SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BALDOR ELECTRIC COMPANY
-------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
BALDOR ELECTRIC COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 3, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Baldor Electric Company, a
Missouri corporation, will be held at the Holiday Inn, 700 Rogers
Avenue, Fort Smith, Arkansas, on Saturday, May 3, 1997, 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 Baldor
Electric Company 1994 Incentive Stock Plan; and
3. 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
19, 1997, as the record date for the determination of the
shareholders entitled to notice of, and to vote at, the Annual
Meeting and all adjournments thereof.
By Order of the Board of Directors
Lloyd G. Davis
Secretary
March 27, 1997
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 3, 1997, at
10:30 a.m, local time. 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 the stock plan amendment. 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 72908. This Proxy
Statement and the accompanying form of proxy are first being sent
to shareholders on or about March 27, 1997.
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
Holders of record of the Company's Common Stock, par value $0.10
per share (the "Common Stock") at the close of business on March
19, 1997, will be entitled to notice of and to vote at the Annual
Meeting. There were 26,361,623 shares of Common Stock of the
Company outstanding as of the close of business on March 19,
1997. Each shareholder has one vote per share of Common Stock on
each item of business to be presented for shareholder vote at the
Annual Meeting, except for the election of directors, in which
case cumulative voting is authorized as described 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. Abstentions may be specified on the proposal to
amend the Baldor Electric Company 1994 Incentive Stock Plan
("Proposal 2") but not the election of directors.
-1-
Under Missouri law, the State in which the Company is incorporated, directors
are elected by a plurality of the votes of Common Stock represented in person
or by proxy at a meeting at which a quorum is present. "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.
Passage of Proposal 2, the amendment of the 1994 Incentive Stock Plan
(the "1994 Plan"), requires the approval of the holders of a majority of the
shares of Common Stock present in person or represented by proxy at a meeting
of the shareholders at which a quorum is present. An abstention has the effect
of a vote against Proposal 2.
The Company maintains the Baldor Electric Company Employees' Profit Sharing and
Savings Plan (the "Profit Sharing and Savings Plan"). One of the investment
alternatives for employee-participants is the Baldor Stock Fund. Employee-
participants have the right under the Profit Sharing and Savings Plan to direct
the trustee thereof how to vote the shares of Common Stock that are allocated
to their accounts. The Profit Sharing and Savings Plan requires the trustee to
vote the shares of Common Stock not yet allocated to the accounts of employee-
participants in proportion to the votes cast by employee-participants.
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 1997, each to serve for a term of three years.
In the election of directors, each shareholder is entitled to vote cumulatively.
To vote cumulatively in the election of directors, each shareholder may multiply
the number of shares of Common Stock held by him by the number of directors to
be elected and cast the whole number of votes for one candidate or distribute
them among two or more candidates. There is no condition precedent to the
exercise of these cumulative voting rights.
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 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 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 size
of the Board will be reduced or the proxies will vote for a substitute nominee
designated by the Board of Directors.
-2-
Information Regarding the Nominees for Directors
to be Elected in 1997 for Terms Ending in 2000
O. A. Baumann ... The Company's manufacturer's sales
representative in St. Louis, Missouri, from 1947 to 1987
(retired); Age 75; Present term expires 1997; Director of the
Company since 1961.
John A. McFarland ... President of the Company since November
1996; Executive Vice President - Sales and Marketing of the
Company from August 1996 to November 1996; Vice President - Sales
of the Company from May 1991 to August 1996; Age 46; Present term
expires 1997; Director of the Company since August 1996. (1)
Robert L. Proost ... Corporate Vice President, Treasurer, and
Director of Administration, A.G. Edwards & Sons, Inc., securities
brokerage and investment banking, which has historically provided
investment banking services to the Company; Age 59; Present term
expires 1997; Director of the Company since 1988. (2)(3)
Information Regarding the Directors Who Are Not Nominees
for Election and Whose Terms Continue Beyond 1997
Jefferson W. Asher, Jr. ... Independent Management Consultant
providing assistance to corporations, attorneys, banking
institutions, and other creditors for more than the past five
years; Director of California Beach Restaurants, Inc.; Age 72;
Present term expires 1999; Director of the Company since 1973.
