BEZ Baldor Electric CO.

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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SCHEDULE 14D-9
(Rule 14d-101)

Solicitation/Recommendation Statement

Under Section 14(d)(4) of the Securities Exchange Act of 1934

(Amendment No.    )

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BALDOR ELECTRIC COMPANY
(Name of Subject Company)

BALDOR ELECTRIC COMPANY
(Name of Person Filing Statement)

Common Stock, $0.10 Par Value
(Title of Class of Securities)

057741100
(CUSIP Number of Class of Securities)

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George E. Moschner
Chief Financial Officer and Secretary
Baldor Electric Company
5711 R. S. Boreham, Jr. St.
Fort Smith, Arkansas 72901
Tel.: (479) 646-4711
Fax: (479) 648-5701
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the persons filing statement)

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With copies to:

         o     Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

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Item 1.    Subject Company Information.

Name and Address.

        The name of the subject company is Baldor Electric Company, a Missouri corporation ("Baldor" or the "Company"). Unless the context indicates otherwise, we use the terms "us," "we," and "our" to refer to the Company. The address of the Company's principal executive office is 5711 R. S. Boreham, Jr. St., Fort Smith, Arkansas 72901. The telephone number of the Company's principal executive office is (479) 646-4711.

Securities.

        The title of the class of equity securities to which this Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9") relates is the Company's common stock, $0.10 par value (the "Shares"). As of December 7, 2010, there were 47,174,157 Shares outstanding.

Item 2.    Identity and Background of Filing Person.

Name and Address.

        The name, business address and business telephone number of the Company, which is both the person filing this Schedule 14D-9 and the subject company, are set forth in Item 1 above under the heading "Name and Address."

Tender Offer.

        This Schedule 14D-9 relates to the tender offer (the "Offer") by Brock Acquisition Corporation, a Missouri corporation ("Merger Sub") and an indirect wholly-owned subsidiary of ABB Ltd, a corporation organized under the Laws of Switzerland ("Parent"), to purchase all of the outstanding Shares, at a purchase price of $63.50 per Share, net to the seller in cash without any interest (the "Offer Price") and less any required withholding taxes, if any. The Offer is being made upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 8, 2010 (the "Offer to Purchase"), and in the related Letter of Transmittal (the "Letter of Transmittal"), as required by the Agreement and Plan of Merger, dated as of November 29, 2010, by and among Parent, Merger Sub and the Company (the "Merger Agreement").

        The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, the "Schedule TO"), filed by Parent and Merger Sub with the Securities and Exchange Commission (the "SEC") on December 8, 2010. The Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B), respectively, to the Schedule TO and are incorporated by reference herein. Merger Sub commenced (within the meaning of Rule 14d-2 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act")) the Offer on December 8, 2010. Subject to the terms and conditions of the Merger Agreement and the Offer, the Offer is initially scheduled to expire at 12:00 midnight, New York City time, on the night of Monday, January 10, 2011. Notwithstanding anything to the contrary in the Merger Agreement, Merger Sub is required to extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff or The New York Stock Exchange ("NYSE") that is applicable to the Offer.

        Following consummation of the Offer, the Merger Agreement provides that, among other things, upon its terms and subject to the satisfaction or waiver of the conditions set forth therein, and in accordance with the General and Business Corporation Law of Missouri (the "MGBCL"), at the time of filing of the articles of merger (the "Articles of Merger") with the Secretary of State of the State of Missouri, together with such other appropriate documents, in such forms as are required by, and executed in accordance with, the relevant provisions of the MGBCL or at such other time as shall be agreed upon by the parties in writing and set forth in the Articles of Merger (either time, as applicable,

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the "Effective Time"), Merger Sub will merge with and into the Company, and the Company will continue as the surviving corporation in the merger (the "Merger," and the surviving corporation of the Merger the "Surviving Corporation"). At the Effective Time of the Merger, each issued and outstanding Share (other than Shares held by Parent or Merger Sub or in the treasury of the Company, and other than dissenting Shares pursuant to and in compliance with the MGBCL, as discussed below under the heading "Dissenters' Rights" in Item 8) will be converted into the right to receive an amount in cash equal to the Offer Price, payable to the holder thereof, without interest (the "Merger Consideration"), less any required withholding taxes.

        The obligation of Merger Sub to accept for payment and to pay for any Shares validly tendered in the Offer and not validly withdrawn is subject to certain conditions, including the condition (the "Minimum Condition") that there having been validity tendered and not withdrawn in accordance with the terms of the Offer a number of Shares greater than sixty-six and two-thirds percent (66 ² / 3 %) of the sum of (x) the number of Shares then issued and outstanding plus (y) all Shares that the Company may be required to issue under stock options, stock units and other derivative securities that are then exercisable, as provided in the Merger Agreement. The Minimum Condition may be waived by Parent and Merger Sub only with the prior written consent of the Company on the terms and subject to the conditions of the Merger Agreement and the applicable rules and regulations of the SEC.

        The Merger Agreement and the transactions contemplated therein, including the Offer and the Merger (collectively, the "Transactions") are summarized in additional detail in Section 11—"The Merger Agreement" and Section 12—"Purpose of the Offer; Plans for the Company" of the Offer to Purchase. A copy of the Merger Agreement is filed as Exhibit (e)(1) to this Schedule 14D-9 and is incorporated herein by reference.

        Parent has formed Merger Sub in connection with the Merger Agreement and the Transactions. The Schedule TO states that the principal executive offices of Parent and Merger Sub are located at Affolternstrasse 44, CH-8050, Zurich, Switzerland and 501 Merritt 7, Norwalk, Connecticut 06851, respectively.

Item 3.    Past Contacts, Transactions, Negotiations and Agreements.

        Except as set forth in this Item 3, or in the Information Statement of the Company, attached to this Schedule 14D-9 as Annex I (the "Information Statement") and incorporated herein by reference, or as otherwise incorporated by reference herein, as of the date hereof, to the knowledge of the Company, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between the Company or its affiliates, on the one hand, and (i) its executive officers, directors or affiliates or (ii) Parent, Merger Sub or their respective executive officers, directors or affiliates, on the other hand.

Arrangements between the Company and Parent.

Merger Agreement

        The summary of the Merger Agreement contained in Section 11—"The Merger Agreement" and Section 12—"Purpose of the Offer; Plans for the Company" of the Offer to Purchase and the description of the conditions of the Offer contained in Section 15—"Certain Conditions of the Offer" of the Offer to Purchase are incorporated herein by reference. The summary of the principal terms of the Merger Agreement in this Schedule 14D-9 and the copy of the Merger Agreement filed as an exhibit to this Schedule 14D-9 are intended to provide holders of Shares with information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the SEC. In particular, the Merger Agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. The summary and

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description of the Merger Agreement are qualified in their entirety by reference to the Merger Agreement, which has been incorporated by reference herein.

