SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
HARNISCHFEGER INDUSTRIES, INC.
- -----------------------------------------------------------
(Name of Registrant as Specified in its Charter)
HARNISCHFEGER INDUSTRIES, INC.
- -----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-
6(i)(1), or 14a-(6)(j)(2).
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
- ---------------------------------------------------------
(2) Aggregate number of securities to which
transactions applies:
- ---------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11:1
- ----------------------------------------------------------
(4) Proposed maximum aggregate value of
transaction:
- ----------------------------------------------------------
/ / 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:
- -----------------------------------------------------------
1 Set forth the amount on which the filing fee is
calculated and state how it was determined.
<PAGE>
[HARNISCHFEGER INDUSTRIES, INC. LOGO]
Notice of 1995
Annual Meeting of
Stockholders and
Proxy Statement
<PAGE>
[HII LOGO]
HARNISCHFEGER INDUSTRIES, INC.
P.O. Box 554
Milwaukee, WI 53201
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders of Harnischfeger
Industries, Inc. will be held at the Vogel Hall of the
Performing Arts Center, 123 E. State Street, Milwaukee,
Wisconsin, on Monday, March 6, 1995, at 10:00 A.M. for the
following purposes:
1. To elect four persons to the Corporation's Board of
Directors;
2. To consider and act upon amendments to the 1988
Incentive Stock Plan to increase by 1,200,000 the
aggregate number of shares of Common Stock issuable
thereunder and to limit the number of shares that may
be issued to any participant thereunder; and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Stockholders of record at the close of business on January
9, 1995 are entitled to receive notice of and to vote at
the annual meeting and any adjournment thereof. A list of
stockholders entitled to vote is available at the
Corporation's offices.
We hope that you will attend the 1995 annual meeting.
Whether or not you plan to attend, we urge you to mark,
date and sign the enclosed proxy card and return it
promptly so that your shares will be voted at the meeting
in accordance with your instructions.
By order of the Board of Directors,
K. THOR LUNDGREN
Secretary
February 6, 1995
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE.
<PAGE>
CONTENTS
NOTICE OF ANNUAL MEETING
PROXY STATEMENT Page
----
INTRODUCTION 1
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF
EXECUTIVE OFFICERS AND DIRECTORS 2
ELECTION OF DIRECTORS 5
CONTINUING DIRECTORS 7
BOARD MEETINGS, COMMITTEES AND COMPENSATION 9
SUMMARY COMPENSATION TABLE 12
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE
COMPENSATION 15
PERFORMANCE GRAPH 19
PENSION PLAN TABLE 20
OPTION GRANTS 21
OPTION EXERCISES AND FISCAL YEAR-END VALUES 22
LONG-TERM INCENTIVE COMPENSATION 23
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS 24
PROPOSAL TO AMEND THE 1988 INCENTIVE
STOCK PLAN 26
OTHER INFORMATION 27
ANNEX 1 - Description of the 1988
Incentive Stock Plan i
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Harnischfeger Industries, Inc. (the "Corporation") for use
at the 1995 annual meeting of stockholders on Monday, March
6, 1995, and at any adjournment thereof. The proxy
statement, proxy card and annual report are
being mailed to stockholders on or about
February 6, 1995.
Proxies
Properly signed and dated proxies received by the
Corporation's Secretary prior to or at the annual meeting
will be voted as instructed thereon or, in the absence of
such instruction, (a) FOR the election to the Board of
Directors of the persons nominated by the Board, (b) FOR
the amendments to the 1988 Incentive Stock Plan, and (c) in
accordance with the best judgment of the persons named in
the proxy on any other matters which may properly come
before the meeting.
Any proxy may be revoked by the person executing it for any
reason at any time prior to the time the polls close as an-
nounced at the meeting by filing with the Secretary of the
Corporation a written revocation or duly executed form of
proxy bearing a later date or by voting in person at the
meeting. The Corporation has appointed an officer of The
First National Bank of Boston, transfer agent for the
Corporation, to act as an independent inspector at the
annual meeting.
Record Date, Voting and Shares Outstanding
Stockholders of record of the Corporation's common stock,
$1 par value per share (the "Common Stock"), at the close
of business on January 9, 1995 (the "Record Date") are
entitled to vote on all matters presented at the annual
meeting. As of the Record Date, 47,671,432 shares of
Common Stock were outstanding and entitled to vote at the
annual meeting. Each share is entitled to one vote.
A majority of the shares entitled to vote, represented in
person or by proxy, constitutes a quorum. Under the
Corporation's bylaws, if a quorum is present, the affirma-
tive vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter is re-
quired for the election of directors and adoption of the
amendments to the 1988 Incentive Stock Plan. In addition,
under applicable New York Stock Exchange rules, the total
votes cast on the amendments to the 1988 Incentive Stock
Plan must represent over 50% of the shares entitled to vote
thereon. The independent inspector shall count the votes
and ballots. Abstentions are considered as shares repres-
ented and entitled to vote; therefore, abstentions are
counted for purposes of the quorum determination but are
not counted as votes cast on a given matter, having the
effect of a negative vote.
Any broker or nominee "non-votes" on a matter will not be
considered as shares entitled to vote on that matter and
therefore will not be counted by the inspector in calcu-
lating the number of shares represented and entitled to
vote on that matter. Such non-votes are, however, counted
toward the quorum requirement.
If less than a majority of the outstanding shares of Common
Stock are represented at the meeting, a majority of the
shares so represented may adjourn the meeting from time to
time without further notice.
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF EXECUTIVE
OFFICERS AND DIRECTORS
The following table sets forth the beneficial ownership of
Common Stock as of January 1, 1995 by any person known to
the Corporation to own beneficially more than 5% of its
Common Stock, each of the executive officers named in the
Summary Compensation Table and the Corporation's executive
officers and directors as a group. Beneficial ownership of
these shares consists of sole voting power and sole invest-
ment power except as noted below.
- ---------------------------------------------------------
Name and Address Shares Percent
of Beneficial Owner Owned of Class
- ---------------------------------------------------------
Harris Associates L.P.
2 North LaSalle Street
Suite 500
Chicago, Illinois 60602 3,621,975(1) 7.6%
FMR Corp. 3,502,662(2) 7.3%
82 Devonshire Street
Boston, Massachusetts
02109
Jeffery T. Grade 347,392(3) 0.7%
John A. McKay 162,783(4) 0.3%
John R. Teitgen 172,831(5) 0.4%
Francis M. Corby, Jr. 147,621(6) 0.3%
K. Thor Lundgren 65,410(7) 0.1%
All executive officers
and directors as a
group (20 persons) 1,082,388(8)(9) 2.3%
- ----------------------------------------------------------
Notes
(1) Based on information supplied to the Corporation by
Harris Associates, L.P., a Delaware limited
partnership ("Harris"). Harris is an investment
adviser registered under Section 203 of the
Investment Advisers Act of 1940 and holds shares only
in customer third party accounts and disclaims
beneficial ownership of these shares for purposes of
Section 16 of the Securities Exchange Act of 1934.
Harris generally does not vote any of these shares,
except in cases where it serves as the general
partner of certain limited partnerships that may own
the shares. However, Harris has been granted the
power to do so in circumstances it determines to be
appropriate in connection with assisting its clients
to whom it renders financial advice in the ordinary
course of its business. Harris has sole dispositive
power with respect to
<PAGE>
Notes (Continued)
2,344,975 shares and has shared dispositive power
with respect to 1,277,000 shares. Oakmark Fund, a
series of the Harris Associates Investment Trust with
the same address as Harris, has sole voting power and
shared dispositive power with respect to 1,254,700 of
these shares (2.6% of class). Harris serves as
investment adviser to Oakmark Fund.
(2) Based on information supplied to the Corporation by
FMR Corp., a parent holding company, in a Schedule
13G filed with the Securities and Exchange Commission
in January, 1995. Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR Corp. and
an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, is the
beneficial owner of 2,857,265 or 6.0% of the
Corporation's Common Stock.
(3) Includes 94,500 shares Mr. Grade had a right to
acquire upon exercise of stock options, 873 shares
beneficially owned under the Profit Sharing Plan,
138,098 shares beneficially owned under the Executive
Incentive Plan, 98,671 shares beneficially owned
under the Supplemental Retirement and Stock Funding
Plan and 8,250 shares of restricted Common Stock
granted under the 1990 Restricted Stock Award Plan.
The 1990 Restricted Stock Award Plan is described in
the Human Resources Committee Report on Executive
Compensation.
(4) Includes 53,250 shares Mr. McKay had a right to
acquire upon exercise of stock options, 873 shares
beneficially owned under the Profit Sharing Plan,
80,969 shares beneficially owned under the Executive
Incentive Plan and 18,816 shares beneficially owned
under the Supplemental Retirement and Stock Funding
Plan.
(5) Includes 50,500 shares Mr. Teitgen had a right to
acquire upon exercise of stock options, 873 shares
beneficially owned under the Profit Sharing Plan,
72,668 shares beneficially owned under the Executive
Incentive Plan and 35,365 shares beneficially owned
under the Supplemental Retirement and Stock Funding
Plan. Also includes 1,000 shares held in an HR10
plan for the benefit of Mr. Teitgen.