(4)(5)
Fred C. Ballman ... Former Chairman and Chief Executive Officer
of the Company (retired); Age 84; Present term expires 1998;
Director of the Company from 1944 to 1982 and since 1992. (6)
R. S. Boreham, Jr. ... Chairman of the Board of the Company since
1981; Chief Executive Officer of the Company from 1978 through
1992; Director of U.S.A. Truck, Inc.; Age 72; Present term
expires 1998; Director of the Company since 1961. (7)
Robert J. Messey ... Senior Vice President, Chief Financial
Officer, and Director of Sverdrup Corporation, engineering and
architectural firm, since 1993; Partner of Ernst & Young LLP,
international accounting firm, prior to 1993; Age 51; Present
term expires 1999; Director of the Company since 1993. (2)(8)
-3-
R. L. Qualls ... Vice Chairman of the Board of the Company since
November 1996; Chief Executive Officer of the Company since 1993;
President of the Company from 1990 to November 1996; Chief
Operating Officer of the Company from 1991 through 1992; Age 63;
Present term expires 1998; Director of the Company since 1987.
(1)
Willis J. Wheat ... President Emeritus of Oklahoma City
University; Professor of Management and Marketing, Oklahoma City
University, 1987 through 1995; Age 71; Present term expires 1999;
Director of the Company since 1991. (5)(8)
_______________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Chairman of the Stock Option Committee
(4) Chairman of the Audit Committee
(5) Member of the Nominating Committee
(6) Chairman of the Nominating Committee
(7) Chairman of the Executive Committee
(8) Member of the Stock Option Committee
Information About the Board of Directors
and Committees of the Board
Board of Directors ... In addition to its normal
responsibilities, the Board of Directors, as a whole, approves
the executive compensation and administers the 1981 Incentive
Stock Plan (the "1981 Plan"), which has expired except for
options outstanding, and the 1990 Stock Plan for District
Managers (the "1990 Plan"). Under the 1990 Plan, the Board has
the exclusive authority to determine the amount and terms and
conditions of the awards made to each eligible participant.
During the fiscal year ended December 28, 1996 ("fiscal year
1996"), 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 or as set
forth in the Company's Bylaws. The Executive Committee serves as
the Company's compensation committee, by making recommendations
to the Board of Directors, and also administers the 1989 Stock
Option Plan for Non-Employee Directors (the "1989 Plan"), which
has expired except for options outstanding, and the 1996 Stock
Option Plan for Non-Employee Directors (the "1996 Plan"). Both
of these plans relate to non-employee directors. The Executive
Committee is comprised of executive officers of the Company and
those officers are not eligible to participate in these two
plans. The Executive Committee held seven meetings during fiscal
year 1996.
Audit Committee ... The Audit Committee performs the following
functions: assists in the selection of independent auditors,
directs and supervises investigations into matters relating to
-4-
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 is
comprised of non-employee directors and the Committee held three
meetings during fiscal year 1996.
Stock Option Committee ... The Stock Option Committee administers
the Company's 1987 Incentive Stock Plan (the "1987 Plan") and the
1994 Plan, both of which are employee stock plans. Awards can be
made from the plans and the Stock Option Committee has the
exclusive authority to determine which of the eligible employees
are to receive awards and to determine the amount and the terms
and conditions of the awards made to each participant. The Stock
Option Committee is comprised of non-employee directors and this
committee held four meetings during fiscal year 1996.
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
principal address of the proposed nominee, the total number of
shares to be voted for the proposed nominee, the number of shares
held by the nominating shareholder, and the name and residence
address of each notifying or nominating shareholder. The
committee will consider candidates for Board membership proposed
by shareholders who have complied with the aforementioned
procedures. The Nominating Committee is comprised of non-
employee directors, none of whom are currently nominees for
directors to be elected in 1997, and the Committee held two
meetings during fiscal year 1996.
Director Compensation ... During fiscal year 1996, each member of
the Board of Directors who was not a Company employee received
$3,500 per quarter for services as a director. Each director who
is a member of the Audit Committee received an additional $2,700
per quarter as chairman or $1,700 per quarter as a member. Each
director who is a member of the Stock Option Committee received
an additional $700 per quarter during fiscal year 1996. The
Company also maintains the 1989 Plan and the 1996 Plan, both
administered by the Executive Committee. Under the terms of the
1989 Plan, all non-employee directors received an annual option
grant on January 31, 1996, to purchase shares of Common Stock of
the Company, consisting of an option to purchase 2,430 shares
having an exercise price of $20.50 (the fair market value per
share on that date) and an additional option to purchase 1,620
shares having an exercise price of $10.25 (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. All options expire ten years after the grant
date. The 1989 Plan expired in May 1996 except for options then
outstanding and grants from the 1996 Plan were permitted to be
made beginning January 1997.