        The Merger Agreement contains representations and warranties of the parties customary for a transaction of this type, which are intended to express factual circumstances that must exist, subject to qualifications, for Parent to be obligated to complete the Transactions. The Company, Parent and Merger Sub made the representations and warranties solely for purposes of the Merger Agreement, and they are subject to qualifications and limitations agreed to by the parties, including limitations of time and contractual standards of materiality, that reflect such limited purpose. The representations and warranties set forth in the Merger Agreement should not be understood to be statements of fact.

        The Company has also agreed to customary covenants governing the conduct of its business, including an obligation to conduct its business in the ordinary course consistent with past practice through the Effective Time. The Company has agreed not to solicit, initiate or participate in discussions with third parties regarding other proposals to acquire the Company and it has agreed to certain restrictions on its ability to respond to such proposals, subject to exceptions necessary for the fulfillment of the fiduciary duties of the board of directors of the Company (the "Company Board"). The Merger Agreement also contains customary termination provisions for the Company and Parent and provides that, in connection with the termination of the Merger Agreement under certain specified circumstances, the Company may be required to pay Parent a termination fee of $105 million.

        The Merger Agreement provides that Company stock options, whether vested or unvested, to purchase Shares will fully vest, become exercisable and be converted into an option to acquire a number of Parent American Depositary Shares (as defined below) equal to the product of (i) the number of Shares subject to such option and (ii) a ratio equal to the Offer Price divided by the volume-weighted-average price (as reported by the NYSE) of Parent American Depositary Shares for the ten (10) consecutive trading days immediately preceding the Effective Time. The Merger Agreement further provides that holders of Company stock options may, instead of having their stock options converted in accordance with the preceding sentence, elect to receive an amount in cash equal to the product of (i) the number of Shares subject to such option and (ii) an amount equal to the Offer Price less the applicable exercise price under such option.

        Additionally, each Company stock unit will fully vest and be converted into a right to receive following the Merger an amount in cash equal to the Offer Price, except that the cash amount that is otherwise payable in respect of any Company stock units that have been deferred in accordance with the terms of a Company plan shall be transferred to the Company to be held in the same manner as other cash deferrals under the applicable deferral arrangement.

        "Parent American Depositary Shares" are the American Depositary Shares, each representing one share of Parent's registered shares ("Parent American Depositary Shares"), par value CHF 1.03, issued under and pursuant to that certain Amended and Restated Deposit Agreement, dated as of May 7, 2001, by and among Parent, Citibank, N.A., as Depositary, and the holders and beneficial owners of American Depositary Shares evidenced by American Depositary Receipts issued thereunder. Parent American Depositary Shares are listed for trading on the NYSE under the symbol "ABB."

Representation on the Company Board

        The Merger Agreement provides that, effective upon the initial acceptance for payment by Merger Sub of Shares tendered pursuant to the Offer (the "Acceptance Time") and from time to time thereafter up to the Effective Time, subject to payment for such Shares and other conditions set forth in the Merger Agreement, Parent will be entitled to designate a number of directors on the Company Board equal to the product (rounded up to the next whole number) obtained by multiplying (i) the number of directors on the Company Board (giving effect to any increase in the number of directors described in the following paragraph) and (ii) a fraction, the numerator of which is the number of

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Shares held by Parent and Merger Sub (giving effect to the Shares purchased pursuant to the Offer and, if Merger Sub exercises the Top-Up Option (as defined below under the heading "Top-Up Option" in Item 8), the Shares purchased upon exercise of the Top-Up Option), and the denominator of which is the total number of then outstanding Shares (including, if Merger Sub exercises the Top-Up Option, the Shares issued pursuant to the Top-Up Option).

        In connection with the foregoing, the Company has agreed to cause the individuals so designated by Parent to be elected or appointed to the Company Board, including either by increasing the size of the Company Board or by seeking and accepting or otherwise securing the resignations of such number of then incumbent directors as is necessary to enable the individuals so designated by Parent to be elected or appointed to the Company Board. From time to time after the Acceptance Time, subject to Merger Sub's payment for the Shares, the Company will cause the individuals so designated by Parent to constitute substantially the same percentage (rounding up where appropriate) as is on the Company Board on each committee of the Company Board to the fullest extent permitted by all applicable laws, including the rules of the NYSE.

        If Parent's designees are elected or appointed to the Company Board prior to the Effective Time, the Merger Agreement requires that the Company Board will have at least three (3) directors who are considered independent directors within the meaning of the rules of the NYSE (the "Independent Directors"). The Merger Agreement further provides that the Company shall, upon Parent's request, take all action necessary to elect to be treated as a "Controlled Company" for purposes of Section 303A of the NYSE rules and make all necessary filings and disclosures associated with such status. If the number of Independent Directors is reduced below three (3), the remaining Independent Directors (or if no Independent Director then remains, the other directors) will be entitled to designate persons to fill such vacancies.

        If Parent's designees are elected or appointed to the Company Board prior to the Effective Time, the prior approval of a majority of the Continuing Directors (or the sole Continuing Director if there is only one Continuing Director then in office) will be required in order to, prior to the Effective Time, (i) amend or terminate the Merger Agreement or agree or consent to any amendment or termination of the Merger Agreement on behalf of the Company, (ii) extend the time for performance of, or waive, any of the obligations or other acts of Parent or Merger Sub under the Merger Agreement, (iii) waive any of the Company's rights under the Merger Agreement, (iv) amend or otherwise modify, in a manner adverse to the stockholders in any material respect, the Company's Restated Articles of Incorporation, as amended as of May 2, 1998 (the "Articles of Incorporation") or the Company's currently effective by-laws (the "By-laws"), or (v) make any other determination with respect to any action to be taken or not to be taken by or on behalf of the Company relating to the Merger Agreement or the Transactions.

        The Information Statement, attached to this Schedule 14D-9 as Annex I, is being furnished to the Company's stockholders pursuant to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated under the Exchange Act, in connection with the right to designate persons to the Company Board discussed above.

Confidentiality Agreement

        The Company and Parent are parties to a confidentiality letter, dated as of January 21, 2010, as amended on September 21, 2010 (the "Confidentiality Agreement"), pursuant to which Parent agreed to keep confidential and not to disclose confidential information of the Company and its affiliates and subsidiaries delivered or made available to Parent, its affiliates or any of Parent's or its affiliates' officers, directors, employees, general partners, managing members, counsel, and the consultants, accountants, investment bankers listed therein, and following Parent's provision of prior written notice to the Company, Parent's sources of debt financing and other advisors, in connection with the

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consideration by Parent of a possible acquisition of the Company, except in accordance with the terms of the Confidentiality Agreement. In the Confidentiality Agreement, Parent also agreed to a standstill provision placing restrictions on, among other things, the ability of Parent and its affiliates to acquire, or offer or propose to acquire, beneficial ownership of securities of the Company in certain circumstances. Notwithstanding such provisions, the Confidentiality Agreement permitted Parent to make a proposal relating to a business combination or similar transaction involving the Company to the Chief Executive Officer of the Company. The Confidentiality Agreement is filed as Exhibit (e)(2) and (e)(3) to this Schedule 14D-9 and is incorporated herein by reference.