(6) Includes 45,625 shares Mr. Corby had a right to
acquire upon exercise of stock options, 873 shares
beneficially owned under the Profit Sharing Plan, 43
shares beneficially owned under the 401(k) Plan,
71,796 shares beneficially owned under the Executive
Incentive Plan, 21,659 shares beneficially owned
under the Supplemental Retirement and Stock Funding
Plan and 4,125 shares of restricted Common Stock
granted under the 1990 Restricted Stock Award Plan.
Also includes 3,500 shares held by Mr. Corby as
custodian for his sons.
(7) Includes 26,250 shares Mr. Lundgren had a right to
acquire upon exercise of stock options, 126 shares
beneficially owned under the Profit Sharing Plan,
32,669 shares beneficially owned under the Executive
Incentive Plan, 2,004 shares beneficially owned under
the Supplemental Retirement and Stock Funding Plan
and 2,000 shares of restricted Common Stock granted
under the 1990 Restricted Stock Award Plan.
<PAGE>
Notes (Continued)
(8) Includes 335,226 shares which eight executive
officers had a right to acquire upon exercise of
stock options, 6,039 shares which eight executive
officers beneficially owned under the Profit Sharing
Plan, 969 shares which three executive officers
beneficially owned under the 401(k) Plan, 481,379
shares which eight executive officers beneficially
owned under the Executive Incentive Plan, 205,068
shares which six executive officers beneficially
owned under the Supplemental Retirement and Stock
Funding Plan and 17,750 shares of restricted Common
Stock granted under the 1990 Restricted Stock Award
Plan. Also includes 3,500 shares held in trust for
the minor children of one executive officer, 2,250
shares one executive officer owned jointly with his
spouse, 1,000 shares held in trust for one executive
officer and 437 shares held by the spouses of two
executive officers.
(9) See the Notes under the headings "Election of
Directors" and "Continuing Directors" on pages 6 and
8 for additional information on beneficial ownership
of directors.
The above beneficial ownership information is based on
information furnished by the specified persons, is
determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as required for purposes
of this proxy statement, and includes shares of Common
Stock that are issuable upon the exercise of options
exercisable within 60 days of January 1, 1995. It is not
necessarily to be construed as an admission of beneficial
ownership for other purposes.
<PAGE>
ELECTION OF DIRECTORS
The following table shows certain information (including
principal occupation, business experience and beneficial
ownership of the Corporation's Common Stock as of January
1, 1995) concerning each of the individuals nominated by
the Board of Directors for election at the 1995
annual meeting. Each is presently a director whose term
expires in 1995. If for any unforeseen reason any of these
nominees should not be available for election, the proxies
will be voted for such person or persons as may be nomi-
nated by the Board. C. R. Whitney, a director whose term
expires as of the date of the annual meeting and who has
reached age 70, the mandatory retirement age set by the
Board, is retiring from the Board. Upon Mr. Whitney's
retirement, the Board intends to amend the Corporation's
bylaws to reduce the number of directors from thirteen to
twelve.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Director Proposed Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John D. Correnti President, Chief Operating Officer 1994 1998 None
and Director, Nucor Corporation, a
major U.S. steel producer headquartered
in Charlotte, North Carolina, since 1991.
Vice President, General Manager and
Construction Manager of Nucor from 1980
to 1991. Director, Navistar
International Corporation, Southern
Regional Board of Wachovia Bank, the
Steel Manufacturers Association and
the Charlotte Chamber of Commerce.
Age 47.
Don H. Davis, Jr. Executive Vice President and Chief 1993 1998 766(2)
Operating Officer of Rockwell
International Corporation, a world
leader in the development of advanced
manufacturing technology, since
January, 1994. Senior Vice
President and President, Automation,
Rockwell International Corporation
from 1993 to 1994. President of
Allen-Bradley Company, manufacturer
of industrial automation equipment
and electronic components and a
subsidiary of Rockwell International
Corporation, from 1989 to 1994;
Senior Vice President and General
Manager of the Industrial Computer
and Communication Group of
Allen-Bradley Company from
1987 to 1989. Director, Sybron
International Corporation. Age 55.
Robert B. Hoffman Senior Vice President and Chief 1994 1998 None
Financial Officer of Monsanto
Company, a diversified company in
pharmaceuticals, food products and
agriculture chemicals, since 1994.
Executive Vice President
International of FMC Corporation,
a manufacturer of machinery and
chemical products, from 1992 to 1994.
Vice President Finance of FMC
Corporation from 1988 to 1992.
Director, Kemper Municipal Bond Fund
Inc. and Kemper Income and Capital
Preservation Fund. Age 58.
- ---------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------
Director Proposed Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------------------
Jean-Pierre
Labruyere Chairman and Chief Executive of 1994 1998 None
Labruyere, Eberle, a financial
holding company based in France
with global interests in many
business areas including oil and
gas importation and distribution and
food distribution, since 1972.
Director, Promodes S.A. Martin
Maurel Bank - Banque de France
Adviser. Age 56.
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) None of the nominees beneficially owned more than 1%
of the Corporation's Common Stock.
(2) Shares beneficially owned under the Directors Stock
Compensation Plan.
<PAGE>
CONTINUING DIRECTORS
The following table shows certain information concerning
the directors whose terms will continue after the 1995
annual meeting including principal occupation,
business experience and beneficial ownership of the
Corporation's Common Stock as of January 1, 1995.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Director Current Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffery T. Grade Chairman of the Board and Chief 1983 1996 347,392(2)
Executive Officer since 1993.
President and Chief Executive
Officer of the Corporation from
1992 to 1993. President and Chief
Operating Officer of the Corporation
from 1986 to 1992. Director,
Coeur D'Alene Mines Corporation,
Crucible Materials Corporation
and Measurex Corporation. Age 51
Robert M. Gerrity Director and former President and 1994 1996 None
Chief Executive Officer of Ford
New Holland, now New Holland
n.v., a London-based agricultural
and industrial equipment
manufacturer. Director, Libralter
Plastics Inc. and Rubbermaid, Inc.
Age 56
Robert F. Schnoes Chairman, President and Chief 1984 1996 6,513(3)
Executive Officer of Freeport
Corporation, a holding company
whose subsidiaries manufacture
specialty electrical products,
since 1986. Vice Chairman of Carter
Motor Co., a manufacturing company
that designs and builds small DC
and universal electric motors,
since 1991. Director, American
National Bank and Trust Company
of Chicago. Age 68.
Donald Taylor Associate, Sullivan Associates, 1979 1996 1,823(4)
specialists in Board of Director
searches, since 1992. Managing
Director-USA, ANATAR Investments
Limited, a venture capital
specialist, from 1990 to 1992.
Chairman of Rexnord Inc.,
manufacturer of industrial
components and machinery, from
1985 to 1988. Director, Banc
One Wisconsin Corporation, Bank
One Milwaukee, N.A., Banta
Corporation, Johnson Controls,
Inc., Level Valley Dairy and The
Enhancers, Inc. Age 67.
- ---------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------
Director Current Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------------------
Donna M. Alvarado Principal of Aguila International, 1992 1997 500
an international business
development consulting firm based
in Columbus, Ohio since 1994.
President and Chief Executive
Officer of Quest International,
a non-profit educational
organization based in Granville,
Ohio, from 1989 to 1994.
Director of ACTION, the federal
domestic volunteer agency, from
1985 to 1989. Director, Park
National Bank. Age 46.
Harry L. Davis Professor of Creative Management 1987 1997 2,039(5)
at the University of Chicago since
1994. Professor of Marketing from
1963 to 1994. Deputy Dean of the
Graduate School of Business at the
University of Chicago from 1983 to
1993. Director, Golden Rule
Insurance Company. Age 57.
Ralph C. Joynes Retired Vice Chairman, President 1988 1997 3,445(6)
Chief Operating Officer of USG
Corporation, international
manufacturer of building materials
and construction systems. Age 66.
Herbert V.
Kohler, Jr. Chairman of the Board and President 1973 1997 700
of Kohler Company, manufacturer of
plumbing and specialty products,
engines, generators, furniture and
accessories, owner and operator of
hospitality businesses and developer
of real estate, since 1974. Age 55.
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) Beneficial ownership of these shares consists of sole
voting power and sole investment power except as
noted below. None of the continuing directors
beneficially owned 1% or more of the Corporation's
Common Stock.
(2) See note (3) on page 3.
(3) Includes 2,100 shares owned jointly with his wife and
4,413 shares beneficially owned under the Directors
Stock Compensation Plan.
(4) Includes 1,223 shares beneficially owned under the
Directors Stock Compensation Plan.
(5) Shares beneficially owned under the Directors Stock
Compensation Plan.
(6) Includes 2,445 shares beneficially owned under the
Directors Stock Compensation Plan.
<PAGE>
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors held eight meetings during fiscal
1994. All incumbent directors attended at least 75% of the
total number of meetings of the Board and committees of
which they were members.
BOARD COMMITTEES
The Board has Audit, Human Resources, Finance and Strategic
Planning, Pension and Executive Committees. The Audit
Committee has an MIS Subcommittee. Mr. C. R. Whitney is
retiring as a member of the Audit, Human Resources, Pension
and Executive Committees as of the date of the annual
meeting.
Audit Committee
The continuing members of the Audit Committee are Donald
Taylor (Chair), Donna M. Alvarado, John D. Correnti, Don H.