-5-
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 19, 1997,
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 four other most highly compensated executive officers
for fiscal year 1996, and all executive officers and directors as
a group.
Number of Percent of
Name Shares Class (1)
- ---------------------------------- --------- --------
The Baldor Electric Company
Profit Sharing and Savings Plan 2,752,885 (2) 10.0 %
P. O. Box 2400
Fort Smith, Arkansas 72902
Fred C. Ballman 2,261,329 (3) 8.6 %
P. O. Box 6638
Fort Smith, Arkansas 72906
R. S. Boreham, Jr. 1,273,405 (4) 4.8 %
O. A. Baumann 512,394 (5) 1.9 %
R. L. Qualls 216,249 (6) *
James R. Kimzey 157,907 (7) *
John A. McFarland 154,693 (8) *
Lloyd G. Davis 150,483 (9) *
Jefferson W. Asher, Jr. 48,870 (10) *
Robert L. Proost 41,580 (11) *
Willis J. Wheat 27,540 (12) *
Robert J. Messey 20,482 (13) *
All executive officers and directors
as a group (17 persons) 5,275,381 (14) 19.3 %
-6-
_______________
* Less than 1%.
(1) Percentage is calculated in accordance with Section 13d-
3(d)(1) 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) Based on correspondence received from the Plan's Trustee
dated March 19, 1997, plan participants have sole voting
power and shared investment power over 2,747,528 shares
and shared voting and shared investment power over 5,357
shares.
(3) Shared voting and shared investment power over 2,254,849
shares; includes exercisable options to purchase 6,480
shares.
(4) Shared voting and shared investment power over 87,577
shares; sole voting and sole investment power over
1,026,162 shares; sole voting and shared investment power
over 26 shares in the Company's Profit Sharing and
Savings Plan; includes exercisable options to purchase
159,640 shares.
(5) Shared voting and shared investment power over 475,944
shares; includes exercisable options to purchase 36,450
shares.
(6) Sole voting and sole investment power over 149,300
shares; sole voting and shared investment power over
1,229 shares in the Company's Profit Sharing and Savings
Plan; includes exercisable options to purchase 65,720
shares.
(7) Shared voting and shared investment power over 42,334
shares; sole voting and sole investment power over 2,389
shares; sole voting and shared investment power over
5,564 shares in the Company's Profit Sharing and Savings
Plan; includes exercisable options to purchase 107,620
shares.
(8) Sole voting and sole investment power over 19,424 shares;
shared voting and shared investment power over 13,946
shares; sole voting and shared investment power over
15,408 shares in the Company's Profit Sharing and Savings
Plan; includes exercisable options to purchase 105,915
shares.
(9) Sole voting and sole investment power over 46,300 shares;
sole voting and shared investment power over 12,483
shares in the Company's Profit Sharing and Savings Plan;
includes exercisable options to purchase 91,700 shares.
(10) Sole voting and sole investment power over 35,910 shares;
includes exercisable options to purchase 12,960 shares.
(11) Sole voting and sole investment power over 18,000 shares;
shared voting and shared investment power over 4,950
shares; includes exercisable options to purchase 18,630
shares.
(12) Shared voting and shared investment power over 2,430
shares; includes exercisable options to purchase 25,110
shares.
(13) Sole voting and sole investment power over 1,800 shares;
shared voting and shared investment power over 862
shares; includes exercisable options to purchase 17,820
shares.
(14) Sole voting and sole investment power over 1,340,129
shares; shared voting and shared investment power over
2,925,047 shares; sole voting and share investment power
over 62,172 shares in the Company's Profit Sharing and
Savings Plan; includes exercisable options to purchase
948,033 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 four other most highly compensated executive officers.
