be entitled to a deduction at that time.
Upon exercise of a Non-Qualified Stock Option or Stock
Appreciation Right, the participant will recognize ordinary
income (a) in the case of an exercise of a Non-Qualified Stock
Option (whether the Non-Qualified Stock Option price is paid in
cash or by the surrender of previously owned common stock), in
an amount equal to the difference between the option price and
the fair market value of the shares to which the Non-Qualified
Stock Option pertains, and (b) in the case of an exercise of a
Stock Appreciation Right, in an amount equal to the sum of the
fair market value of the shares and any cash received on the
exercise. In the event that a participant cannot sell shares
acquired on exercise of a Non-Qualified Stock Option or Stock
Appreciation Right without incurring liability under Section
16(b) of the Securities Exchange Act of 1934, the taxable event
described above will be delayed until six months after
acquisition of the shares, or the first day on which the sale of
such property no longer subjects the person to suit under
Section 16(b) of the Securities Exchange Act of 1934, whichever
is earlier. The Company is generally entitled to a tax
deduction in an amount equal to the amount of ordinary income
realized by the participant.
A participant generally will not recognize income for federal
income tax purposes at the time Restricted Stock is awarded to
him. An amount equal to the fair market value of Restricted
Stock at the time the restrictions lapse less the cost of the
shares, if any, generally is includable in gross income of the
participant for the year in which the restrictions lapse. Gain
or loss realized upon disposition of Restricted Stock after the
restrictions lapse will be taxed as capital gain or loss. A
participant's basis in the stock is equal to the cost of the
shares, if any, plus the amount includable in the gross income
of the participant when the restrictions lapse.
A participant may elect to include in his gross income the fair
market value of the Restricted Stock on the date of the
acquisition; provided such an election is made within 30 days of
such acquisition.
The Company is generally entitled to a deduction at the time and
in the amount income is included in the gross income of the
participant. Dividends received by the participant on
Restricted Stock during the Restricted Period are taxed to the
participant as compensation and are deductible by the Company.
However, if the participant elects to have the value of the
Restricted Stock includable in his gross income before the end
of the Restricted Period, dividends on such shares after the
taxable event will not be deductible by the Company. If a
participant forfeits previously taxed Restricted Stock, the
Company is required to include in income the deductions it
claimed with respect to such Restricted Stock.
Under the recently enacted Omnibus Reconciliation Act of 1993
(the "Act"), certain compensation payments in excess of $1
million are not deductible by the Company for Federal Income Tax
purposes. The limitation on deductibility applies with respect
to that portion of a compensation payment for a taxable year in
excess of $1 million to either the chief executive officer of
the corporation or any one of the other four highest paid
executives. Certain performance-based compensation is not
subject to the cap on deductibility. Stock options can qualify
for this performance-based exception, but only if they are
granted at fair market value,
19
the total number of shares that can be granted to an executive for
any period is stated in the Plan and shareholder and Board
approval is obtained.
A participant generally will not recognize income for federal
income tax purposes at the time Formula Price Shares are
awarded. A participant will recognize long or short term
capital gain (excess of sale proceeds over price paid for stock)
on the sale of shares, depending on the holding period of the
shares. The Company will not be allowed a deduction for federal
income tax purposes in connection with either the award of
Formula Price Shares to a participant, or a sale of such shares
by a participant.
The last reported sale price of the Company's Common Stock on
the New York Stock Exchange on March 10, 1994, was $26.25.
Your Board of Directors recommends a vote "FOR" this proposal 3.