Exclusivity Agreement

        Parent and the Company entered into an exclusivity agreement, dated November 16, 2010 (the "Exclusivity Agreement"), during the course of discussions between such parties regarding a potential business combination between Parent and the Company. Under the Exclusivity Agreement, the Company agreed not to, and to cause certain of its representatives not to, solicit, initiate, participate in, knowingly facilitate, knowingly encourage or otherwise enter into any discussion, negotiations or agreements with any person (other than Parent) concerning any merger, tender offer, exchange offer, share exchange, consolidation or other similar combination or recapitalization or reorganization involving the Company or any of its subsidiaries, any sale or other transfer or disposition of all or substantially all of the assets of the Company and its subsidiaries, on a consolidated basis (other than assets sold in the ordinary course of business), or any other similar transaction involving any of the Company or its subsidiaries. The Exclusivity Agreement expired on November 23, 2010 at 11:59 p.m. (New York time). A copy of the Exclusivity Agreement is filed as Exhibit (e)(4) to this Schedule 14D-9 and is incorporated herein by reference.

General Product Purchases

        Parent globally purchases from Company certain electric motor products, components and related services. In 2009, these global purchases were minimal. In 2009, the Company purchased some low voltage switches and low voltage contractors from Parent for the Company's motion control systems business.

Arrangements between the Company and its Executive Officers, Directors and Affiliates.

        The Company's executive officers and the members of the Company Board may be deemed to have certain interests in the Transactions that may be different from or in addition to those of the Company's stockholders generally. These interests may create potential conflicts of interest. The Company Board was aware of those interests and considered them, among other matters, in reaching its decision to approve the Transactions.

        For further information with respect to the arrangements between the Company and its executive officers, directors and affiliates described in this Item 3, please also see the Information Statement, which is incorporated herein in its entirety.

Consideration for Shares Tendered Pursuant to the Offer

        If the directors and executive officers of the Company who own Shares tender their Shares for purchase pursuant to the Offer, they will receive the same cash consideration on the same terms and conditions as the other stockholders of the Company. As of November 30, 2010, the directors and executive officers of the Company and their affiliates beneficially owned, in the aggregate, 989,004 Shares, which for purposes of this subsection excludes any Shares issuable upon exercise of stock options and stock units held by such individuals. If the directors, executive officers and their affiliates were to tender all of such Shares pursuant to the Offer and those Shares were accepted for purchase

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and purchased by Merger Sub, the directors, executive officers and their affiliates would receive an aggregate of $62,801,754 in cash, without interest, less any required withholding taxes. For a description of the treatment of stock options and stock units held by the directors and executive officers of the Company, see below under the heading "Effect of the Merger on Stock Options and Stock Units."

        The following table sets forth, as of November 30, 2010, the cash consideration that each executive officer, director and their affiliates would be entitled to receive in respect of his or her outstanding Shares if such individual or affiliate were to tender all of his or her outstanding Shares pursuant to the Offer and those Shares were accepted for purchase and purchased by Merger Sub.

Merger Agreement

Effect of the Merger on Company Stock Options and Company Stock Units

        Pursuant to the Merger Agreement, each holder of options, whether vested or unvested, to purchase Shares that are outstanding and unexercised at the Effective Time may elect in writing, no later than five (5) business days prior to the Effective Time, to receive an amount in cash equal to the product of (i) the number of Shares subject to such option and (ii) an amount equal to the Offer Price less the applicable exercise price under such option. Additionally, each Company stock unit will fully vest and be converted into a right to receive an amount in cash equal to the Offer Price, except that the cash amount that is otherwise payable in respect of any Company stock units that have been deferred in accordance with the terms of a Company plan shall be transferred to the Company to be held in the same manner as other cash deferrals under the applicable deferral arrangement.

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        The following table sets forth, as of November 30, 2010, the cash consideration that each executive officer and non-employee director would be entitled to receive in respect of his or her outstanding stock options and stock units at the Effective Time, pursuant to the Merger Agreement, should such executive officer or non-employee director elect to receive the cash consideration for all of their Company stock options.

Executive Compensation

        The key elements of the Company's executive compensation program generally include base salary, annual cash bonus, equity incentive compensation in the form of Company stock options and Company stock units, which are awarded through the Company's equity incentive plans, and personal benefits.

Employment Arrangements Following the Merger

        The Merger Agreement provides that Parent will cause to be provided to the employees of the Company and its subsidiaries who are employed as of the Effective Time (the "Continuing Employees"), for a period of one year following the Effective Time (or such shorter period of time that any such Continuing Employee remains an employee of the Surviving Corporation), with compensation and benefits (excluding equity based compensation) that are, in the aggregate, no less favorable than the compensation and benefits provided by the Company immediately prior to the Effective Time.

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Parent and the Surviving Corporation have no obligation to continue any specific plans or to continue the employment of any specific person.

        Parent and the Company have also agreed to cooperate in good faith to implement a previously discussed retention program for the benefit of key management position holders of the Company, which will take effect at the Effective Time. The previously discussed retention program is anticipated to apply to key management position holders and will entitle the eligible employees to cash retention bonuses. It is currently anticipated that for certain members of the Company's senior management up to half of any such bonus would be paid on the first anniversary of the Merger, with the remainder to be paid on the second anniversary.

Director Compensation for Fiscal Year 2009

        The following tables set forth the compensation of the Company's directors for 2009.

(2)

Stock units were awarded in the amount of 1,755 units per Director with a fair value of $22.56 per unit. These stock units vest after one year from date of grant.



(3)

Non-qualified options to purchase 5,280 Shares were granted at $23.24 per Share, the composite closing price of the Shares on the day preceding the date of grant. The options vest after one year from date of grant. At grant date, the fair value of these non-qualified options was $6.65 per Share. The Company used the Black-Scholes option pricing model to determine the fair value. Calculations are based on a ten-year option term and the following variable assumptions: expected option life of 5.5 years; interest rate of 2.36%; annual dividend yield of

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2.92%; and volatility of 38.20%. Because the present values are based on estimates and assumptions, the amounts reflected in this table may not be achieved.

(4)

Base Director fees have remained unchanged since 2005.