Summary Compensation Table
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
--------------------------- ---------------------- -------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation (1)
- --------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
($) ($) ($) ($) (#) ($) ($)
R. L. Qualls 1996 300,000 307,669 0 0 28,000 0 62,046
Vice Chairman of the Board 1995 270,000 286,187 0 0 21,000 0 61,554
of Directors and Chief 1994 240,000 262,570 0 0 25,000 0 59,570
Executive Officer
R. S. Boreham, Jr. 1996 275,000 282,030 0 0 28,000 0 98,749
Chairman of the Board 1995 220,000 256,582 0 0 16,800 0 98,657
of Directors 1994 200,000 235,777 0 0 10,000 0 96,768
Lloyd G. Davis 1996 132,000 110,761 0 0 16,500 0 22,729
Chief Financial Officer, 1995 120,000 78,948 0 0 10,500 0 21,817
Executive Vice President - 1994 100,000 58,944 0 0 12,000 0 19,007
Finance, Secretary, and
Treasurer
James R. Kimzey 1996 128,000 84,096 0 0 16,500 0 23,218
Executive Vice President - 1995 120,000 47,369 0 0 7,500 0 23,076
Research and Engineering 1994 100,000 42,869 0 0 2,000 0 19,711
John A. McFarland 1996 132,000 110,761 0 0 16,500 0 20,431
President 1995 120,000 78,948 0 0 10,500 0 19,567
1994 100,000 58,944 0 0 5,000 0 16,723
_______________
(1) The amounts disclosed in this column include contributions by
the Company to the Baldor Electric Company Employees' Profit
Sharing and Savings Plan, a defined contribution plan, which
is two plans in one: a Profit Sharing Plan and a Savings
Plan. The Company makes all contributions to the 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 6% 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 1996 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 14,720 2,250 45,076
R. S. Boreham, Jr. 14,720 1,500 82,529
Lloyd G. Davis 14,720 1,980 6,029
James R. Kimzey 14,720 1,280 7,218
John A. McFarland 14,720 1,980 3,731
-8-
Option Grants in Last Fiscal Year
Individual Grants
--------------------------------------------------
Number of % of Total Market
Securities Options Price
Underlying Granted on Grant Date
Options in Exercise Grant Expiration Present
Name Granted Fiscal Year Price Date Date Value (1)
- ----------------- ------- ----------- ----- ---- ---- -----
(#) ($/sh) ($/sh) ($)
R.L. Qualls 20,000 (2) 3.3% 19.250 19.250 01/16/2006 107,968
8,000 (3) 1.3% 9.625 19.250 01/16/2006 83,787
R.S. Boreham, Jr. 20,000 (2) 3.3% 19.250 19.250 01/16/2006 107,968
8,000 (3) 1.3% 9.625 19.250 01/16/2006 83,787
Lloyd G. Davis 12,000 (2) 2.0% 19.250 19.250 01/16/2006 64,781
4,500 (3) 0.7% 9.625 19.250 01/16/2006 47,130
James R. Kimzey 12,000 (2) 2.0% 19.250 19.250 01/16/2006 64,781
4,500 (3) 0.7% 9.625 19.250 01/16/2006 47,130
John A. McFarland 12,000 (2) 2.0% 19.250 19.250 01/16/2006 64,781
4,500 (3) 0.7% 9.625 19.250 01/16/2006 47,130
_______________
(1) The Company used the Black-Scholes option pricing model to
determine grant date present value. Calculations are based
on a ten-year option term and assumptions of: a seven-year
estimated life, interest rate of 5.4%; annual dividend yield
of 1.8%; and volatility of 20.0%. As indicated, the present
values are based on assumptions and the amounts reflected in
this table may not be achieved.
(2) Incentive options to purchase shares of Common Stock of the
Company were granted at the market value of the Common Stock
on the date of grant and are 100% exercisable six months and
one day following the grant date.
(3) Non-qualified options to purchase shares of restricted Common
Stock of the Company were granted at 50% of the market value
of the Common Stock on the date of grant with full vesting
occurring on the fifth anniversary date. Vesting may be
accelerated by early exercise or when certain events relating
to change of the Company's ownership occurs. The restricted
shares purchased on exercise of such options may be voted but
cannot be sold or transferred until they are vested. The
options are 100% exercisable six months and one day following
the grant date.