Davis, Jr., and Jean-Pierre Labruyere. The functions of
the Audit Committee are to: (i) recommend for appointment
independent auditors for the Corporation, (ii) review and
approve the scope of the annual audit and proposed budget
for audit fees, (iii) review the results of the annual
audit with the independent auditors, (iv) review the audi-
tors' management letters with the independent auditors and
engage in appropriate follow-up with the corporate staff,
(v) determine that appropriate action is taken if any
irregularities are uncovered, (vi) review with the inde-
pendent auditors the Corporation's internal controls, (vii)
review the activities of the internal auditors and (viii)
report to the Board on the activities and findings of the
Audit Committee and make recommendations to the Board based
on such findings. The Audit Committee met twice during
fiscal 1994.
MIS Subcommittee of the Audit
Committee
The members of the MIS Subcommittee of the Audit Committee
are Donald Taylor (Chair) and Don H. Davis, Jr. The func-
tion of the MIS Subcommittee is to examine the data pro-
cessing activities of the Corporation and its subsidiaries,
with particular emphasis on monitoring progress by Harnisc-
hfeger Corporation in implementing a Business Management
System. The MIS Subcommittee met twice during fiscal 1994.
Human Resources Committee
The continuing members of the Human Resources Committee are
Robert F. Schnoes (Chair), Harry L. Davis, Ralph C. Joynes
and Donald Taylor. The functions of the Human Resources
Committee are to: (i) periodically review and approve the
compensation structure for the Corporation's key execu-
tives, including salary rates, participation in any
incentive bonus plan, fringe benefits, non-cash perquisites
and all other forms of compensation, (ii) administer the
Incentive Stock, the Executive Incentive and the Supple-
mental Retirement and Stock Funding Plans, (iii)
periodically audit the executive manpower of the Corpora-
tion and make recommendations to the Board as appropriate
and (iv) receive, consider and present to the Board for its
consideration nominations to fill vacancies in the Board of
Directors. Stockholders who wish to recommend persons to
become directors of the Corporation should direct their
recommendations to the Human Resources Committee in care of
the Corporation. The Human Resources Committee met five
times during fiscal 1994.
<PAGE>
Finance and Strategic Planning Committee
The members of the Finance and Strategic Planning Committee
are Don H. Davis, Jr., (Chair), Harry L. Davis, Robert M.
Gerrity, Ralph C. Joynes, Herbert V. Kohler and Robert F.
Schnoes. The functions of the Finance and Strategic Plan-
ning Committee are to: (i) periodically review with man-
agement of the Corporation the financial structure of the
Corporation and the appropriateness of such structure given
the short-term and long-term goals of the Corporation, (ii)
review specific financial proposals of management which
require Board approval and make recommendations to the
Board as appropriate, (iii) review with management the
strategic plans of management for the Corporation and (iv)
review specific recommendations of management relating to
acquisitions, divestitures and other strategic activities
requiring approval of the Board and make recommendations to
the Board as appropriate. The Finance and Strategic Plan-
ning Committee met once during fiscal 1994.
Pension Committee
The continuing members of the Pension Committee are Donna
M. Alvarado (Chair), John D. Correnti, Robert M. Gerrity
and Jean-Pierre Labruyere. The functions of the Pension
Committee are to: (i) periodically review the investment
policy of the Corporation's Pension and Investment Com-
mittee, (ii) periodically review the actions and perfor-
mance of the Pension and Investment Committee and any other
administrative committees for retirement plans and trusts
for which the Corporation is now or may hereafter serve or
sponsor (a "Plan" or "Trust"), including the implementation
by such committees of the investment policy, (iii) make
recommendations to the Board regarding the membership of
the Pension and Investment Committee, (iv) review the need
for the establishment of any new Plan or Trust, the
termination of any existing Plan or Trust and the adoption
of any amendment to any single Plan that would result in an
increase in current Plan liabilities in excess of
$5,000,000 and (v) report to the Board on the activities
and findings of the Committee and make recommendations to
the Board based on these findings. The Pension Committee
met twice during fiscal 1994.
Executive Committee
The continuing members of the Executive Committee are
Jeffery T. Grade (Chair), Ralph C. Joynes, Herbert V.
Kohler, Robert F. Schnoes and Donald Taylor. The function
of the Executive Committee is to act upon a matter when it
determines that prompt action is in the best interest of
the Corporation and it is not possible to call a meeting of
the full Board. The Executive Committee did not meet
during fiscal 1994.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the
Corporation receive an annual retainer fee of $18,000, a
fee of $1,000 for each Board meeting attended and a fee of
$800 for each Board committee or subcommittee meeting
attended. Committee and subcommittee chairs receive $1,200
for each committee or subcommittee meeting attended.
Directors who are officers of the Corporation earn no
additional remuneration for their services as directors.
The Corporation has a Directors Stock Compensation Plan
under which non-employee directors are allowed to elect to
defer up to 100% of their fees by converting their fees
into Common Stock to be held in trust until termination of
their status as directors. The Directors Stock
<PAGE>
Compensation Plan provides that, in the event of a "Change
in Control", as defined in the Corporation's Deferred Com-
pensation Trust, the Corporation will purchase for cash all
shares of Common Stock then allocated to all participants'
accounts at a per-share price equal to the highest per-
share price actually paid in connection with such Change in
Control and cash proceeds will be distributed to the
participants.
The Corporation also has a Service Compensation Plan for
Directors which provides that, upon leaving the Board
(other than removal for cause), a director who has been a
non-employee director for at least five years will receive
a cash retirement benefit equal to one-twelfth the average
annual compensation received by the director for Board
service during the preceding three year period multiplied
by the number of months of service as anon- employee
director and payable in quarterly installments over a
period of five to ten years. In the event a director who
has been a non-employee director for at least five years
retires following a Change In Control of the Corporation,
benefits under the Service Compensation Plan are equal to
one-twelfth the highest compensation received by the
director for Board service in any consecutive twelve month
period during the thirty-six month period preceding the
Change In Control multiplied by the number of months of
service as a non-employee director plus thirty-six. Pay-
ments are suspended any time a former director becomes an
employee of the Corporation or returns to service as a
director. A former director is required to be available
for consultation with officers of the Corporation during
the period the director receives benefits under the Service
Compensation Plan. Mr. C. R. Whitney, whose term as a
director expires as of the annual meeting, and Mr. Terrance
J. Bruggeman, who resigned as a director in 1994, are
entitled to receive benefits under the terms of the Service
Compensation Plan for Directors.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to,
earned by or paid to the Corporation's Chief Executive
Officer and each of the four most highly compensated execu-
tive officers other than the Chief Executive Officer who
were serving as executive officers at the end of fiscal
1994 for services rendered to the Corporation and its sub-
sidiaries during fiscal 1994, 1993 and 1992.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-Term
Annual Compensation Compensation
Awards
Secu-
Other rities All
Name Annual Restricted Under- Other
and Compen- Stock lying Compen-
Principal Position Year Salary Bonus sation Awards Options sation
($) ($) ($) ($) /SARs ($)
- ---------------------------------------------------------------------------------------------
Jeffery T. Grade 1994 $525,000 -- $252,026 -- 25,000 $661,805
Chairman and 1993 493,753 -- 86,008 $68,750 25,000 203,284
Chief Executive 1992 453,630 -- 143,345 50,875 25,000 403,320
John A. McKay
President and 1994 333,996 -- $160,613 -- -- $429,553
Chief Operating 1993 312,708 -- 60,002 $40,625 20,000 131,184
Officer 1992 282,750 $62,205 70,984 30,063 20,000 190,807
John R. Teitgen
President of 1994 $250,452 -- $123,476 -- -- $316,864
Harnischfeger 1993 250,452 -- 50,868 $34,375 15,000 102,549
Systems(4) 1992 237,948 -- 80,175 25,438 15,000 212,278
Francis M. Corby, Jr.
Executive Vice 1994 $247,800 -- $131,779 -- 15,000 315,109
President for Finance 1993 235,296 -- 50,772 34,375 15,000 96,430
and Administration(5) 1992 223,500 -- 73,692 25,438 12,500 199,601
K. Thor Lundgren
Executive Vice 1994 $209,304 -- $104,499 -- 15,000 $265,143
President for Law and 1993 198,804 -- 40,126 $25,000 15,000 80,695
Government Affairs(6) 1992 187,500 -- 54,998 18,500 15,000 166,787
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) Participants in the Executive Incentive Plan may
elect to defer up to 100% of their cash bonuses by
converting such bonuses into Common Stock at a 25%
discount from the average closing price of the Common
Stock for the last month of the fiscal year. All
<PAGE>
Notes (Continued)
such stock is held in the Corporation's Deferred
Compensation Trust and may not be withdrawn by a
participant as long as the participant remains an
employee of the Corporation. All of the named
executive officers elected to convert 100% of their
cash bonuses into Common Stock under this plan in
each of the last three fiscal years except Mr. McKay,
who did not convert 25% of his fiscal 1992 bonus.
The Executive Incentive Plan also provides that
dividends on shares held in participants' accounts
are reinvested in Common Stock at a 25% discount from
market prices. The dollar value of the difference
between the bonus amount converted and the market
value of the shares purchased and the dollar amounts
attributable to the discount upon the reinvestment of
dividends are included in the "Other Annual
Compensation" column. The dollar value of the bonus
amounts that have been converted into stock and
deferred are reported in the "All Other Compensation"
column. The "banked" portion of any bonus is not
reported in the Summary Compensation Table, but is
reported in the Long-Term Incentive Plans - Awards
Table on page 23.