Director and Officer Indemnification and Insurance

        Section 351.355.1 of the MGBCL allows a corporation to indemnify individuals who are made a party to a proceeding because the individual is or was a director or officer of the corporation against liability incurred in the proceeding, as long as, (i) the director or officer acted in good faith; (ii) the director or officer acted in a manner the director or officer reasonably believed to be in or not opposed to the corporation's best interests; and (iii) in the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her conduct was unlawful. In the case of an action or suit by or in the right of the corporation, pursuant to Section 351.355.2 of the MGBCL, the corporation may indemnify directors and officers against certain judgments except that no indemnification shall be made in respect of any claim, issue or matter as to which such person was adjudged liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the court in which the action or suit was brought determines upon application that such person is fairly and reasonably entitled to indemnity for proper expenses. Section 351.355.3 of the MGBCL generally requires a corporation to indemnify a director or officer against reasonable expenses incurred by the director or officer in connection with a proceeding referred to in Section 351.355.1 or 351.355.2 of the MGBCL in which the director was successful, on the merits or otherwise. Section 351.355.7 of the MGBCL provides that a corporation may provide additional indemnification to directors and officers provided that no person shall be indemnified against conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. Article Ten of the Articles of Incorporation currently provides for indemnification of the directors and officers of the Company based on the standard of conduct enumerated in Section 351.355.7 and provides that such directors and officers shall be indemnified by the Company to the fullest extent permitted by Missouri law. A copy of the Articles of Incorporation is filed as Exhibit (e)(12) to this Schedule 14D-9 and is incorporated herein by reference.

        Pursuant to directors' and officers' liability insurance policies, with total annual limits of $35 million, the Company's directors and officers are insured, subject to the limits, retention, exceptions and other terms and conditions of such policy, against liability for any actual or alleged error, misstatement, misleading statement, act or omission, or neglect or breach of duty by the directors or officers of the Company, individually or collectively, or any matter claimed against them solely by reason of their being directors or officers of the Company or a subsidiary of the Company.

        Pursuant to the Merger Agreement, Parent has agreed that all rights of exculpation, indemnification and advancement of expenses existing in favor of the current or former directors and officers of the Company and its subsidiaries (the "Indemnified Parties") as provided in the Articles of Incorporation and By-laws, or under any indemnification, employment or similar agreement between an Indemnified Party and the Company or its subsidiaries, in each case as in effect on the date of the Merger Agreement, will survive the Merger and continue in full force and effect in accordance with their respective terms to the extent permitted by applicable law.

        From and after the Effective Time, Parent has agreed to cause the Surviving Corporation to pay and perform in a timely manner such indemnification obligations. Parent has also agreed to cause the articles of incorporation and by-laws of the Surviving Corporation to contain provisions no less favorable with respect to exculpation, indemnification of and advancement of expenses to the Indemnified Parties than are set forth as of the date of the Merger Agreement in the Articles of Incorporation and By-laws in favor of the Indemnified Parties, for a period of six years after the Effective Time.

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        The Merger Agreement further provides that, from the date on which the majority of the Company's directors are designees of Parent that have been effectively elected or appointed to the Company Board in accordance with the Merger Agreement (the "Board Appointment Date") through the sixth anniversary of the Board Appointment Date, Parent will, or will cause the Surviving Corporation to, maintain in effect the Company's existing directors' and officers' insurance policies for acts or omissions occurring prior to the Board Appointment Date with respect to any matter claimed against a director or officer by reason of him or her serving in such capacity on terms with respect to such coverage and amounts no less favorable in the aggregate than those of such policy in effect on the date of the Merger Agreement; provided that the aggregate costs of such policies shall not exceed in any one year 250% of the current aggregate annual premiums currently paid by the Company. Parent may satisfy its obligations with respect to the directors' and officers' insurance policies by causing the Company to obtain a prepaid (or "tail") directors' and officers' liability policy the material terms of which, including coverage and amount, are no less favorable in the aggregate to such directors and officers than the insurance coverage in effect on the date of the Merger Agreement.

Item 4.    The Solicitation or Recommendation.

Recommendation of the Company Board.

        At a meeting of the Company Board held on November 29, 2010, the Company Board (i) unanimously resolved that the Merger Agreement and the Transactions are fair to and in the best interests of the Company and the Company's stockholders, (ii) unanimously authorized and adopted the Merger Agreement and the Transactions on the terms and subject to the conditions set forth in the Merger Agreement, and (iii) unanimously recommended that the Company's stockholders accept the Offer, tender their Shares to Merger Sub pursuant to the Offer and, if required by the MGBCL, approve the Merger Agreement.

         THE COMPANY BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF REQUIRED BY THE MGBCL, APPROVE THE MERGER AGREEMENT.

Background of the Offer; Reasons for the Company Board's Recommendation.

Background of the Offer

        As part of Baldor's ongoing strategic planning process, the Company Board and members of the Company's senior management have regularly reviewed and evaluated its business and operations, competitive position, and strategic plans with a goal of enhancing stockholder value.

        On or about December 23, 2009, John McFarland, Baldor's Chief Executive Officer and Chairman, met with Joseph M. Hogan, Chief Executive Officer of Parent, at Mr. Hogan's invitation. At such meeting Mr. Hogan expressed to Mr. McFarland Parent's interest in a business combination transaction with Baldor. Following such meeting, Messrs. McFarland and Hogan continued to engage in preliminary discussions regarding the benefits of a potential transaction.

        On January 17, 2010, the Company Board met and, among other things, discussed Parent's expression of interest in a business combination transaction. The Company Board noted that in its preliminary discussions with Mr. McFarland, Mr. Hogan had indicated that Parent could potentially be prepared to pay a premium of up to 50% of the then-trading price of the Shares. Based on Baldor's closing stock price of $28.10 per Share on January 15, 2010, such premium could have represented a purchase price of up to $42.15 per Share. After a thorough discussion of the merits of Parent's proposal to the Company and its stockholders, the Company Board authorized Mr. McFarland and Ronald E. Tucker, Baldor's President, Chief Operating Officer and member of the Company Board, to

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further explore Parent's indication of interest with Parent representatives and provide Parent with non-public information, subject to the execution of a customary confidentiality agreement.

        On or about January 18, 2010, Baldor formally engaged UBS Securities LLC ("UBS") as its financial advisor in connection with Baldor's consideration of Parent's proposal or other similar transaction.

        On January 19, 2010, Mr. Hogan and Mr. McFarland spoke on the phone and Mr. McFarland agreed to send a draft confidentiality agreement with standstill language to Mr. Hogan.

        On or about January 21, 2010, Baldor and Parent executed the Confidentiality Agreement. The Confidentiality Agreement contained a customary standstill provision that prohibited Parent from acquiring any equity securities of Baldor (in excess of a de minimis amount) or otherwise seeking to take control of Baldor. The standstill provision was scheduled to expire on July 21, 2011.