-9-
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of
Securities Underlying Value of
Shares Unexercised Unexercised
Acquired on Value Options In-the-Money Options
Name Exercise Realized (1) at FY-End (#) at FY-End ($) (2)
- --------------- -------- -------- --------------- -----------------
(#) ($) (A) (B) (A) (B)
R.L. Qualls 0 0 65,720 0 925,717 0
R.S. Boreham, Jr. 19,350 309,490 159,640 0 2,244,905 0
Lloyd G. Davis 7,706 134,277 93,100 0 1,198,609 0
James R. Kimzey 17,095 282,022 107,620 0 1,675,114 0
John A. McFarland 6,800 107,750 109,765 0 1,543,271 0
_______________
(A) Exercisable
(B) Unexercisable
(1) 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 acquired upon
exercise.
(2) Represents the difference between the $24.75 closing price of
the Common Stock as reported by the New York Stock Exchange
on December 27, 1996, the last trading day of fiscal year
1996, 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
an eight-year period.
Change-of-Control Arrangements
Pursuant to agreements under the 1987 Plan and the 1994 Plan,
outstanding restricted Common Stock of the Company acquired by an
early exercise of a non-qualified stock option will fully vest and
be free of restrictions without the requirement of any further act
by the Company or shareholder in the event of a "Change-of-
Control" of the Company as defined in those agreements.
Compensation Committee Interlocks and Insider Participation
Although the Company has no standing compensation committee of the
Board of Directors, the Executive Committee performs functions
similar to those customarily performed by such committees by
making recommendations to the Board; however, the Board of
Directors, as a whole, approves the salary and bonus remuneration
arrangements for directors and executive officers. The Board of
Directors administers the 1981 Plan, which has expired except for
option outstanding, and the Stock Option Committee administers the
1987 Plan and the 1994 Plan, both relating to employees. The
Executive Committee administers the 1989 Plan and the 1996 Plan,
both relating to non-employee directors. The members of the
Executive Committee are the following executive officers: R. S.
Boreham, Jr., John A. McFarland, and R. L. Qualls. The members of
the Stock Option Committee are the following non-employee
directors: Robert J. Messey, Robert L. Proost, and Willis J.
Wheat.
-10-
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. For purposes of
this section, total compensation is defined as salary plus bonus.
The Plan combines annual base compensation with a bonus based upon
the Company's performance. The Company believes that the goals of
the Plan are met by providing competitive compensation which will
motivate and retain key employees.
Total compensation for all executive officers is established
within the range of salaries and bonuses for persons holding
similar positions at other comparably-sized manufacturing
companies utilizing independent salary survey data. The survey
data is a composite of all manufacturing companies that are
comparably-sized based upon sales volume. The independent survey
does not provide a detailed list of all participating companies
and the companies included may or may not include those in the
performance graph. In general, the total compensation for all
executive officers is expected to be slightly below the median for
similar positions compared to the independent survey data. This
is accomplished by establishing the annual base portion of
compensation at the low end of the survey with the potential
incentive portion being slightly above the median. This results
in a greater emphasis being placed upon the Company's performance.
The total compensation individual officers may earn is subjective
based upon the individual's position, experience, and ability to
impact the Company's performance. In establishing each officer's
annual base and potential bonus portion of compensation,
additional consideration includes the individual's past
performance, initiative and achievement, and future potential, as
well as the Company's performance.
The potential bonus pool is based upon the sales and earnings
performance of the Company and the relative weights are 75% sales
and 25% earnings. Compensation attributable to the sales
component increases or decreases in relation to sales.
Compensation attributable to the earnings component increases if
earnings exceed a percentage of shareholders' equity as determined
by the Board of Directors (currently 10%) and decreases if
earnings are less than such amount. Each individual officer's
participation in the potential bonus pool is determined as
described above and is assigned such that if the Company achieves
its sales and earnings objectives, the salary and bonus combined
will be competitive with the industry and will remain consistent
with the Company's philosophy and Plan. The outcome of the
Company's sales and earnings for fiscal year 1996 resulted in
actual bonuses equaling 40% to 51% of total compensation for named
executive officers.
-11-
The factors considered in determining the compensation package for
the Chief Executive Officer for fiscal year 1996 were the same as
those described above for executive officers. The total
compensation for 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 51%
of the CEO's compensation at risk in the form of a performance
bonus. In 1996, 42% of the increase in the CEO's total
compensation over 1995 total compensation was the result of
improved sales and earnings.