PROPOSAL 4:
TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE
AMENDMENTS TO THE BALDOR ELECTRIC COMPANY 1989 STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS TO INCREASE THE NUMBER OF
SHARES AVAILABLE UNDER THE PLAN FROM 270,000 TO 420,000 SHARES,
TO EXTEND THE DURATION OF SUCH PLAN FROM 1996 TO 2003,
AND TO MAKE THE EXERCISE PRICE FOR ALL OPTIONS AWARDED
DURING THE EXTENSION PERIOD EQUAL TO THE FAIR MARKET VALUE
OF THE COMMON STOCK ON THE DATE OF THE GRANT
On February 7, 1994, the Board of Directors of the Company
adopted an amendment to the 1989 Stock Option Plan for Non-
Employee Directors (the "1989 Plan") and directed that it be
submitted to the shareholders for their approval. A copy of the
amendment to the 1989 Plan is attached to this Proxy Statement
as Exhibit "B". The amendment would: (i) provide for an
increase in the number of shares of the Company's Common Stock
available for issuance upon exercise of options awarded under
the 1989 Plan by 150,000 shares; (ii) extend the termination
date of the 1989 Plan from the day following the Annual Meeting
of Shareholders in 1996 to the day following the Annual Meeting
of Shareholders in 2003; and (iii) make the exercise price for
all options awarded during the extension period equal to the
fair market value of the Common Stock on the date of the grant.
The amendment will become effective upon approval by the holders
of at least a majority of the shares of the Company's Common
Stock present in person or by proxy at the 1994 Annual Meeting
and entitled to vote.
General ... The purpose of the 1989 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. The purpose of the proposed
amendment to the 1989 Plan is to increase the number of
available shares and to extend the duration of the 1989 Plan so
as to enable the Company to continue the 1989 Plan in future
years. Under the 1989 Plan, which became effective in August
1989, an aggregate
20
of 150,000 shares of Common Stock were initially made available
for issuance upon the exercise of options granted under the 1989
Plan (subject to adjustment for, among other reasons, stock
splits, stock dividends and changes in the capitalization of the
Company). After adjustment for two subsequent stock dividends,
that number is now 270,000 shares of Common Stock. If any option
granted under the 1989 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 1989 Plan
without being charged against the limitation of the number of
authorized shares under the 1989 Plan. The shares currently
authorized have been and, if Proposal 4 is approved, the
additional shares will be registered under the Securities Act of
1933, as amended.
Only the directors of the Company who are not employees of the
Company or any of its affiliates are eligible to participate in
the 1989 Plan. The 1989 Plan is administered by a committee of
non-participating directors (the "Committee") who are authorized
to: (i) interpret the 1989 Plan; (ii) establish, amend and
rescind any rules and regulations relating to the 1989 Plan and
(iii) to make all other determinations necessary or advisable
for the administration of the 1989 Plan. However, the Committee
has no discretion with respect to the selection of directors to
receive options, the number of shares subject to the 1989 Plan
or any grant thereunder, or the purchase price for such shares
and shall have no authority to take any action or make any
determination that would materially increase the benefits
accruing to participants under the 1989 Plan. The determination
of the Committee in the administration of the 1989 Plan is final
and conclusive and binding upon all persons, including, without
limitation, the Company, its shareholders and persons granted
options under the 1989 Plan. The Secretary of the Company is
authorized to implement the 1989 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 of the 1989
Plan.
Stock Option Grants ... All options awarded pursuant to the 1989
Plan are evidenced by an option agreement in such form as the
Committee may from time to time approve and which shall comply
with the terms of the 1989 Plan.
Currently options to purchase 2,700 shares of Common Stock
(which may be adjusted as indicated above) have been and will be
granted to each non-employee director on the last trading day of
stock on the New York Stock Exchange in each January through
1996 (the "Annual Grant"). Options awarded pursuant to Annual
Grants have been and will become exercisable in five equal
installments commencing on the first anniversary of the date of
the grant and annually thereafter. The exercise price per share
of Common Stock issuable upon exercise of options awarded
pursuant to Annual Grants has been and will be equal to the fair
market value per share on the date of grant for 60% of the
shares and has been and will be 50% of the fair market value per
share on the date of grant for 40% of the shares.