        Following execution of the Confidentiality Agreement, members of Baldor's senior management and members of Parent's senior management engaged in some preliminary discussions to explore the level of Parent's interest in a business combination transaction. In that regard, Parent was provided with limited non-public information about Baldor, including Baldor's two-year financial forecast. Baldor representatives indicated to Parent that they were prepared to meet in person to further explain the plan and management's expectations with respect to Baldor's future results, but such meeting did not occur.

        On or about January 25, 2010, Mr. Hogan orally indicated to Mr. McFarland that Parent was prepared to make an indicative non-binding proposal of $36 per Share in cash, for 100% of the outstanding equity interests of the Company. The proposal represented an approximate 37.0% premium to the $26.28 per Share closing price on January 25, 2010. Mr. McFarland indicated that he would present the indication of interest to the Company Board at its next regularly scheduled meeting.

        On January 27, 2010, the Company Board met. Also present at the meeting was George Moschner, Baldor's Chief Financial Officer and Secretary. Among other things, the Company Board reviewed in detail Baldor's business plan, and discussed the challenges and opportunities facing the Company. The Company Board also was updated regarding the status of discussions with Parent, including Parent's $36.00 per Share proposal. The Company Board thoroughly discussed Parent's proposal and concluded that the proposal was financially inadequate and determined not to proceed with discussions with Parent at that price level.

        During February and March 2010, the parties and their respective representatives continued limited discussions regarding a potential transaction.

        On March 19, 2010, Mr. Hogan and Mr. McFarland spoke on the telephone. Mr. McFarland explained that the Company was not ready to continue discussions regarding a potential transaction at that time.

        Between March and July, 2010, Mr. Hogan contacted Mr. McFarland from time to time to discuss industry trends and issues, but did not engage during this period in further substantive discussions regarding a business combination transaction between Parent and Baldor.

        On August 2, 2010, Baldor announced that Mr. McFarland was planning to step down from his role as Baldor's Chief Executive Officer on December 31, 2010, but would remain active as Executive Chairman and retain his position as Chairman of the Executive Committee. Baldor also announced on that date that the Company Board had promoted Mr. Tucker to Chief Executive Officer and President effective January 1, 2011.

        On or about August 16, 2010, Mr. Hogan contacted Mr. McFarland to discuss, among other things, Baldor's latest quarterly results, industry trends and the general macroeconomic environment.

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Mr. Hogan also indicated that he had further discussed with Parent's board of directors a potential transaction with Baldor, and that, in that regard, would be interested in meeting with Mr. McFarland later in the month. Mr. McFarland immediately reported the substance of the call to the other members of the Company Board.

        On or about August 25, 2010, Parent delivered to Baldor a written indication of interest that proposed a potential combination of Baldor and Parent in which Parent would pay $51.00 per Share in cash, for 100% of Baldor's outstanding Shares. The proposal represented a 45.7% premium to Baldor's closing price on August 24, 2010, and a 34.5% premium to the one-month volume weighted average trading price of the Shares. The proposal was subject to satisfactory completion of confirmatory due diligence and negotiation of mutually acceptable definitive agreements. The proposal was expressly not subject to a financing condition.

        On August 30, 2010, the Company Board met to consider Parent's revised indication of interest. Also present at the meeting was Mr. Moschner and a representative of Thompson Coburn, Baldor's outside corporate counsel. At the meeting, the representative of Thompson Coburn first reviewed with the Company Board its fiduciary duties under applicable law. The Company Board then discussed in detail the Parent proposal, and the history of the Company's discussions with Parent. The Company Board then discussed in detail the Company's business plan and the opportunities and risks facing the Company in the short and long term. The Company Board concluded that the $51.00 per Share proposal was financially inadequate, but authorized Messrs. McFarland and Tucker to further explore with Parent the possibility of a transaction with Parent, but only if it could be completed at a price higher than Parent's $51.00 per Share proposal.

        On September 1, 2010, Mr. McFarland sent a letter to Mr. Hogan stating that the Company Board had considered the offer contained in Mr. Hogan's August 25 letter and had rejected it.

        During the first three weeks of September 2010, Mr. McFarland and Mr. Hogan spoke on a number of occasions to discuss Parent's indication of interest and the Company's reaction. In particular, on September 3, 2010, Mr. Hogan requested a copy of the Company's updated business plan.

        On September 7, 2010, the Company Board met to review the status of discussions with Parent regarding a potential transaction. Mr. Moschner and a representative of Thompson Coburn were also present at the meeting. At the meeting, the Company Board decided to provide the Company's updated business plan to Parent, provided that Parent agreed to an extension of the standstill provision included in the Confidentiality Agreement previously executed by the parties. The Company Board also instructed Mr. McFarland to indicate to Parent that the Company Board wanted the process with Parent to come to a conclusion and wanted Parent to submit its "best and final" offer.

        On September 8, 2010, Parent and Baldor amended the standstill provision contained in the Confidentiality Agreement to extend the expiration of the standstill period from July 21, 2011 to January 21, 2012.

        On September 9, 2010, Mr. Tucker sent an updated business forecast for the Company's fiscal years 2010 through 2013 to Mr. Hogan for Parent's review.

        On September 16, 2010, Parent's financial advisor, Citigroup Global Markets Inc. ("Citi"), and UBS had an exploratory conversation about the broad parameters for a potential transaction.

        On October 13, 2010, Mr. Hogan, Dr. Ulrich Spiesshofer, Head of Parent's Discrete Automation and Motion Division, and two additional business representatives from Parent met with Mr. McFarland and Mr. Tucker in Fort Smith, Arkansas, to discuss a possible business combination between the two parties.

        On October 28, 2010, Mr. Hogan told Mr. McFarland that the Parent board of directors would likely be supportive of a transaction at a price of $62.00 per Share in cash, subject to negotiation of

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other deal terms. Four days later, on November 1, 2010, Parent delivered to Baldor a written proposal for the acquisition of 100% of Baldor's outstanding Shares at a price of $62.00 per Share in cash, which price represented a 47.5% premium to the price of the Shares on October 29, 2010. The proposal also indicated that Parent would envision that Baldor's headquarters would be at least the center and headquarters of Parent's North American motors and generators business, as well as the mechanical power transmission business. The proposal was conditioned on Parent's satisfactory completion of confirmatory due diligence, negotiation of mutually acceptable definitive agreements, and prompt agreement by Baldor to an exclusivity period of 30 days from the time a virtual data room was substantially populated to conduct due diligence. Parent also indicated it was not prepared to participate in an auction or pre-signing sale process. Parent also requested that members of the Company Board and key executives commit to tender their Shares in a potential Parent tender offer.