The Company also maintains stock option plans to provide
additional incentives to executive officers and other employees to
work to maximize shareholder value. The Stock Option Committee
has granted incentive options to purchase shares of Common Stock
of the Company (at the 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 1996 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 Chief Executive Officer received an incentive stock option to
purchase 20,000 shares of Common Stock, which represented 3.3% 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 Board of Directors, as a whole, and the Board's Executive
Committee and Stock Option Committee, as appropriate, continually
review the executive compensation policies in regards to Section
162(m) of the Internal Revenue Code of 1986 as Amended pertaining
to the Company's $1,000,000 deductibility limitation for
applicable compensation paid to named executive officers. In
1996, the deductibility of the Company's executive compensation
was not affected by the limitation under Section 162(m).
EXECUTIVE COMMITTEE STOCK OPTION COMMITTEE
R. S. Boreham, Jr., Chairman Robert L. Proost, Chairman
John A. McFarland Robert J. Messey
R. L. Qualls Willis J. Wheat
-12-
Performance Graph
Comparison of Five-Year Cumulative Total Return
Among Baldor Electric Company, S&P 500 Index,
and S&P Electrical Equipment Composite Index
Compound Annual Growth Rate
Baldor $314 25.7%
S&P Elec Eqp Grp $258 20.8%
S&P 500 $203 15.2%
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- ----- -----
Baldor $100 $145 $192 $222 $252 $314
S&P 500 $100 $108 $118 $120 $165 $203
S&P Elec Eqp Grp $100 $110 $132 $134 $188 $258
Assumes $100 invested at year-end 1991
in Baldor Electric Company, S&P 500 Index,
and S&P Electrical Equipment Composite Index
-13-
PROPOSAL 2:
TO CONSIDER AND ACT UPON A PROPOSAL TO AMEND THE
BALDOR ELECTRIC COMPANY
1994 INCENTIVE STOCK PLAN
The 1994 Plan was adopted by the Board of Directors of the Company
on February 7, 1994, and was effective on that date subject to the
subsequent approval by the Company's shareholders on May 7, 1994.
Proposed Amendment ... Proposal 2 requests approval to amend the
definition of "eligible employee" to encompass "all" employees of
the Company or its subsidiaries, a broadening of the current
definition under which only "salaried" employees of the Company
are eligible to receive grants. Under federal income tax law, the
Company may not, without obtaining shareholder approval, change
the class of employees who are eligible to receive incentive stock
options.
General ... The purpose of the 1994 Plan, as originally approved
by the Company's Board and its shareholders, was to aid in
maintaining and developing strong management capable of assuring
the future success of the Company. Accordingly, eligibility to
receive benefits thereunder was limited to salaried employees of
the Company. The Board subsequently concluded that it would be in
the best interest of the Company if all employees were allowed the
opportunity to be awarded a proprietary interest in the Company on
a favorable basis and, thereby, to have the ability to share in
its prosperity. Effective November 4, 1996, the Board of
Directors of the Company amended the definition of "eligible
employee" in the 1994 Plan to include all employees of the
Company. This amendment is subject to shareholder approval which
is required by federal income tax law so that such employees may
be awarded incentive stock options.
Benefits ... Four types of benefits may be granted under the 1994
Plan: Stock Options, Restricted Shares, Stock Appreciation
Rights, and Formula Price Shares. The Administrator may make the
award of any benefit subject to any provisions as it deems
appropriate. It is anticipated that the Administrator may award
any of these benefits to those officers and employees it
designates. In view of the discretionary authority vested in the
Administrator, it is impossible to estimate the number of shares
that will be granted or awarded to any individual or group of
individuals over the life of the 1994 Plan.
Amendment and Termination ... The Board of Directors may terminate
or amend the 1994 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 1994 Plan. However, the
Board of Directors, may not, without shareholder approval,
increase the maximum number of shares that may be issued under the
1994 Plan (except for appropriate adjustments as described below),
and may not make amendments required to be approved by
shareholders pursuant to certain laws, regulations, or rules,
including federal income tax laws (hence, the requirement that
shareholders approve this amendment). 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 in the number of shares authorized and in
the number of shares and exercise price of shares subject to
outstanding options.