(2) Represents the market value on the date of grant of
restricted Common Stock granted under the 1990
Restricted Stock Award Plan. This valuation does not
take into account the diminution in value
attributable to the restrictions applicable to the
shares. The number and market value at the end of
the last fiscal year of aggregate restricted Common
Stock holdings based on a fiscal year-end closing
price of $25.00 per share were: Jeffery T. Grade
8,250 ($206,250); John A. McKay 3,250 ($81,250); John
R. Teitgen 2,750 ($68,750); Francis M. Corby, Jr.
4,125 ($103,125) and K. Thor Lundgren 2,000
($50,000). Dividends are paid on the restricted
Common Stock at the same rate as on unrestricted
shares. As discussed in the Human Resources
Committee Report on Executive Compensation, except
for Mr. McKay and Mr. Teitgen, the vesting of this
stock was extended to November 1, 1995. Mr. McKay's
and Mr. Teitgen's restricted stock vested on November
1, 1994.
(3) Includes the following amounts which represent
bonuses earned in 1994 and deferred and converted
into Common Stock by the named executives under the
Executive Incentive Plan as described in Note 1
above: Jeffery T. Grade $653,625; John A. McKay
$415,825; John R. Teitgen $311,813; Francis M. Corby,
Jr. $308,511 and K. Thor Lundgren $260,584. In
previous year's proxy statements, deferred bonus
amounts were reported in the Bonus column under
Annual Compensation. The method of reporting was
changed to emphasize that the executive officers have
elected to defer this compensation and convert it to
Common Stock under the terms of the Executive
Incentive Plan. Also includes $2,482 for each
executive which represents contributions for fiscal
1994 under the Profit Sharing Plan and the following
amounts paid by the Corporation during fiscal 1994
for group term life insurance premiums for the
benefit of the executives: Jeffery T. Grade $5,698;
John A. McKay $11,246; John R. Teitgen $2,569;
Francis M. Corby, Jr. $4,116 and K. Thor Lundgren
$2,077.
<PAGE>
(4) Mr. Teitgen's employment with the Corporation ended
effective January 15, 1995. See page 25 for
information about payments to be made to Mr. Teitgen
in connection with the cessation of his employment.
(5) Mr. Corby was Senior Vice President, Finance and
Chief Financial Officer until December 5, 1994, when
he assumed his present position.
(6) Mr. Lundgren was Senior Vice President, Secretary and
General Counsel until December 5, 1994, when he
assumed his present position.
<PAGE>
HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE
COMPENSATION
The Human Resources Committee, which currently consists of
five outside directors, met five times in 1994. In addi-
tion, the Committee Chairman maintained an ongoing dialogue
with senior management during fiscal 1994 on matters
related to compensation and organizational development.
In its compensation deliberations, the Committee considers
corporate performance as well as individual contributions
and relies on the personal experience and knowledge of its
members and, where appropriate, outside survey data to
reach its decisions.
As reported to stockholders in earlier proxy statements,
the Committee is guided by the following fundamental
considerations:
1. The need to attract and retain competent management.
2. The desire to set pay levels that are competitive
with levels being paid in similar businesses.
3. The intent to reward management for a mix of long and
short term accomplishments.
4. The need to link executive pay levels to quantifiable
benchmarks.
5. The belief that base salaries should be conservative
(50th percentile) but that incentive opportunities
should allow for above average total compensation
(75th percentile) if the performance of the
Corporation so warrants.
Cash Compensation
The Committee believes that the compensation plans of the
Corporation became further linked with the potential
rewards to stockholders through the adoption of the
concept of Economic Value Added (EVA) in 1994.
In prior years, executive bonus incentives were based on
the attainment of budgeted objectives related to operating
profit. While this provided incentives for achieving budget
goals, it was determined a change in incentive goals was
appropriate and in the interest of stockholders at this
time.
Therefore, in 1994, following careful deliberation with
both management and independent sources, the Corporation
adopted EVA for its key employee incentive plans.
Under EVA, executive focus shifted from budgeted
performance to the returns that managers produced on the
capital invested in their respective businesses. Thus,
management is truly rewarded for adding and creating
economic value. The hurdle becomes the Corporation's
weighted average after-tax cost of capital and the rewards
are linked to the difference management is able to produce
between that cost and corporate earnings. The EVA target
is raised each year by an "improvement factor" so that
increasingly higher EVA benchmarks must be attained in
order to earn the same level of incentive pay.
A total of 199 executives participated in EVA based
incentive plans in 1994 with targeted bonus opportunities
ranging from 10% to 90% of base pay.
In those business units where the EVA incentive plan
produced bonuses in excess of 125% of the target, two
thirds of the excess amount was placed in a "bank" to be
paid in future years or forfeited if
<PAGE>
future performance targets are not achieved.
Because EVA was adopted when the Corporation was at the
bottom of a business cycle, all divisions started with
negative EVAs. One product group, the Material Handling
Equipment Division, became EVA positive in the first year
of the program and all others are targeted to follow over
the next four years.
Companies adopting EVA in the past have seen a correlation
between improved EVA and increased common stock prices.
While no promises of improved performance should be
inferred, the Committee has noted the improvement in stock
performance of the Corporation and believes that EVA was,
and will continue to be, one of the contributing factors.
Stock-based Compensation
The Committee administers a number of stock based plans
that are designed to promote management's ownership of the
Corporation's Common Stock.
Stock Options
The Committee at its sole discretion may award stock
options to key contributors under the Corporation's
Incentive Stock Plan. Such grants vary in amounts de-
pending on the level of the executive and vest over a 42
month period.
All options give the option holder a ten year right,
subject to the vesting provisions, to acquire stated
amounts of Common Stock at an exercise price equal to the
closing price of the stock on the New York Stock Exchange
on the date of the grant.
The Committee strongly believes that stock ownership by a
large number of managers is an important linkage to stock-
holder value. As a result, the Committee has over the past
several years granted options to managers at lower levels
of the organization than had been the practice in the past.
Today, the Committee is pleased to report that over 250
current managers hold options to purchase Common Stock
under this Plan. In determining the size of option grants,
the Committee considers the size of prior grants and the
value of those grants in relation to the current market
price of the stock as well as the relative difference in
pay and responsibilities of the recipients.
To assure that a sufficient number of options is available
to continue the program, given in particular the additional
candidates resulting from the acquisitions of Morris
Mechanical Handling, Limited and Joy Technologies Inc. in
1994, the Committee is recommending an increase in the num-
ber of shares available for issuance under the Plan.
Further information on the proposal, which must be approved
by stockholders, is contained elsewhere in this proxy
statement. See "Proposal to Amend the 1988 Incentive Stock
Plan" on page 26.
Restricted Common Stock
On limited occasions, the Committee has awarded restricted
stock to certain key executives with restrictions tied to
the attainment of specific performance objectives.
In 1990, the Committee approved a plan to allow certain
senior managers the ability to earn restricted Common Stock
in fiscal years 1991, 1992, 1993 and 1994 if in each of
those years the Corporation's return on equity ranked in
the upper half of a list of comparable companies. Grants
were earned in the first three years of the plan. Compara-
tive fiscal 1994 performance as described above did not
qualify. The Committee determined to provide an additional
grant to the participants to be made at the end of fiscal
1995 if the Corporation meets the return on equity criteria
in fiscal 1995. At this time, no
<PAGE>
other restricted stock grants are contemplated for fiscal
1995.
Stock in Lieu of Bonus
As reported earlier, the Committee has a strong belief in
the importance of management becoming significant
stockholders in the Corporation. In pursuit of this objec-
tive, the Executive Incentive Plan was adopted by the Com-
mittee and subsequently approved by stockholders in 1992.
The Committee strongly supports this plan that encourages
about 50 members of senior management to convert up to 100%
of their cash bonuses into Common Stock of the Corporation.
As an inducement, and in view of restrictions upon sale of
the stock, the plan provides that the executives may
convert their bonuses into stock at a 25% discount from the
current market price, but must agree to place the stock in
a grantor trust maintained by the Corporation until the
executive retires or leaves the Corporation for other rea-
sons. Dividends remain in the account and are used to buy
additional shares, also at a 25% discount.
Under this plan, the participants have purchased a total of
693,227 shares in the Corporation, further aligning their
interests with those of stockholders.
Profit Sharing
For fiscal 1994, the Corporation tied its profit sharing
plan trigger to the attainment of corporate EVA objectives.
Participants include all domestic salaried and non-
bargaining unit employees. For 1994, the payout was
approximately 2.5% of a participating employee's base pay
(up to a maximum of $100,000 in annual base pay). The pay-
ments are made to individual accounts in the form of
Harnischfeger Industries Common Stock.
Chief Executive Officer Compensation
At its October meetings in 1993 and 1994, the Committee
reviewed at some length the performance and contributions
of the Chairman and Chief Executive Officer, Jeffery T.
Grade.
In recognition of the substantial progress the Corporation
has enjoyed under his leadership, Mr. Grade's base pay was
increased at the October, 1994 meeting from $525,000 per
year to $555,000, an increase of 6%. Based on survey data
from the compensation consulting firm of Towers Perrin,
this places Mr. Grade's base pay at the 50th percentile for
comparable companies, the Committee's stated compensation
benchmark.