        On November 3, 2010, the Company Board met to discuss Parent's revised proposal. Also present at the meeting were representatives of senior management, UBS, Thompson Coburn and Gibson Dunn, outside special counsel to the Company. During the meeting, the directors discussed in detail with senior management and the Company Board's advisors the Company's business plan and the terms of Parent's revised indication of interest. The Company Board also reviewed with its advisors additional parties that could be interested in engaging in a business combination transaction with Baldor. At the end of the meeting, the Company Board directed UBS to seek improved financial terms to Parent's proposal and request Parent's commitment to a prompt closing of the transaction if an agreement on price was reached.

        On November 4, 2010, representatives of UBS contacted representatives of Citi to discuss Parent's proposal. UBS proposed that Parent increase its offer price to $65.00 per Share. UBS also communicated Baldor's desire that the parties conclude negotiations on the terms of a merger agreement by the end of November, and asked that Parent's due diligence be expedited to improve the likelihood of achieving that objective. UBS also highlighted the importance to Baldor of preserving the Company's unique business culture and other company-wide social issues of importance to Baldor.

        On November 7, 2010, Mr. Hogan called Mr. McFarland to discuss the proposed transaction, including Baldor's request for an enhanced price. Mr. McFarland discussed with Mr. Hogan the reasons why Baldor believed that an increased offer price of $65.00 per Share was justified and the issues raised by UBS in its discussions with Citi on November 4, 2010. Mr. Hogan stated that he would need to discuss the offer price further with members of Parent's board of directors.

        On November 8, 2010, representatives of Citi contacted representatives of UBS. Citi's representatives indicated that Parent would be willing to expedite due diligence and curtail certain requests in order to expedite signing of a definitive agreement. Citi's representatives conveyed that Parent was not prepared to offer $65.00 per Share.

        On November 9, 2010, representatives of UBS contacted representatives of Citi and suggested that the Company Board may be prepared to proceed with discussions at an offer price of $63.50 per Share. Later on November 9, 2010, Mr. Hogan called Mr. McFarland and offered a price of $63.50 per Share.

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        On November 10, 2010, the Company Board met and, after thorough discussion, authorized management to proceed with discussions with Parent at the proposed $63.50 per Share price and make available confirmatory due diligence information to Parent. The next day, Mr. McFarland informed Mr. Hogan that the Company was willing to move forward at an offer price of $63.50 per share

        On November 11, 2010, representatives of Parent sent an exclusivity agreement to Baldor which provided, among other things, that Baldor would engage in exclusive negotiations with Parent regarding a possible acquisition of Baldor by Parent, and would not engage in negotiations with any third party regarding an alternative transaction, for a period of 30 days from the date on which Parent and its representatives first obtained access to the Company's virtual due diligence data room.

        On or about November 13, 2010, counsel for the Company sent to representatives of Parent, and representatives of UBS sent to representatives of Citi, a revised draft of the proposed exclusivity agreement between the parties in which the Company proposed shortening the period for exclusive negotiations so that it would expire on November 23, 2010.

        Between November 14, 2010 and November 29, 2010, representatives of Parent engaged in a due diligence investigation of Baldor and its operations, including numerous calls and meetings with representatives of Baldor and its advisors. As part of Parent's due diligence investigation of Baldor, commencing on November 17, 2010 and continuing through November 19, 2010, members of senior management of Baldor and Parent, as well as their advisors, held a series of meetings in New York City.

        On November 15, 2010, the Company Board met with members of senior management and representatives of UBS, Thompson Colburn and Gibson Dunn. UBS reviewed with the Company Board the financial terms of Parent's latest proposal, and generally briefed the Company Board regarding the status of the discussions between Baldor and Parent. After thorough discussion, the Company Board decided to proceed with discussions with Parent, including making available to Parent confirmatory due diligence information and the negotiation of definitive transaction documentation.

        On November 15, 2010, Kirkland & Ellis LLP ("Kirkland & Ellis"), counsel to Parent, delivered to Gibson Dunn a draft merger agreement. Between such date and until the execution of the merger agreement, representatives of Kirkland & Ellis and Gibson Dunn negotiated the terms of the merger agreement and ancillary documentation. Among other things, the parties discussed and negotiated extensively the deal protection provisions of the merger agreement (including the terms of the no-solicitation covenant, the Company termination fees and whether any tender agreement would be executed by members of the Company Board and management in connection with the Offer).

        On November 16, 2010, Baldor and Parent entered into the Exclusivity Agreement pursuant to which Baldor agreed that, commencing on such date and continuing through November 23, 2010, it would engage in exclusive negotiations with Parent regarding a possible acquisition of Baldor by Parent.

        On November 20, 2010, Citi sent to UBS an amendment to the Exclusivity Agreement to extend the exclusivity period until November 30, 2010. The amendment was never executed by the parties.

        On November 29, 2010, the Company Board met to consider approval of the Merger Agreement and related issues. At the meeting, representatives of Thompson Colburn reviewed with the Company Board their fiduciary duties under applicable law, and representatives of Gibson Dunn reviewed the proposed Merger Agreement with the Company Board. Also at this meeting, UBS reviewed with the Company Board its financial analysis of the transaction, and delivered to the Company Board an oral opinion, which opinion was later confirmed by delivery of a written opinion, to the effect that, as of that date and based upon and subject to various assumptions, matters considered and limitations described in its opinion, the $63.50 per Share in cash to be paid to the holders of Shares pursuant to the Transactions was fair from a financial point of view to such holders. See discussion below under the heading "Opinion of the Company's Financial Advisor." Following further discussion, and after

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consultation with its financial advisor and counsel, the Company Board (i) unanimously resolved that the Merger Agreement and the Transactions were fair to and in the best interests of the Company and the Company's stockholders, (ii) unanimously authorized and adopted the Merger Agreement and the Transactions on the terms and subject to the conditions set forth in the Merger Agreement and (iii) unanimously recommended that the Company's stockholders accept the Offer, tender their Shares to Merger Sub pursuant to the Offer and, if required by the MGBCL, approve the Merger Agreement.

        On the evening of November 29, 2010, the Merger Agreement was executed.

        On November 30, 2010, prior to the opening of trading on the NYSE, Baldor and Parent issued a joint press release announcing the transaction.

Reasons for the Recommendation of the Company Board

        In evaluating the Merger Agreement and the Transactions, and recommending that the stockholders accept the Offer, tender their Shares pursuant to the Offer, and, if required by the MGBCL, approve the Merger Agreement, the Company Board consulted with the Company's senior management, and its legal and financial advisors, and considered and analyzed a wide and complex range of factors. Based on these consultations, considerations and analyses, the Company Board concluded that entering into the Merger Agreement with Merger Sub and Parent was fair to and in the best interests of the Company and the Company's stockholders.