-14-
Federal Tax Consequences ... A discussion of the federal income
tax consequences arising from the award of incentive stock options
to the Company and to a recipient is set forth below. 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. The following tax results will occur with respect to an
Incentive Stock Option, provided that certain conditions described
below are met: (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 exercise price and the amount realized upon
sale of the shares of the Participant will be treated as long-term
capital gain or loss. For these tax results to occur, a
Participant may not dispose of the shares of Common Stock acquired
on the exercise of an Incentive Stock Option within one (1) year
after the transfer of such shares to him or within two (2) years
from the date the Incentive Stock Option was granted to him. In
addition, the Participant must be an employee of the Company or
its subsidiaries at all times during the period beginning on the
date of the grant of an Incentive Stock Option through the day
that is three (3) months before the date of exercise of the
Incentive Stock Option. The Company will not be entitled to a
deduction upon the exercise of an Incentive Stock Option.
Status of the 1994 Plan ... The maximum number of shares which can
be issued under the 1994 Plan is 1,500,000 (subject to adjustments in
certain events) and such shares may be treasury shares or authorized
and unissued shares. As of March 19, 1997, options to purchase
951,700 shares of Common Stock have been awarded under the 1994 Plan
at exercise prices ranging from $9.042 per share to $25.625 per
shares and expiring between January 3, 2005, and February 3, 2007,
and approximately 700 employees are eligible to participate in the
1994 Plan. With the approval of this amendment to the 1994 Plan,
all employees (approximately 3,650) of the Company will be eligible
for grants. Of the 951,700 shares currently awarded, options to
purchase 227,600 shares of Common Stock have been awarded to employees
who are not currently eligible for grants under the original 1994
Plan. Should the amendment not be approved by the shareholders, the
options to purchase the 227,600 shares of Common Stock will be null
and void and the optionee will have no further rights pertaining to
the exercise of these options.
The last reported sale price of the Company's Common Stock on the
New York Stock Exchange on March 19, 1997, was $25.25.
Your Board of Directors recommends a vote "FOR" this Proposal 2.
SHAREHOLDER PROPOSALS
Any shareholder proposals intended to be presented at the 1998
Annual Meeting must be received by the Company at its principal
executive offices no later than November 26, 1997, in order to be
considered for inclusion in the proxy materials.
-15-
INDEPENDENT AUDITORS
The Company is presently utilizing the services of Ernst & Young
LLP, which has been the Company's independent auditors since 1972.
The Audit Committee and the Board of Directors will consider the
reappointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending January 3, 1998, at the
Company's next regular Board of Directors meeting in May. The
Company has no reason to believe that Ernst & Young LLP will not
be reappointed. Representatives of Ernst & Young LLP will be
present at the Annual Meeting with an opportunity to make a
statement if they desire to do so and will be available to respond
to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
R. S. Boreham, Jr., Chairman of the Board, filed one Form 4, with
respect to one transaction, late during the year ended December
28, 1996.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented
for consideration at the meeting by the Board of Directors or by
shareholders who have requested inclusion of proposals in the
Proxy Statement. If any other matter shall properly come before
the meeting, the persons named in the accompanying form of proxy
intend to vote on such matters in accordance with their judgment.
March 27, 1997
-16-
"FRONT OF PROXY CARD"
BALDOR ELECTRIC COMPANY
Proxy Solicited on Behalf of the Board of Directors
For Annual Meeting of Shareholders on May 3, 1997
The undersigned hereby appoints R. S. Boreham, Jr. and R. L.
Qualls, and each of them, with power of substitution, as proxies
of the undersigned, to attend the Annual Meeting of Shareholders
of Baldor Electric Company, to be held at the Holiday Inn, 700
Rogers Avenue, Fort Smith, Arkansas, on Saturday, May 3, 1997, at
10:30 a.m., local time, and all adjournments thereof, and there
to vote, as indicated on the reverse side of this proxy, the
shares of Common Stock of Baldor Electric Company which the
undersigned is entitled to vote with all the powers the
undersigned would possess if personally present at the meeting.