The Committee believes that this is well in line with
compensation paid to CEOs of similar size companies.
In addition, under the terms of the Corporation's EVA
incentive plan, Mr. Grade earned an additional $779,625 for
fiscal 1994, of which $126,000 was banked against future
performance as called for by the EVA program. The amount
of the bonus was determined by the Corporation's corporate
performance which exceeded the 1994 EVA target by 65%,
entitling Mr. Grade and certain other senior managers to an
incentive equal to 165% of their individual bonus targets,
which, in Mr. Grade's case, was 90% of base pay.
The total cash compensation earned by Mr. Grade in 1994
(excluding the banked portion of his bonus) was $1,178,625.
Based on survey data provided by the firm of Towers Perrin,
the comparable total cash payment by similar companies at
the 75th percentile (the Committee's total
<PAGE>
compensation target) would be $1,163,800.
In addition to his cash compensation in 1994, Mr. Grade
received options to purchase 25,000 shares of the
Corporation's Common Stock at a price of $26.50 per share,
the closing price on the day of the option grant.
Section 162(m)
Section 162(m) of the Internal Revenue Code limits the de-
ductibility by a publicly-held corporation of compensation
paid in a taxable year to the Chief Executive Officer and
any other executive officer whose compensation is required
to be reported in the Summary Compensation Table to $1
million. Qualified performance-based compensation will not
be subject to the deduction limit if certain conditions are
met. It is the Committee's intent to take the steps
necessary to satisfy those conditions in order to preserve
the deductibility of executive compensation to the fullest
extent possible consistent with its other compensation
objectives and overall compensation philosophy. One of
those conditions is stockholder approval of the
Corporation's performance-based compensation plans, which
is one of the reasons why stockholder approval of amend-
ments to the Corporation's Incentive Stock Plan is being
sought at the 1995 annual meeting.
In Summary
In light of the Corporation's improved performance and its
aggressive approach to enhancing stockholder value, the
Committee believes that compensation paid to senior
executives is in line with performance and comparable to
that being paid in similar corporate situations.
Respectfully,
Robert F. Schnoes (Chair)
Harry L. Davis
Ralph C. Joynes
Donald Taylor
C. R. Whitney
<PAGE>
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder
return on the Corporation's Common Stock over the last five
fiscal years as compared to the returns of the Standard &
Poor's 500 Stock Index and the Heavy Machinery subgroup
of the Standard & Poor's 500 Stock Index. The Heavy
Machinery subgroup consists of Caterpillar Inc., Clark
Equipment, Deere & Co., Harnischfeger Industries, Inc.,
Indresco Inc., Manitowoc Co. and Nacco Industries. The
graph assumes $100 was invested on October 31, 1989 in (a)
the Corporation's Common Stock, (b) the Standard & Poor's
500 Stock Index and (c) the Heavy Machinery subgroup and
assumes reinvestment of dividends.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10/31/89 10/31/90 10/31/91 10/31/92 10/31/93 10/31/94
S & P 500 100 93 124 136 156 165
Machinery Group 100 70 94 93 150 167
Harnischfeger 100 72 101 98 129 148
Machinery Group = CAT, CKL, DE, HPH, MANT, ID, NC
</TABLE>
<PAGE>
PENSION PLAN TABLE
The following table sets forth the estimated annual
benefits payable upon retirement at normal retirement age
for the years of service indicated under the Corporation's
defined benefit pension plan (and excess benefit arrange-
ments defined below) at the indicated remuneration levels.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Years of Service
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Remuneration 15 20 25 30 35 40
500,000. . . . . 112,500 150,000 187,500 225,000 262,500 300,000
700,000. . . . . 157,500 210,000 262,500 315,000 367,500 424,000
900,000. . . . . 202,500 270,000 337,500 405,000 472,500 540,000
1,100,000 . . . . 247,500 330,000 412,500 495,000 577,500 660,000
1,300,000 . . . . 292,500 390,000 487,500 585,000 682,500 780,000
1,500,000 . . . . 337,500 450,000 562,500 675,000 787,500 900,000
- ---------------------------------------------------------------------------------------------
</TABLE>
Remuneration covered by the plan includes the following
amounts reported in the Summary Compensation Table: salary
and bonus (including the cash value of bonuses forgone for
stock under the Executive Incentive Plan). "Banked" bonus-
es are not included.
The years of service credited for each of the executive
officers named in the Summary Compensation Table are:
Jeffery T. Grade, 26 years; John A. McKay, 17 years; John
R. Teitgen, 21 years; Francis M. Corby, Jr., 14 years and
K. Thor Lundgren, 3 years.
Benefits are based both upon years of service and the
highest consecutive five year average annual salary and
incentive compensation during the last ten calendar years
of service. Estimated benefits under the retirement plan
are subject to the provisions of the Internal Revenue Code
which limit the annual benefits which may be paid from a
tax qualified retirement plan. Amounts in excess of such
limitations will either be paid from the general funds of
the Corporation or funded with Common Stock under the terms
of the Supplemental Retirement and Stock Funding Plan. The
estimated benefits in the table above do not reflect off-
sets under the plan of 1.25% per year of service (up to a
maximum of 50%) of the Social Security benefit.
<PAGE>
OPTION GRANTS
The following table sets forth information about stock
option grants during the last fiscal year to the five
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
---------------------------------------------------------------------------------------------
Individual Grants
Number of Percent
Securities of Total
Underlying Options/
Options/SARs SARs Granted Exercise or Grant Date
Granted to Employees Base Price Expiration Present
(#) in Fiscal Year(2) ($/sh) Date(3) Value($)(4)
<S> <C> <C> <C> <C> <C>
Jeffery T. Grade 25,000 31.3% $26.50 Oct. 3, 2004 $305,000
John A. McKay -- -- -- -- --
John R. Teitgen -- -- -- -- --
Francis M. Corby, Jr. 15,000 18.8% $26.50 Oct. 3, 2004 $183,000
K. Thor Lundgren 15,000 18.8% $26.50 Oct. 3, 2004 $183,000
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) were granted.
(2) Only includes options granted on October 3, 1994;
does not reflect options to purchase 218,750 shares
granted on November 17, 1994, after the end of fiscal
1994, to managers other than senior executive
officers of the Corporation. If the October 3, 1994
and November 17, 1994 grants are combined, the
resulting percentages are: Jeffery T. Grade 8.4%;
Francis M. Corby, Jr. 5.0% and K. Thor Lundgren 5.0%.
(3) Unless earlier terminated, options expire ten years
from the date of grant (October 3, 1994) and become
exercisable in cumulative installments of one-fourth
of the shares in each year beginning six months from
the date of grant (i.e., 25% on April 3, 1995, 25% on
April 3, 1996, 25% on April 3, 1997 and 25% on April
3, 1998).
(4) Grant date present values were determined using the
Black-Scholes option pricing model. The actual
value, if any, an executive may realize will depend
on the excess of the stock price over the exercise
price on the date the option is exercised. There is
no assurance the value realized by an executive will
be at or near the value estimated by the Black-
Scholes model. The estimated values are based on
assumed volatility of 24%, risk-free rate of return
of 8.02%, dividend yield of 1.51% and ten year option
expiration. No adjustments have been made for non-
transferability or risk of forfeiture.
<PAGE>
OPTION EXERCISES AND
FISCAL YEAR-END VALUES
The following table sets forth information with respect to
the five executive officers named in the Summary
Compensation Table concerning the number and value of
options outstanding at the end of the last fiscal year.
None of the executive officers named in the Summary Compen-
sation Table exercised options or SARs during the last
fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
- ---------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options/
Options/SARs at SARs at Fiscal Year-
Name Fiscal Year-End (#) End ($) (2)
<S> <C> <C> <C> <C>
Exercisable Unexercisable Exercisable Unexercisable
Jeffery T. Grade 94,500 62,500 $259,340 $233,500
John A. McKay 53,250 28,750 225,928 179,613
John R. Teitgen 50,500 22,500 153,310 140,100
Francis M. Corby, Jr. 45,625 36,875 141,419 136,506
K. Thor Lundgren 26,250 38,750 156,038 144,463
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) are outstanding.
(2) Based on the closing price of the Corporation's
Common Stock on the New York Stock Exchange at the
end of the fiscal year of $25.00.
<PAGE>
LONG-TERM INCENTIVE COMPENSATION
As described in the Human Resources Committee Report on
Executive Compensation, incentive compensation for senior
executives, including each of the executives named in the
Summary Compensation Table, is based on the concept of
Economic Value Added (EVA). The EVA bonus program has a
"Bonus Bank" feature which is designed to ensure that EVA
improvements are sustained over a period of years. The
bonus paid to an executive for any fiscal year is equal to
the earned bonus for the year, up to a maximum of 125% of
the target bonus, plus 33% of the bonus earned, if any, in
excess of 125% of the target bonus. Two-thirds of any
bonus earned in excess of 125% of the target bonus is
credited to the Bonus Bank for possible future payment to
the executive or forfeiture under the terms of the EVA
program. A Bonus Bank account is at risk in the sense that
in any year the earned bonus is negative, the negative
bonus amount is subtracted from the Bonus Bank balance.
The executive is not expected to repay negative balances in
the Bonus Bank. In the event an executive voluntarily
terminates employment with the Corporation or is discharged
with cause, any positive Bonus Bank balance may be subject
to forfeiture.