If the amendment to the 1989 Plan is approved by the
shareholders at this Annual Meeting, Annual Grants to purchase
2,700 shares of Common Stock (which may be adjusted as indicated
above) will continue to be granted on an annual basis through
2003. The exercise price per share of Common Stock issuable
upon exercise of options awarded from January 1997 through 2003
will be equal to the fair market value per share on the date of
grant.
21
The 1989 Plan also currently provides for an initial option
grant to purchase 10,800 shares of Common Stock to any new
director (the "New Director Grant"). The New Director Grants
have been and will be made on the first trading day of July of
the year in which such person is first elected or appointed as a
director of the Company. Options awarded pursuant to New
Director Grants have been and will become exercisable in five
equal installments with the first installment maturing and
becoming exercisable on May 31 of the year following the award
of the New Director Grant and each subsequent installment of
such grant shall mature and become exercisable on the last day
of each subsequent January. The exercise price per share of
Common Stock issuable upon exercise of options awarded pursuant
to a New Director Grant has been and will be equal to the fair
market value per share on the date of grant for 75% of the
shares and has been and will be 50% of the fair market value per
share on the date of grant for 25% of the shares.
If the amendment to the 1989 Plan is approved by the
shareholders at this Annual Meeting, New Director Grants to
purchase 10,800 shares of Common Stock (which may be adjusted as
indicated above) will continue to be granted. Beginning in 1997
the exercise price per share of Common Stock issuable upon
exercise of options awarded pursuant to a New Director Grant
will be equal to the fair market value per share on the date of
grant.
Options awarded pursuant to Annual Grants and New Director
Grants may be exercised only upon payment to the Company in
cash, Common Stock of the Company, or a combination thereof, for
the full exercise price of the option. All such options expire
ten years after the date they were granted, or earlier under
certain conditions as set forth in the 1989 Plan.
In the event of termination of service on the Board by a non-
employee director, each of the then outstanding options
previously awarded to that individual will continue to mature
and become exercisable in accordance with the terms of the 1989
Plan and the holder may exercise the matured installments at any
time within five years after such termination of service on the
Board, but in no event after the expiration date of the term of
the option. In the event of the death of the non-employee
director, each of the then outstanding options of such
individual 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
person dies within five years following termination of service
on the Board, such option shall only be exercisable for two
years after the individual's death or five years after
termination of service on the Board, whichever is longer, or
until the expiration date of the term of the option, if earlier.
Each option awarded under the 1989 Plan and all rights
thereunder are non-assignable and non-transferable other than by
will or by the laws of descent or distribution and are
exercisable during the person's lifetime only by the person or
the person's guardian or legal representative. Neither the
1989 Plan, nor the granting of one or more options thereunder,
shall constitute or be evidence of any agreement that the
individual has the right to continue as a director for any
period of time or at any particular rate of compensation.
Further, no non-employee director shall have any rights as a
shareholder of the Company with respect to the shares issuable
upon exercise of options awarded under the 1989 Plan until the
issuance of a stock certificate 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.
22
New Plan Benefits
Name and Position Dollar Value ($) (1) Number of Options
Jefferson W. Asher, Jr. 18,900
Fred C. Ballman 18,900
O. A. Baumann 18,900
Robert J. Messey 18,900
Robert L. Proost 18,900
Willis J. Wheat 18,900
All current Directors who are not
executive officers, as a group 113,400
_______________
(1) The current dollar value of option grants is not presently determinable.
Federal Tax Consequences ... All of the options granted under
the 1989 Plan have been and shall 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. If the holder is subject to Section 16(b)
of the Securities Exchange Act of 1934 at the time of exercise,
under the rules presently in effect, the date for recognition
and determination of ordinary income attributable to the
exercise would be delayed for six months unless he has elected
to be taxed as of the date of exercise.
Amendment and Termination ... 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, the Administrator shall make appropriate
adjustments to the aggregate number and kind of shares under the
1989 Plan and to the kind and number of shares and price per
share of options outstanding.