        The Company Board considered these factors, among others, as supporting its recommendation:

•

The Company Board's familiarity with the business, operations, properties and assets, financial condition, business strategy, and prospects of the Company (as well as the risks involved in achieving those prospects), industry trends, and economic and market conditions, both on a historical and on a prospective basis;



•

the historical trading prices of the Shares, including the fact that the Offer Price of $63.50 represents a premium of approximately 41% over the closing price of the Shares on November 29, 2010, the last full trading day before the announcement of the execution of the Merger Agreement;



•

the attractiveness of a cash offer from Parent relative to perceived opportunities and the feasibility of other possible strategic alternatives to enhance long-term stockholder value, including risks and uncertainties attendant to possible future acquisitions;



•

the fact that the payment of the Offer Price and Merger Consideration will be funded by Parent out of funds on hand and, accordingly, the transaction is not subject to a financing contingency;



•

the financial presentation of UBS and its opinion dated November 29, 2010, to the Company Board as to the fairness, from a financial point of view and as of the date of the opinion, of the $63.50 per Share consideration to be received by holders of Shares in the Offer and Merger, as more fully described below under "—Opinion of the Company's Financial Advisor" beginning on page 18 and in the written opinion of UBS attached to this Schedule 14D-9 as Annex II;



•

the fact that the transaction is structured as a tender offer, which can be completed, and cash consideration can be delivered to the Company's stockholders, promptly, reducing the period of uncertainty during the pendency of the Transactions on the Company's stockholders, employees and business partners and the fact that the completion of the Offer will be followed by a second-step merger, in which stockholders who do not tender their Shares in the Offer will receive the same cash price as the Offer Price;



•

the fact that the Company's stockholders will not be obligated to tender their Shares in the Offer, and if they so desire, will be able to exercise dissenters' rights with respect to the Merger

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and demand payment of the fair value of their Shares under the MGBCL, subject to compliance with the applicable provisions of the MGBCL;

•

the fact that, subject to compliance with the terms and conditions of the Merger Agreement, the Company is permitted to furnish information to and conduct negotiations with third parties that make unsolicited acquisition proposals;



•

the Company Board's view that the terms of the Merger Agreement as reviewed by the Company Board with its legal and financial advisors, are advisable and fair to and in the best interests of the Company and the Company's stockholders, with the flexibility, under certain circumstances, to accept a proposal from a third party for a business combination with the Company which the Company Board determines to be more favorable to the stockholders of the Company from a financial point of view than the Transactions;



•

the Company's operating results will continue to be subject to risks of conditions or events outside the Company's control, such as global economic instability, and such uncertainties ultimately could have a material adverse effect upon the Company's results of operations or financial conditions and could negatively affect the Company's future stock price, and the Transactions allow stockholders to receive a significant premium to market price and no longer be subject to such risks and uncertainties;



•

certain discussions and considerations that the Company has had regarding Parent's commitment to retain most of the Company's employees; and



•

Parent's agreement to keep the Company's headquarters in Fort Smith, Arkansas, to cause such offices to be the headquarters for the North American operations of Parent's motors and generators business, and to maintain the Baldor brand.

        The Company Board considered these potentially negative factors, among others, in reaching its recommendation:

•

the fact that the Company's stockholders will receive cash pursuant to the Merger Agreement, which will not afford them the opportunity to participate in any growth in the business of the combined company;



•

the fact that an all-cash transaction would be taxable to the Company's stockholders that are U.S. persons for U.S. federal income tax purposes;



•

the significant costs involved in connection with entering into and completing the Transactions and the substantial time and effort of management required to complete the Transactions and related disruptions to the operation of our business;



•

while the Company expects that the Transactions will be consummated, the fact that there can be no assurance that the conditions to the Offer or the Merger will be satisfied, and that as a result, the Transactions may not be completed. If the Transactions are not consummated, (i) the trading price of the Shares could be adversely affected, (ii) the Company will have incurred significant transaction and opportunity costs attempting to consummate the Transactions, (iii) the Company may have lost business partners, customer relationships and employees after the announcement of the Transactions, (iv) the Company's business may be subject to disruption and (v) the market's perceptions of the Company's prospects could be adversely affected; and



•

the restriction that the Merger Agreement imposes on soliciting competing proposals, subject to payment of a termination fee of $105 million to Parent in certain circumstances (as described in the Merger Agreement), that could inhibit competing bidders from making a bid.

        The foregoing discussion of the information and factors considered by the Company Board is intended to be illustrative and not exhaustive, but includes all material reasons and factors considered.

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In view of the wide variety of reasons and factors considered, the Company Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the specified factors considered in reaching its determinations or the reasons for such determinations. Individual directors may have given differing weights to different factors or may have had different reasons for their ultimate determination. In addition, the Company Board did not reach any specific conclusion with respect to any of the factors or reasons considered. Instead, the Company Board conducted an overall analysis of the factors and reasons described above and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of the Transactions.

Financial Projections

        The management of the Company prepared certain non-public business and financial information about the Company, including certain financial projections for 2011 through 2013, as set forth below, which were provided to Parent and UBS.

        There is no guarantee that any projections will be realized, or that the assumptions on which they are based will prove to be correct.

        The Company does not as a matter of course make public any projections as to future performance or earnings, other than limited guidance for periods no longer than one year. The Company's internal financial forecasts, upon which the projections were based in part, are, in general, prepared solely for internal use, such as budgeting and other management decisions, and are subjective in many respects. As a result, these internal financial forecasts are susceptible to interpretations and periodic revision based on actual experience and business developments.

        The projections are forward-looking statements that reflect numerous assumptions made by the management of the Company and general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many of which are beyond the Company's control. Although the Company believes the assumptions underlying the projections to be reasonable, all projections are inherently uncertain, and the Company expects that there will be differences between actual and projected results. Such differences may result from the realization of any of numerous risks and uncertainties, including but not limited to the important factors listed under "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended January 2, 2010. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate or that any of the projections will be realized.

        The projections discussed above were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of

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Certified Public Accountants regarding projections or forecasts. The projections do not purport to present operations in accordance with U.S. generally accepted accounting principles, and the Company's independent registered public accounting firm has not examined, compiled or otherwise applied procedures to the projections and accordingly assumes no responsibility for them.

        The inclusion of the above projections should not be regarded as an indication that any of the Company, UBS, Parent or their respective affiliates or representatives considered or consider the projections to be a prediction of actual future events, and the projections should not be relied upon as such. However, as communicated by the Company to UBS, the projections are the projections that the management of the Company believes reflects the best currently available estimates and judgments by management as to the expected future result of operations and financial condition of the Company and, accordingly, upon which, with the Company's consent, UBS relied and performed its analysis.

        None of the Company, UBS, Parent or any of their respective affiliates or representatives intends to update or otherwise revise the projections to reflect circumstances existing or arising after the date such projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the projections are shown to be in error.

        To the extent stockholders give any consideration to the projections themselves, stockholders should carefully consider the assumptions, risks and uncertainties inherent in such projections in making any decision to tender their Shares in the Offer.