For those executives who have elected to defer their cash
bonuses by converting such bonuses into Common Stock under
the terms of the Executive Incentive Plan, the "banked"
portion of any bonus is converted into Common Stock on the
same terms as the "unbanked" portion of the bonus. Each of
the named executive officers elected to convert 100% of his
bonus earned in fiscal 1994 into Common Stock. Accord-
ingly, the following table sets forth the number of shares
banked by each for fiscal 1994.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
- ---------------------------------------------------------
Name Number of Shares, Units
or Other Rights (#)(1)
Jeffery T. Grade 6,653
John A. McKay 4,233
John R. Teitgen 3,174
Francis M. Corby, Jr. 3,140
K. Thor Lundgren 2,653
- ---------------------------------------------------------
(1) Reflects Common Stock purchased through conversion of
each executive's banked bonus at a 25% discount on
the purchase price of $25.25 in accordance with the
provisions of the Executive Incentive Plan. The
amount so converted by each of the executive officers
is as follows: Jeffery T. Grade $126,000; John A.
McKay $80,159; John R. Teitgen $60,108; Francis M.
Corby, Jr. $59,472 and K. Thor Lundgren $50,232.
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Corporation has employment agreements with the five
executive officers named in the Summary Compensation Table
which contain change-in-control provisions, as well as an
Executive Incentive Plan and Supplemental Retirement and
Stock Funding Plan which contain change-in-control provi-
sions.
Employment Contracts
In 1992, the Corporation entered into employment agreements
with substantially similar provisions with the five execu-
tives named in the Summary Compensation Table. The
agreements replaced earlier agreements.
The agreements have initial terms of three years. The
initial terms are automatically extended for an additional
year after each successive year of employment except that
the term with respect to each executive ends when such
executive reaches age 65.
The agreements provide that the executive's present duties
cannot be changed and that an executive's present base
salary may not be reduced without the executive's consent.
All of the agreements except for Mr. Lundgren's provide
supplemental pension benefits to give credit for the
executives' years of service with their immediate former
employers. Pursuant to these provisions, the named execu-
tives were credited with the following years of service:
Mr. Grade, 15 years; Mr. McKay, 9 years; Mr. Teitgen, 11
years and Mr. Corby, 6 years. Any supplemental pension
benefits will be reduced by any pension benefits payable by
such former employers.
Under the agreements, each executive agrees not to compete
with the Corporation during the term of the agreement and
for a period of one year following termination of the
agreement.
The agreements may be terminated by the Corporation only
upon the death or disability of the executive or for
"Cause" as defined in the agreements. If an executive
voluntarily terminates an agreement or the agreement is
terminated by the Corporation for Cause, the executive is
entitled to receive only accrued benefits, including salary
and bonus, earned through the termination date.
Except for the right to terminate an agreement for "Good
Reason" as defined in the agreements, the executives agree
not to terminate the agreements before the earlier of
disability or retirement at age 65 or twelve months from
the event of a "Potential Change in Control" or a "Change
in Control" as defined in the agreements. In the event of
a Change in Control, the terms of the agreements will be
extended for three years from the date of such Change in
Control and not thereafter further extended.
If an executive terminates the agreement for Good Reason or
if the Corporation terminates an agreement for any reason
other than for Cause, disability or death, the executive is
entitled to receive (a) three times (or, if less, the whole
number of years (rounded upward) remaining at the time of
termination until such executive would attain age 65) the
executive's base salary plus the greater of the
average incentive compensation paid over the previous three
years or the bonus that would be paid in the current year
if the bonus target were met; (b) the total
<PAGE>
unrealized value of any stock options and restricted Common
Stock; (c) the present value of supplemental retirement
benefits determined as if the executive were employed by
the Corporation an additional three years; (d) payment of
any previously deferred compensation; (e) payment of any
other benefits to which the executive would be entitled
under the terms of any other benefit plans; and (f) other
accrued benefits. In the event Section 4999 of the
Internal Revenue Code imposes any excise tax liability on
the executives because of such payments, additional amounts
are to be paid to offset such excise tax liability. In
addition, for purposes of the Corporation's pension plan
and its health, life, accident and disability insurance
programs, the executive shall, for a period of three years
or until the executive reaches age 65, be considered to be
a full-time employee of the Corporation.
The agreement with Mr. McKay was sup-plemented in November,
1992 to reflect his additional duties as President and
Chief Operating Officer of the Corporation and to provide,
among other things, that he will upon retirement (a)
provide consulting services to the Corporation for one year
following his retirement and be paid a one-time salary
equal to his annual salary at the time he retires; (b)
waive rights to payments under the terms of his employment
agreement as a result of a Change-in-Control; and (c) be
reimbursed for moving expenses.
In connection with cessation of his employment effective
January 15, 1995, Mr. Teitgen is entitled to certain
payments under the terms of his employment contract. While
final calculations of these payments are not complete as of
the date of this proxy statement, the Corporation has
recognized a liability in the following amounts: three
times his then current base salary and bonus ($1,400,000)
and the unrealized value of options ($540,000) . Mr.
Teitgen also became eligible to receive distributions of
amounts accrued under the Supplemental Retirement and Stock
Funding Plan and the Executive Incentive Plan.
The approximate cumulative dollar amounts that would have
been payable to the named executives other than Mr. Teitgen
under the provisions of their agreements had their agree-
ments been terminated by the Corporation on January 1, 1995
other than for Cause, disability or death, exclusive of
amounts that may be necessary to offset any excise tax
liability, any possible bonus related to fiscal 1995 and
any offsets for pension benefits payable by former em-
ployers and in addition to accrued benefits under the
Executive Incentive and Supplemental Retirement and Stock
Funding Plans and other accrued benefits, are: Mr. Grade,
$4,400,000; Mr. McKay, $2,700,000; Mr. Corby, $2,400,000
and Mr. Lundgren, $1,800,000.
Executive Incentive Plan and Supplemental Retirement and
Stock Funding Plan
The Executive Incentive and Supplemental Retirement and
Stock Funding Plans provide that, in the event of a "Change
in Control", as defined in the Corporation's Deferred
Compensation Trust, the Corporation will purchase for cash
all shares of Common Stock then allocated to all
participants' accounts at a per-share price equal to the
highest per-share price actually paid in connection with
such Change in Control and cash proceeds will be dis-
tributed to the participants.
<PAGE>
PROPOSAL TO AMEND THE 1988
INCENTIVE STOCK PLAN
The Board of Directors has adopted, subject to approval by
the stockholders, amendments to the 1988 Incentive Stock
Plan (the "Plan") to increase by 1,200,000 the number of
shares of the Corporation's Common Stock issuable under the
Plan and to limit to 350,000 the total number of shares
that may be issued to any participant over the life of the
Plan.
The Plan as adopted in 1988 originally provided up to
1,200,000 shares for issuance pursuant to stock options
granted under the Plan. The Plan was amended in 1989 to
authorize grants of restricted stock and to increase by
600,000 the aggregate number of shares issuable thereunder.
The Plan was amended again in 1991 to increase the aggre-
gate number of shares issuable thereunder by an additional
600,000, bringing to 2,400,000 the aggregate number of
shares issuable under the Plan.
The purpose of the Plan is to promote the Corporation's
interests in strengthening its ability to attract and
retain officers and key employees by encouraging them to
maintain a greater personal interest in the Corporation's
progress.
The proposed amendment to the Plan increasing the number of
shares issuable under the Plan is intended to continue to
make the benefits of the Plan available to the Corporation.
Of the 2,400,000 shares previously authorized, only
about 350,000 remain available for grant under the Plan.
Approximately 500,000 shares have been issued under
the Plan and options to purchase approximately 1,550,000
shares are outstanding.
The Corporation's acquisitions of Joy Technologies Inc. and
Morris Mechanical Handling, Limited in 1994 greatly
increased the number of employees to whom the Human
Resources Committee of the Board of Directors would expect
to grant options in the future. The Board of Directors be-
lieves that the increased number of shares provided by the
amendment will be sufficient to last until 1998 when the
Plan will expire. Approximately 250 employees currently
participate in the Plan.
The proposed amendment to the Plan limiting to 350,000 the
total number of shares that may be issued to any partici-
pant over the life of the Plan is required by recent tax
law changes in order that the compensation expense
recognized upon the exercise of stock options will continue
to be deductible under Internal Revenue Code Section
162(m).
On January 31, 1995, the closing price of the Corporation's
Common Stock on the New York Stock Exchange was $26-5/8.
The affirmative vote of the holders of a majority of the
shares of Common Stock represented at the annual meeting of
stockholders and entitled to vote thereon is necessary to
approve the amendments to the Plan, provided the total vote
cast represents over 50% of the shares entitled to vote on
the amendments. Upon receipt of such vote, the Plan will
be amended. If such vote is not received, the Plan will
not be amended.
A more complete description of the Plan and the amendments
is attached hereto as Annex 1 and should be read in its
entirety by stockholders.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF
THIS PROPOSAL.
<PAGE>
OTHER INFORMATION
Auditors
The Board of Directors has selected Price Waterhouse as
independent accountants for the fiscal year ending October
31, 1995. Price Waterhouse has served the Corporation as
auditors since 1925. A representative of Price Waterhouse
will be present at the 1995 annual meeting, will have the
opportunity to make a statement and will be available to
answer questions that may be asked by stockholders.