The Board of Directors may suspend or terminate the 1989 Plan or
revise or amend it. However, any revision or amendment that
changes the election or eligibility of directors to receive
options, the number of shares subject to the 1989 Plan or any
option thereunder, the exercise price for options, or that
materially increases benefits under the 1989 Plan will require
the approval of the shareholders of the Company.
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 10, 1994, was $26.25.
Your Board of Directors recommends a vote "FOR" this proposal 4.
23
INDEPENDENT AUDITORS
The Company is presently utilizing the services of Ernst &
Young, who have been the Company's independent auditors since
1972. The Audit Committee and the Board of Directors will
consider the reappointment of Ernst & Young as the Company's
independent auditors for the fiscal year ending December 31,
1994, at the Company's next regular Board of Directors meeting
in May. The Company has no reason to believe that Ernst & Young
will not be reappointed. Representatives of Ernst & Young 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.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the 1995
Annual Meeting must be received by the Company at its principal
executive offices no later than December 5, 1994, in order to be
considered for inclusion in the proxy materials.
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.
April 4, 1994
24
EXHIBIT "A"
BALDOR ELECTRIC COMPANY
1994 INCENTIVE STOCK PLAN
1. Purpose.
The purpose of the 1994 Incentive Stock Plan (the "1994
Plan") is to aid in maintaining and developing strong
management capable of assuring the future success of Baldor
Electric Company (the "Company"). The 1994 Plan is
designed to secure for the Company and its shareholders the
benefits inherent in common stock ownership by the
employees of the Company and its subsidiaries, who are
largely responsible for the Company's future growth and
continued financial success; and to afford such persons the
opportunity to obtain or increase a proprietary interest in
the Company on a favorable basis and, thereby, to have an
opportunity to share in its success.
2. Definitions.
As used in this 1994 Plan, the following words shall have
the following meanings:
(a) "Board of Directors" means the Board of Directors of
the Company;
(b) "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall
include that section and any comparable section or
sections of any future legislation that amends,
supplements or supersedes that section.
(c) "Common Stock" means common stock of the Company;
(d) "Disinterested Person" shall have the meaning set
forth in Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934, as amended, and shall include
(1) the board of directors if each member is a
Disinterested Person; and (2) a committee of two or
more directors if all the members of the committee are
Disinterested Persons;
(e) "Eligible Employee" means a salaried employee of the
Company or a Subsidiary, including a director of the
Company or a Subsidiary who is a salaried employee of
the Company or a Subsidiary;
(f) "Formula Price Share" means a share of Common Stock
subject to the Company's first right of refusal upon
such terms and conditions determined by the
Administrator in accordance with Paragraph 6;
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(g) "Incentive Stock Option" means an option to purchase
shares of Common Stock at the times and at the price
determined by the Administrator in accordance with
Paragraph 6 which is intended to qualify as an
incentive stock option as defined in Section 422 of
the Code;
(h) "Nonqualified Stock Option" means an option to
purchase shares of Common Stock at the times and at
the price determined by the Administrator in
accordance with Paragraph 6 which is not intended to
qualify as an Incentive Stock Option;
(i) "Option" means an Incentive Stock Option or
Nonqualified Stock Option;
(j) "Restricted Share" means a share of Common Stock that
is subject to certain restrictions on the disposition
of the share and rights of the Company to reacquire
the share upon the occurrence of certain events during
a specified period as determined by the Administrator
in accordance with Paragraph 6;
(k) "Stock Appreciation Right" means a right the holder of
which is entitled to receive upon surrender of the
right an amount of cash or Common Stock, measured in
whole or in part by the Common Stock's appreciation in
value during a specified period and as determined by
the Administrator in accordance with Paragraph 6;
(l) "Subsidiary" means any corporation, partnership, joint
venture or business trust, fifty percent (50%) or more
of the control of which is owned, directly or
indirectly, by the Company; provided that for the
purpose of Incentive Stock Options "Subsidiary" shall
have the same meaning as the term "subsidiary
corporation," as defined in Section 425 of the Code;
provided further that "Subsidiary" includes any entity
or arrangement that first becomes described in this
subparagraph after the effective date of this 1994
Plan.