Opinion of the Company's Financial Advisor

        On November 29, 2010, at a meeting of the Company Board held to evaluate the proposed Offer and Merger, UBS delivered to the Company Board an oral opinion, which opinion was confirmed by delivery of a written opinion dated November 29, 2010, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the $63.50 per Share consideration to be received in the Offer and Merger by holders of Shares was fair, from a financial point of view, to such holders.

        The full text of UBS's opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. This opinion is attached to this Schedule 14D-9 as Annex II and is incorporated into this document by reference. Holders of Shares are encouraged to read UBS's opinion carefully in its entirety. UBS's opinion was provided for the benefit of the Company Board (in its capacity as such) in connection with, and for the purpose of, its evaluation of the $63.50 per Share consideration from a financial point of view and does not address any other aspect of the Offer or Merger. The opinion does not address the relative merits of the Offer or Merger as compared to other business strategies or transactions that might be available with respect to the Company or the Company's underlying business decision to effect the Offer and Merger. The opinion does not constitute a recommendation to any stockholder as to whether such stockholder should tender Shares in the Offer or how such stockholder should vote or act with respect to the Offer and Merger. The following summary of UBS's opinion is qualified in its entirety by reference to the full text of UBS's opinion.

        In arriving at its opinion, UBS, among other things:

•

reviewed certain publicly available business and financial information relating to the Company;



•

reviewed certain internal financial information and other data relating to the Company's business and financial prospects that were not publicly available, including financial forecasts and estimates prepared by the Company's management that the Company Board directed UBS to utilize for purposes of its analysis;

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•

conducted discussions with members of the Company's senior management concerning the Company's business and financial prospects;



•

reviewed publicly available financial and stock market data with respect to certain other companies UBS believed to be generally relevant;



•

compared the financial terms of the Offer and Merger with the publicly available financial terms of certain other transactions UBS believed to be generally relevant;



•

reviewed current and historical market prices of the Shares;



•

reviewed a draft, dated November 29, 2010, of the Merger Agreement; and



•

conducted such other financial studies, analyses and investigations, and considered such other information, as UBS deemed necessary or appropriate.

        In connection with its review, with the consent of the Company Board, UBS assumed and relied upon, without independent verification, the accuracy and completeness in all material respects of the information provided to or reviewed by UBS for the purpose of its opinion. In addition, with the consent of the Company Board, UBS did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company, and was not furnished with any such evaluation or appraisal. With respect to the financial forecasts and estimates referred to above, UBS assumed, at the direction of the Company Board, that such forecasts and estimates had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the Company's future financial performance. UBS's opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information available to UBS as of, the date of its opinion.

        In addition, at the direction of the Company Board, UBS was not asked to, and it did not, offer any opinion as to the terms, other than the $63.50 per Share consideration to the extent expressly specified in UBS's opinion, of the Merger Agreement or the form of the Offer and Merger. In addition, UBS expressed no opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Offer and Merger, or any class of such persons, relative to the $63.50 per Share consideration. UBS expressed no opinion as to the price at which the Shares would trade at any time. In rendering its opinion, UBS assumed, with the consent of the Company Board, that (i) the final executed form of the Merger Agreement would not differ in any material respect from the draft that UBS reviewed, (ii) the parties to the Merger Agreement would comply with all material terms of the Merger Agreement and (iii) the Offer and Merger would be consummated in accordance with the terms of the Merger Agreement without any adverse waiver or amendment of any material term or condition of the Merger Agreement. UBS also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Offer and Merger would be obtained without any material adverse effect on the Company or the Offer and Merger. UBS was not authorized to solicit and did not solicit indications of interest in a transaction with the Company from any party. Except as described above, the Company imposed no other instructions or limitations on UBS with respect to the investigations made or the procedures followed by UBS in rendering its opinion. The issuance of UBS's opinion was approved by an authorized committee of UBS.

        In connection with rendering its opinion to the Company Board, UBS performed a variety of financial and comparative analyses which are summarized below. The following summary is not a complete description of all analyses performed and factors considered by UBS in connection with its opinion. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected companies analysis and the selected transactions analysis summarized below, no company or transaction used as a comparison was identical to the Company or the Offer and Merger. These analyses

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necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the companies concerned.

        UBS believes that its analyses and the summary below must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying UBS's analyses and opinion. UBS did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole.

        The estimates of the future performance of the Company provided by the Company or derived from public sources in or underlying UBS's analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, UBS considered industry performance, general business and economic conditions and other matters, many of which were beyond the control of the Company. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold or acquired.

        The $63.50 per Share consideration to be received pursuant to the Offer and Merger was determined through negotiation between the Company and Parent and the decision by the Company to enter into the Offer and Merger was solely that of the Company Board. UBS's opinion and financial analyses were only one of many factors considered by the Company Board in its evaluation of the Offer and Merger and should not be viewed as determinative of the views of the Company Board or management with respect to the Offer and Merger or the $63.50 per Share consideration.

        The following is a brief summary of the material financial analyses performed by UBS and reviewed with the Company Board on November 29, 2010 in connection with its opinion relating to the proposed Offer and Merger. The financial analyses summarized below include information presented in tabular format. In order for UBS's financial analyses to be fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of UBS's financial analyses.

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Selected Companies Analysis

        UBS compared selected financial and stock market data of the Company with corresponding data of the following four selected publicly traded motor and mechanical power transmission companies:

•

A.O. Smith Corporation



•

Altra Holdings, Inc.



•

Franklin Electric Co., Inc.



•

Regal Beloit Corporation

        UBS reviewed, among other things, the enterprise values of the selected companies, calculated as diluted equity market value based on closing stock prices on November 26, 2010, plus debt at book value, preferred stock at liquidation value and minority interests at book value, less cash and cash equivalents, as multiples of calendar years 2010 and 2011 estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA. UBS also reviewed closing stock prices of the selected companies on November 26, 2010 as a multiple of calendar years 2010 and 2011 estimated earnings per share, referred to as EPS. UBS then compared these multiples derived for the selected companies with corresponding multiples implied for the Company based both on the closing price of the Shares on November 26, 2010 and the $63.50 per Share consideration. Financial data for the selected companies were based on publicly available research analysts' consensus estimates, public filings and other publicly available information. Estimated financial data for the Company were based both on internal estimates of the Company's management, referred to as Company Management Estimates, and publicly available research analysts' consensus estimates, referred to as Company Wall Street Consensus Estimates. In calculating enterprise value as a multiple of EBITDA based on Company Management Estimates, operating income plus depreciation and amortization, referred to as Operating EBITDA, was used as the denominator. This analysis indicated the following implied high, mean, median and low multiples for the selected companies, as compared to corresponding multiples implied for the Company:

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