Additional Matters
The Board of Directors is not aware of any other matters
that will be presented for action at the 1995 annual
meeting. Should any additional matters properly come be-
fore the meeting, the persons named in the enclosed proxy
will vote on those matters in accordance with their best
judgment.
Submission of Stockholder Proposals
All stockholder proposals to be presented at the 1996
annual meeting must be received by the Corporation not
later than October 9, 1995 in order to be considered for
inclusion in the Corporation's proxy statement and proxy
for that meeting under SEC Rule 14a-8. In addition, the
Corporation's bylaws require that stockholder proposals
must be received by the Corporation not less than ninety
days before the meeting in order to be submitted at the
meeting.
Cost of Proxy Solicitation
The Corporation will pay the cost of preparing, printing
and mailing proxy materials as well as the cost of solicit-
ing proxies on behalf of the Board. In addition to using
the mails, officers and other employees may solicit proxies
in person and by telephone and telegraph. The Corporation
has also hired Kissell-Blake, Inc., a professional proxy
solicitation firm, and will pay such firm its customary
fee, which is anticipated not to exceed $5,500, plus
expenses, to solicit proxies from banks, brokers and other
nominees having shares registered in their names which are
beneficially owned by others.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Corporation during the last fiscal
year and Forms 5 and amendments thereto furnished to the
Corporation with respect to the last fiscal year, the Cor-
poration is not aware that any director, officer or benefi-
cial owner of more than 10% of the Corporation's Common
Stock failed to file on a timely basis reports required by
Section 16(a) of the Securities Exchange Act of 1934 during
the last fiscal year.
By order of the Board of Directors
K. THOR LUNDGREN
Secretary
February 6, 1995
<PAGE>
ANNEX 1
THE 1988 INCENTIVE STOCK PLAN
INTRODUCTION
The 1988 Incentive Stock Plan (the "Plan") was adopted by
the Board on February 8, 1988 and approved by the
stockholders of the Corporation on March 7, 1988. The Plan
authorizes the granting of incentive stock options,
nonqualified stock options and stock appreciation rights to
key employees of the Corporation and its subsidiaries.
The Plan was amended on March 6, 1989 to increase by
600,000 the number of shares issuable under the Plan, to
provide for the granting of restricted stock and to provide
that, except to the extent stock appreciation rights are
exercised for stock or were granted in connection with
incentive stock options, the exercise of stock appreciation
rights will not reduce the number of shares available for
grant under the Plan.
The Plan was amended again on March 4, 1991 to increase by
600,000 the number of shares issuable under the Plan and on
February 3, 1992 to conform the Plan to new Securities and
Exchange Commission rules.
On December 4, 1994, the Board approved amendments to the
Plan to increase by 1,200,000 the number of shares issuable
under the Plan, bringing the total number of shares
issuable under the Plan to 3,600,000, and to limit to
350,000 the total number of shares that may be issued to
any participant during the life of the Plan. Although the
Corporation currently has no stock appreciation rights
outstanding and has previously stated its intention not to
issue new stock appreciation rights, the share equivalent
of any cash received upon the exercise of any stock
appreciation rights that may be granted in its future will
be counted against the 350,000 share limitation on the
total number of shares that may be issued to any
participant. The Corporation's stockholders will be
afforded the opportunity to vote on the amendments to the
Plan at the annual meeting. The amendments must be
approved by the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote
thereon, provided the total vote cast represents over 50%
of the shares entitled to vote on the amendments, before
the amendments can become effective. The amendments will
become effective when such approval is given.
The purpose of the Plan is to give key employees of the
Corporation and its subsidiaries a proprietary interest in
the Corporation, thereby creating an additional incentive
for them to perform in a manner which will promote the
Corporation's financial success. The Plan also provides an
incentive which may be used by the Corporation to induce
able persons to enter into positions of employment with the
Corporation and to induce existing key employees to remain
in the employment of the Corporation.
A stock purchase option granted under the Plan entitles the
employee to whom the option is granted the right to
purchase from the Corporation a number of shares subject to
the option at a price per share determined by the Human
Resources Committee which administers the Plan (the "Com-
mittee") at the time the option is granted. The Plan
expressly provides that the purchase price per share under
<PAGE>
each stock purchase option granted under the Plan may not
be less than the fair market value per share of the Common
Stock on the date of the grant of such option and that no
option granted under the Plan may be exercised more than
ten years after its grant date.
Section 422 of the Internal Revenue Code (the "Code")
prescribes special federal income tax treatment for options
which satisfy criteria specified in Section 422 (which are
called "incentive stock options"). The Plan is intended to
enable the Corporation to grant incentive stock options, as
well as options (herein called "nonqualified options")
which do not qualify for incentive stock option tax
treatment. The tax treatment of the various options is
summarized under a separate heading below.
The Plan also permits the grant of stock appreciation
rights. A stock appreciation right granted under the Plan
would entitle the employee to whom it is granted the right
to receive, upon any exercise of the stock appreciation
right, a payment from the Corporation equal to the amount
by which the fair market value on the date of said exercise
of the shares with respect to which the stock appreciation
right is exercised exceeds the exercise price for those
shares specified in the stock appreciation right. Under
the Plan, stock appreciation rights may only be granted if
they are attached (i.e., in tandem) with a purchase option.
As an illustration of how options granted under the Plan
might operate, assume a key employee was awarded an option
covering 100 shares of Common Stock at $30 per share.
Assume further that the employee desires to exercise his
rights under the option four years after it is granted and
that at the time of the exercise, the fair market value for
the Common Stock has risen to $35 per share. If the option
were a purchase option, the employee would be obligated to
pay the Corporation $3,000 and in exchange the Corporation
would be obligated to issue to the employee 100 shares of
its Common Stock then having a fair market value of $3,500.
Purchase options may (but need not) be granted in tandem
with stock appreciation rights under the Plan covering the
same shares at the same price. In such a case, the option
holder may exercise with respect to any shares either the
purchase option or the stock appreciation right but not
both. If, for example, stock appreciation rights had been
granted in tandem with the options described in the preced-
ing paragraph, the option holder could either exercise the
purchase option (and thereby receive 100 shares worth
$3,500 in exchange for a payment of $3,000) or the stock
appreciation right (and thereby become entitled to receive
a payment from the Corporation equal to the $500
appreciation in the value of the shares subject to the
option).
A tandem stock appreciation right may be added to a stock
purchase option after the original grant date of the stock
purchase option. In such a case, the exercise price used
to calculate the appreciation in the value of the stock
subject to the stock appreciation right may be set at an
amount equal to the exercise price of the purchase option
(even if it is lower than the fair market value of the
Common Stock at the time the tandem stock appreciation
right is added). The addition of a tandem stock
appreciation right to an incentive stock option after the
original grant date of such option may cause the option to
be treated as a nonqualified option.
Restricted stock granted under the Plan is Common Stock
issued subject to such conditions and restrictions as the
Committee may determine which may include the attainment of
performance goals, the payment of a purchase price which
may be less than fair market value and may be
<PAGE>
zero, restrictions on transferability and the right of the
Corporation to reacquire the stock upon termination of
employment. During the period of restriction, the partic-
ipant has the right to receive dividends paid on such stock
and to vote such stock.
Shares Subject to the Incentive Stock Plan
The mechanism by which the number of shares available for
grants under the Plan is determined is discussed below.
The number of options granted under the Plan is limited so
that the sum of the following will never exceed 2,280,000
shares: (i) all shares which are purchased after December
31, 1987 upon the exercise of purchase options, (ii) all
shares issued in connection with the exercise of stock
appreciation rights and covered under incentive stock
options surrendered after December 31, 1987 in connection
with the exercise of stock appreciation rights, (iii) the
number of shares equal to the number of options surrendered
to the Corporation after December 31, 1987 in exchange for
a payment by the Corporation, and (iv) all shares of
restricted stock granted and not forfeited. The proposed
amendments would modify the foregoing calculation by in-
creasing the 2,280,000 figure to, 3,480,000. There are
currently approximately 350,000 shares available for grants
under the Plan. The proposed amendments would increase
this number to approximately 1,550,000.
If an option granted under the Plan terminates or expires
without being wholly exercised, if shares as to which an
option has been exercised are for any reason not issued, or
if shares issued pursuant to the Plan are reacquired, a new
option, an option in connection with a stock appreciation
right or restricted stock may be granted under the Plan
covering the number of shares to which such termination,
expiration, failure to issue or reacquisition relates.
However, to the extent a stock appreciation right granted
in connection with an incentive stock option is exercised
or shares are issued in connection with the exercise of
stock appreciation rights granted in connection with a
nonqualified option, the related option will, solely for
purposes of determining the total number of shares
available for grant under the Plan, be deemed to have been
exercised, and the shares of Common Stock which otherwise
would have been issued upon the exercise of such option
will not thereafter be available for any further grants.
In the event of reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger,
consolidation or other change in the Common Stock, the
Board will make appropriate changes in the aggregate number
and type of shares reserved for options, stock appreciation
rights and restricted stock under the Plan, in the number
and type of shares subject to grant as restricted stock and
subject to unexercised options and stock appreciation
rights and in the option price per share specified in
unexercised options and in stock appreciation rights
relating to unexercised options.