(m) "Reporting Person" means any person who is the
beneficial owner, directly or indirectly, of more than
ten percent (10%) of any class of equity securities
registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended; any director or
officer of the issuer of such securities; and any
person specified in Section 17(a) of the Public
Utility Holding Company Act of 1935 or Section 30(f)
of the Investment Company Act of 1940.
3. Administration.
(a) General. The 1994 Plan shall be administered by the
Board of Directors or by a committee or committees
appointed by the Board of Directors as Administrator
of the 1994 Plan. The Board of Directors may appoint
a committee to act as Administrator with respect to
one or more classes of employees, and another
committee or committees to act as Administrator with
respect to other classes of employees; or appoint a
committee to serve as Administrator with respect to
one category of benefits, and another committee to
serve as Administrator with respect to a different
category of benefits.
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(b) Reporting Persons. Anything in subparagraph (a) of
this Paragraph 3 to the contrary notwithstanding,
selection of Reporting Persons for participation in
the 1994 Plan and decisions concerning the timing,
pricing, and amount of a grant or award to Reporting
Persons must be made solely by a committee of two or
more directors, each of whom is a Disinterested
Person.
(c) Administrator. References throughout this 1994 Plan
to "the Administrator" shall refer to (i) the
administrative committee described in subparagraph (b)
of this Paragraph 3, with respect to selection of
Reporting Persons for participation in the 1994 Plan
and decisions concerning the timing, pricing, and
amount of a grant or award to Reporting Persons; and
(ii) the Board of Directors or the committee or
committees described in subparagraph (a) of this
Paragraph 3, with respect to all other administrative
functions. Subject to the provisions of this 1994
Plan, the Administrator shall have exclusive authority
to interpret and administer the 1994 Plan, to
establish appropriate rules relating to the 1994 Plan,
to select persons to receive awards under the 1994
Plan, to grant Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights, Restricted
Shares and Formula Price Shares in accordance with the
1994 Plan, to delegate its authority and duties under
the 1994 Plan and to take all such steps and make all
such determinations in connection with the 1994 Plan
and the Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted Shares
and Formula Price Shares as it may deem necessary or
advisable.
4. Eligibility.
The Administrator shall from time to time determine and
designate Eligible Employees who shall receive awards under
the 1994 Plan and the number of Incentive Stock Options,
Nonqualified Stock Options, Restricted Shares, Formula
Price Shares and Stock Appreciation Rights to be awarded to
each such Eligible Employee. In making any such award, the
Administrator may take into account the nature of services
rendered by an Eligible Employee, the capacity of the
Eligible Employee to contribute to the success of the
Company, and other factors that the Administrator may
consider relevant.
5. Types of Benefits.
Benefits that may be awarded under the 1994 Plan include
(a) Incentive Stock Options; (b) Nonqualified Stock
Options; (c) Restricted Shares; (d) Formula Price Shares;
and (e) Stock Appreciation Rights, as described in this
1994 Plan ("Benefits").
6. Award of Benefits.
(a) General. The Administrator may from time to time
award Options, Restricted Shares, Formula Price Shares
or Stock Appreciation Rights, or any combination
thereof, to Eligible Employees. Each Eligible
Employee receiving an award under the 1994 Plan shall
enter into an agreement with the Company in the form
specified
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by the Administrator agreeing to the terms and
conditions of the award and such other consistent with
the 1994 Plan as the Administrator in its sole
discretion shall determine.