In their discretion, the proxies are authorized to cumulate and
vote the shares of the undersigned for any nominee other than
nominees with respect to whom authority to vote has been
withheld, and to vote upon such other business as may properly
come before the meeting and all adjournments thereof. This
proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted
FOR the election of directors and FOR proposal 2.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When
signing as Attorney, Executor, Trustee, Guardian, or Officer of a
Corporation, please give title as such. For joint accounts, all
named holders should sign. If you receive more than one proxy,
please sign all cards and return in the accompanying postage-paid
envelopes.
HAS YOUR ADDRESS CHANGED? _______________________________________
_________________________________________________________________
_________________________________________________________________
DO YOU HAVE ANY COMMENTS? _______________________________________
_________________________________________________________________
_________________________________________________________________
"BACK OF PROXY CARD"
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
---------------------------------------
BALDOR ELECTRIC COMPANY
---------------------------------------
COMMON STOCK
RECORD DATE SHARES:
NAME
ADDRESS
CITY STATE ZIP
Please be sure to sign and date this Proxy.
Date ______________________________________
Shareholder sign here ___________________________________________
Co-owner sign here ______________________________________________
THE BOARD OF DIRECTORS RECOMMENDS VOTES "FOR":
1. Election of Directors
[ ] For
[ ] Withhold
[ ] For All Except
O. A. Baumann
John A. McFarland
Robert L. Proost
To withhold authority to vote for any nominee listed
above, mark the "For All Except" box and strike a line
through the nominee's(s') name(s).
2. Approval of the Amendment to the Baldor Electric Company
1994 Incentive Stock Plan.
[ ] For
[ ] Against
[ ] Abstain
Mark box at right if an address change or comment has been noted
on the reverse side of this card. [ ]
DETACH CARD DETACH CARD
"FRONT OF DIRECTION CARD"
BALDOR ELECTRIC COMPANY
Annual Meeting of Shareholders on May 3, 1997
The undersigned, a participant in the Baldor Electric Company
Profit Sharing and Savings Plan (the "Plan") hereby directs
Wachovia Bank of North Carolina, N.A., as Trustee (the "Trustee")
of the Plan Trust (the "Trust"), at the Annual Meeting of
Shareholders of Baldor Electric Company, to be held at the
Holiday Inn, 700 Rogers Avenue, Fort Smith, Arkansas, on
Saturday, May 3, 1997, at 10:30 a.m., local time, and all
adjournments thereof, to vote, as indicated on the reverse side
of this direction card, the shares of Common Stock of Baldor
Electric Company which the undersigned is entitled to vote with
all the powers the undersigned would possess if personally
present at the meeting.
As Trustee, you are authorized to cumulate and vote the shares of
the undersigned for any nominee other than nominees with respect
to whom authority to vote has been withheld, and to vote upon
such other business as may properly come before the meeting and
all adjournments thereof. This direction card, when properly
executed, will be voted in the manner directed herein by the
undersigned participant.
If no direction is made, voting will be controlled
by the terms of the Plan and the Trust.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When
signing as Attorney, Executor, Trustee, Guardian, or Officer of a
Corporation, please give title as such. For joint accounts, all
named holders should sign. If you receive more than one
direction card, please sign all cards and return in the
accompanying postage-paid envelopes.
HAS YOUR ADDRESS CHANGED? _______________________________________
_________________________________________________________________
_________________________________________________________________
DO YOU HAVE ANY COMMENTS? _______________________________________
_________________________________________________________________
_________________________________________________________________
"BACK OF DIRECTION CARD"
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
---------------------------------------
BALDOR ELECTRIC COMPANY
---------------------------------------
PROFIT SHARING AND SAVINGS PLAN
RECORD DATE SHARES:
NAME
ADDRESS
CITY STATE ZIP
Please be sure to sign and date this Direction Card.
Date ______________________________________
Participant sign here ___________________________________________
THE BOARD OF DIRECTORS RECOMMENDS VOTES "FOR":
1. Election of Directors
[ ] For
[ ] Withhold
[ ] For All Except
O. A. Baumann
John A. McFarland
Robert L. Proost
To withhold authority to vote for any nominee listed
above, mark the "For All Except" box and strike a line
through the nominee's(s') name(s).
2. Approval of the Amendment to the Baldor Electric Company
1994 Incentive Stock Plan.
[ ] For
[ ] Against
[ ] Abstain
Mark box at right if an address change or comment has been noted
on the reverse side of this card. [ ]
DETACH CARD DETACH CARD