(b) Administrator's Discretion. The award of any Benefit
under the 1994 Plan may be subject to any provisions
(whether or not applicable to the Benefit awarded to
any other similarly situated Eligible Employee) as the
Administrator determines appropriate consistent with
the provisions specifically provided for in the 1994
Plan, including, without limitation, (i) provisions
for the purchase of common shares under Options in
installments, (ii) provisions for the payment of the
purchase price of shares under Options by delivery of
Common Stock, (iii) restrictions on resale or other
disposition, (iv) such provisions as may be
appropriate to comply with federal or state securities
laws and stock exchange requirements, (v)
understandings or conditions regarding the Eligible
Employee's employment, (vi) provisions for making the
grant of Benefits conditional upon an election by an
Eligible Employee to defer payment of a portion of his
salary, (vii) provisions for giving an Eligible
Employee a choice between two Benefits or combinations
of Benefits, and (viii) provisions for awarding
Benefits in any combination or combinations. Any
election by a Reporting Person pursuant to a provision
described in subsection (vi) of this subparagraph 6(b)
or any choice given to a Reporting Person described in
subsection (vii) of this subparagraph 6(b) shall be
made by the Reporting Person prior to the award of
Benefits by the Administrator.
(c) Individual Limit. Notwithstanding anything to the
contrary in this 1994 Incentive Stock Plan, the
maximum number of shares that may be awarded in any
calendar year to a "covered employee" for such year,
as defined in Section 162(m) of the Code, shall not
exceed 50,000 shares.
(d) Stock Options. Each agreement evidencing an Option by
appropriate language shall include the substance of
all of the provisions as set forth in subparagraphs
(i) through (iii) below, and shall further contain the
provisions of subparagraphs (iv) through (vi) if the
Option is an Incentive Stock option.
(i) The purchase price of the shares of stock covered
by each Option shall be determined by the
Administrator, but in the case of Incentive Stock
Options shall not be less than one hundred percent
(100%) of the fair market value of such stock, as
determined by the Administrator in its sole
discretion, on the date the Incentive Stock Option
is granted and, in the case of Nonqualified Stock
Options, shall not be less than fifty percent (50%)
of the fair market value of such stock, as
determined by the Administrator in its sole
discretion, on the date the Nonqualified Stock
Option is granted.
(ii) The purchase price shall be payable in full upon
exercise of the Option.
(iii) An Option shall not be transferable by the individual
to whom granted except by will or by the laws of
descent and distribution and such an Option may be
exercised during the lifetime of such individual only
by such individual.
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(iv) The aggregate fair market value (determined by the
Administrator in its sole discretion as of the time
an Incentive Stock Option is granted) of the shares
of Common Stock covered by an Incentive Stock Option
granted to an Eligible Employee under the 1994 Plan or
any plan of a parent corporation or Subsidiary which
become exercisable for the first time during any
calendar year shall not exceed one hundred thousand
dollars ($100,000) or such other maximum applicable to
Incentive Stock Options as may be in effect from time
to time under the Code.
(v) The maximum term of an Incentive Stock Option shall
be ten (10) years from the date it was granted.
(vi) No Incentive Stock Option shall be awarded after the
day preceding the tenth anniversary of the effective
date of the 1994 Plan.
No person entitled to exercise any option granted
under the 1994 Plan shall have any of the rights or
privileges of a shareholder of the Company with
respect to shares issuable upon exercise of such
Option until certificates representing such shares
shall have been issued and delivered to such
person.
(e) Stock Appreciation Rights. A Stock Appreciation Right
may be satisfied in cash or in shares of Common Stock,
as determined by the Administrator. The agreement
evidencing a Stock Appreciation Right may limit the
maximum amount of appreciation in the value of Common
Stock to be taken into account under a Stock
Appreciation Right.
(f) Restricted Shares. The consideration to be paid by an
Eligible Employee for a Restricted Share shall be
determined by the Administrator in its sole discretion
and may be solely the prior services of the Eligible
Employee. Restricted Shares awarded to Eligible
Employees may not be sold, transferred, pledged or
otherwise encumbered during a period (the "Restricted
Period") designated by the Administrator at the time
of the award. The Eligible Employee shall have most
of the rights and privileges of a shareholder with
respect to Restricted Shares awarded to him, including
the right to receive dividends and the right to vote
such Restricted Shares.
An Eligible Employee shall not be entitled to delivery
of the certificate until the expiration of the
Restricted Period applicable to such Restricted Shares.
(g) Formula Price Shares. Formula Price Shares shall be
subject to the Company's first right of refusal to
purchase the Formula Price Shares. The Company's
first right of refusal shall be on the terms and
conditions determined by the Administrator in its sole
discretion. Each Eligible Employee receiving an award
of a Formula Price Share shall pay as consideration
therefor an amount not less than fifty percent (50%)
of the fair market value of a share of Common Stock as
determined by the Administrator in its sole discretion
as of the date the Formula Price Share is awarded.
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7. Shares Subject to 1994 Plan.
Subject to the provisions of Paragraph 8 (relating to
adjustment for changes in capital stock), there is hereby
reserved One Million (1,000,000) shares of Common Stock.
The shares hereby reserved are in addition to the shares
previously reserved under the Company's Incentive Stock
Option Plan and 1987 Incentive Stock Plan. If there is a
lapse, expiration, termination or cancellation of any
Benefit without the issuance of shares, or if shares are
issued under any Benefit and later are reacquired by the
Company pursuant to rights reserved on issuance, the shares
subject to or reserved for such Benefit may again be used
for Benefits authorized under this 1994 Plan; provided that
in no event may the number of shares of Common Stock issued
under this 1994 Plan exceed One Million (1,000,000).
8. Adjustment Upon Changes in Stock.
If any change is made in the shares of common stock of the
Company by reason of any merger, consolidation,
reorganization, recapitalization, stock dividend, split up,
combination of shares, exchange of shares, change in
corporate structure, or otherwise, appropriate adjustments
shall be made by the Administrator to the kind and maximum
number of shares subject to the 1994 Plan and the kind and
number of shares and price per share of stock subject to
each outstanding Benefit. Any shares received by an
Eligible Employee with respect to any Benefit shall be
subject to the same restrictions applicable to such
Restricted Shares, Formula Price Shares or shares obtained
upon the exercise of an Option or a Stock Appreciation
Right, whichever are applicable. No fractional shares of
stock shall be issued under the 1994 Plan on account of any
such adjustment, and rights to shares always shall be
limited after such an adjustment to the lower full share.
9. Amendment of the 1994 Plan.
The Board of Directors may at any time amend the 1994 Plan,
provided that the Board may not, without the approval
(within twelve months before or after the date of such
change) of the holders of a majority of the outstanding
shares entitled to vote of the Company: (a) increase the
maximum number of shares of Common Stock that may be issued
under the 1994 Plan, except as may be permitted under the
adjustment provisions of Paragraph 8, or (b) adopt any
other amendment for which shareholder approval is required
by federal income tax or securities laws. The Board of
Directors may not alter or impair any Benefit previously
granted under the 1994 Plan without the consent of the
person to whom the Benefit was granted.
10. Termination of the 1994 Plan.
The Board of Directors may terminate or suspend the 1994
Plan at any time. No Benefit shall be awarded after
termination of the 1994 Plan.
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Rights and obligations under a Benefit awarded while the
1994 Plan is in effect shall not be altered or impaired by
termination or suspension of the 1994 Plan except by
consent of the person to whom the Benefit was awarded.
11. Definitions and Rules of Construction.
The terms of the 1994 Plan shall be construed in accordance
with the laws of the state of Missouri provided that the
terms of the 1994 Plan as they relate to Incentive Stock
Options shall be construed first in accordance with the
meaning under and in a manner that will result in the 1994
Plan satisfying the requirements of the provisions of the
Code governing Incentive Stock Options.
13. Nontransferability.
Each Benefit other than Formula Price Shares (including
Restricted Stock only during the Restricted Period) granted
under this 1994 Plan shall not be 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.
14. Effective Date.
The 1994 Plan shall become effective as of the date it is
adopted by the Board of Directors subject only to approval
by the Company's shareholders within twelve (12) months
after the adoption of the 1994 Plan by the Board of
Directors.
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EXHIBIT "B"
BALDOR ELECTRIC COMPANY
FIRST AMENDMENT TO THE BALDOR ELECTRIC COMPANY
1989 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Baldor Electric Company (the "Company") adopted the Baldor
Electric Company 1989 Stock Option Plan for Non-Employee
Directors ("Plan") effective at the 1990 Annual Meeting of
Shareholders.
The Company now wishes to amend the Plan to increase the number of
shares available for issuance, to amend the formula for awarding
shares after 1996, and to extend the duration of the Plan.
NOW, THEREFORE, the Baldor Electric Company 1989 Stock Option
Plan for Non-Employee Directors is hereby amended as follows:
1. Section 4 of the Plan is hereby amended by increasing the
number of shares available for issuance upon exercise of
options granted under the Plan from an aggregate of 270,000
shares of Company common stock ("Stock") (as adjusted for
stock splits) to an aggregate of 420,000 shares of Stock.
2. Paragraphs "a" and "b" of Section 6 of the Plan are hereby
amended to read in its entirety as follows:
6. Terms, Conditions, and Form of Options.
Each option granted under this Plan shall 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 to purchase 2,700 shares
of Stock (as adjusted pursuant to Section 7) shall be
granted automatically to each Eligible Director on the
last trading day of Stock on the New York Stock
Exchange in each January, 1995 through 2003 ("Annual
Grants"). In addition, options to purchase 10,800
shares of Stock (as adjusted pursuant to Section 7)
shall be granted to each new Eligible Director ("New
Director Grant") on the first trading day of July of
the year in which such New Eligible Director is first
elected or appointed as a director of the Company,
provided, that, if the effective date of such election
or appointment is after July 1 of any given year, the
New Director Grant shall be made as of the first
trading day of the month following such effective
date. Options that are granted after the 1996 Annual
Meeting of Shareholders shall be subject to approval
of this First Amendment to the Plan by shareholders at
the 1994 Annual Meeting of Shareholders.
b. Purchase Price. The purchase price per share of Stock
for which each option is exercisable shall be the
fair market value per share of Stock on the date the
option is granted, which shall be the closing per
share price of the Stock based upon its consolidated
trading as generally reported for New York Exchange
listed
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stocks, except that the purchase price per share for
25% of each New Director Grant and 40% of each Annual
Grant made on or before the 1996 Annual Meeting of
Shareholders, which becomes exercisable each year as
provided in Paragraph (c) of Section 6 below, shall be
50% of the fair market value per share on the date any
such option is granted. The purchase price per share
of Stock granted after the 1996 Annual Meeting of
Shareholders and the purchase price per share of stock
in excess of the first 270,000 shares (as adjusted for
stock splits) shall be the fair market value per share
of Stock on the date the option is granted, determined
as described above.
3. Section 11 of the Plan is hereby amended to read in its
entirety as follows:
11. Effective Date and Duration of Plan
This First Amendment shall become effective immediately
following approval by the shareholders at the 1994 Annual
Meeting of Shareholders. Options granted in excess of
the initial 270,000 shares authorized (as adjusted for
stock splits), if any, are contingent upon approval of the
Plan at such Annual Meeting. The period during which
option grants shall be made under the Plan shall terminate
on the day following the 2003 Annual Meeting of
Shareholders (unless the Plan is extended or terminated
at an earlier date by shareholders) but such termination
shall not affect the terms of any then outstanding
options.
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