Administration
The Plan is administered by the Committee which has full
power and authority to administer the Plan, to construe and
interpret the Plan, to prescribe, amend and rescind rules
and procedures for governing administration of the Plan and
to grant options and stock appreciation rights and
restricted stock under the Plan. Each action taken and
decision made by the Committee within the scope of au-
thority delegated to the Committee by the Plan or by the
Board of Directors is binding and conclusive on all persons
interested in the Plan.
No member of the Committee is eligible, and no person can
become a member of the Committee, if within one year prior
thereto such person was eligible for
<PAGE>
selection as a person to whom stock could be allocated or
to whom stock options, stock appreciation rights or
restricted stock could be granted pursuant to the Plan or
any other plan of the Corporation or any of its affiliates
entitling the participants therein to acquire stock, stock
options, stock appreciation rights or restricted stock of
the Corporation or any of its affiliates other than a plan
meeting the requirements of certain provisions of Section
16(b) of the Securities Exchange Act of 1934 ("Section
16(b)"). The Directors Stock Compensation Plan meets those
requirements.
Subject to the terms, provisions and conditions of the
Plan, the Committee has the right and power to determine,
at or prior to the grant of each option, stock appreciation
right or restricted stock, all terms and conditions
governing the rights and obligations of the holder with
respect to such option, stock appreciation right or
restricted stock.
Service on the Committee constitutes service as a director
of the Corporation so that the members of the Committee are
entitled to indemnification and reimbursement as directors
of the Corporation to the full extent provided for at any
time in the Corporation's Certificate of Incorporation or
bylaws or in any insurance policy or other agreement
intended for the benefit of the Corporation's directors.
Eligibility
Options, stock appreciation rights and restricted stock may
be granted only to persons who are key employees of the
Corporation or of a subsidiary of the Corporation. The
term "key employees" includes officers as well as other
employees of the Corporation and its subsidiaries and
includes directors who are also employees of the
Corporation or of a subsidiary of the Corporation. Neither
any member of the Committee nor any member of the Board of
Directors who is not an employee of the Corporation (or of
a subsidiary of the Corporation) is eligible to receive
options, stock appreciation rights or restricted stock
under the Plan.
The Committee has the right and power to: (i) select the
key employees to whom options, stock appreciation rights or
restricted stock will be granted under the Plan (it being
understood that more than one option, stock appreciation
right or share of restricted stock may be granted to the
same person), and (ii) determine whether a key employee
will be granted a stock appreciation right in connection
with any option. The Committee does not, however, have the
authority to grant a stock appreciation right under the
Plan unless such stock appreciation right is granted in
connection with an option granted under the Plan.
Currently, the Plan does not limit the number of options,
stock appreciation rights or restricted stock which may be
granted to any individual under the Plan. The amendments
would limit to 350,000 the total number of shares that may
be issued to any participant during the life of the Plan.
No option or restricted stock may be granted to any person
who owns, directly or indirectly (or who would own as a
result of the grant of the restricted stock or the exercise
of the option to be granted) stock representing more than
10% of the total combined voting power or value of all
classes of stock of the Corporation.
Options
An option may be exercised by written notice to the
Corporation and payment of the option price. The option
price per share is fixed by the Committee at or before the
time the option is granted. No option can have an option
price per share of less than 100% of the fair market value
of a share of Common Stock on the date the option is
granted. In general, payment of the exercise price under
<PAGE>
options may be made by delivery of cash or a combination of
cash and Common Stock. Until an option is duly exercised
and the option price is paid, an optionee has no rights as
a stockholder with respect to any shares which may be issu-
able upon the exercise of such option. No option is
exercisable during the first six months from the date it is
granted nor more than ten years from the date it is
granted.
Stock Appreciation Rights
At the sole discretion of the Committee, a stock
appreciation right may be granted in connection with all or
part of any option granted under the Plan, either
concurrently with the grant of an option or at any time
thereafter during the term of the option, provided that at
the time of such grant the person to whom the stock ap-
preciation right is granted is a key employee of the
Corporation or of a subsidiary. No stock appreciation
right can be granted under the Plan unless such stock
appreciation right is granted in connection with an option
granted under the Plan.
A stock appreciation right entitles the holder thereof,
upon exercise of such right, to surrender the related
option or any portion thereof, and to receive an amount
(the "incremental value") equal to the excess of the fair
market value, on the date of such exercise, of the Common
Stock subject to such option or portion thereof over the
option price of such Common Stock as provided in such op-
tion. The incremental value is paid by the Corporation;
(i) all in cash, (ii) all in Common Stock, or (iii) in any
combination of cash and Common Stock as the Committee
determines in its sole discretion, which determination is
made after considering any preference expressed by the
holder of the stock appreciation right. Any holder who
wishes to express such a preference must notify the
Corporation in writing of his preference and, if such
holder expresses a preference to receive cash in whole or
in part, such writing must be delivered to the Corporation
during the period (the "Window Period") beginning on the
third business day following the date of release for
publication of an annual or quarterly summary statement of
the sales and earnings of the Corporation and its
consolidated subsidiaries and ending on the twelfth
business day following such date. In the event the holder
does not duly notify the Corporation of any preference, and
in the absence of any express determination by the Com-
mittee to the contrary, each payment of incremental value
which becomes due by reason of any exercise of a stock
appreciation right is made in cash. In the event any
Common Stock is delivered by the Corporation to satisfy all
or any part of any incremental value obligation arising by
reason of any exercise of a stock appreciation right, the
dollar amount of such obligation deemed to have been
satisfied by such delivery of Common Stock is deemed to be
equal to the product derived by multiplying the fair market
value per share as of the date of exercise times the number
of shares delivered.
Upon exercise of a stock appreciation right and surrender
of the related option or portion thereof, such option, to
the extent surrendered, is not thereafter exercisable. A
stock appreciation right is exercisable at such time or
times and to the extent, but only to the extent, that the
option or portion thereof to which such stock appreciation
right is related is exercisable. Upon the termination,
exercise or expiration of an option or portion thereof to
which a stock appreciation right is related, such stock
appreciation right is not thereafter exercisable.
Notwithstanding that the option or portion thereof related
to a stock appreciation right may be exercisable: (i) such
stock appreciation right must not be exercised for a period
of six months after the date such right is granted (except
that this six
<PAGE>
month limitation will not apply in the case of the death or
disability of an optionee if the option or portion thereof
to which such stock appreciation right is related is itself
exercisable), and (ii) any exercise of such stock
appreciation right must be made during the Window Period.
Certain Limitations on the Exercisability
of Options
Twenty-five percent of the number of shares specified in an
option becomes exercisable at the beginning of each suc-
cessive twelve-month period following the first six-month
period after the date of grant; provided, however, that in
the case of an employee who will reach normal retirement
age (as defined in the Plan) less than forty-two months
from the date of grant, the number of shares which becomes
exercisable at the beginning of each twelve-month period
subsequent to the initial six-month period following the
date of grant is the total number of shares specified in
the option multiplied by a fraction whose numerator is 100%
and whose denominator is the greater of one or the number
of complete twelve-month periods between the date following
such initial six-month period and the date the optionee
would reach his normal retirement age. The Committee may,
at its discretion, accelerate the exercisability of any
option granted under the Plan. An option or a portion of
an option which becomes exercisable in any twelve-month
period will be exercisable thereafter until: (i) the option
terminates, (ii) the option or such portion thereof is
exercised, or (iii) a stock appreciation right related to
the option or such portion thereof is exercised.
If an optionee's employment is terminated for any reason
during the first six months of the option, the option
terminates. If an optionee's employment is terminated
after the expiration of the first six months of the option
for reasons other than "for cause" (as defined in the
Plan), the unexercised portion of his option which is then
exercisable may be exercised in whole or in part during a
period of three months following termination. If an
optionee obtains employment with a competitor of the
Corporation prior to the expiration of the three-month
grace period, however, his options terminate as to any
unexercised shares as of the date he accepts such
employment. If an optionee dies after the first six months
of the term of the option while an employee of the Cor-
poration or within the three month grace period mentioned
above, the unexercised portion of the option which is then
exercisable may be exercised within a period of twelve
months after his death by his estate or any person directly
acquiring the right to exercise such option from him by
bequest, inheritance or under the laws of descent and
distribution. If an optionee is terminated for cause, the
unexercised portion of his option terminates.
Additional Limitations on the Grant and Exercise of
Incentive Stock Options
Pursuant to Code Sec. 422(d), to the extent that incentive
stock options which first become exercisable in a given
calendar year entitle an optionee to acquire stock with a
fair market value (determined as of the grant date) in
excess of $100,000, the "excess" options will be treated as
nonqualified options.
Effects on Reported Income
Neither the grant nor the exercise of any option under the
Plan, under current accounting rules, has any effect on the
net income reported by the Corporation. However, the grant
of options under the Plan may under certain conditions in-
crease for accounting purposes the number of shares deemed
to be outstanding and does, therefore, have a somewhat
dilutive effect on earnings per share.
<PAGE>
If a stock appreciation right is granted in connection with
an option, there is no initial charge to net income. As
the fair market value of the shares increases (or decreases
subsequent to increases) there is a charge (or credit) to
net income during annual and interim periods for the
appreciation (or depreciation) attributable to the stock
appreciation rights which are expected to be exercised in
the future. Such appreciation (or depreciation) is
measured by the increase (or decrease subsequent to an
increase) of the excess of the fair market value of the
Common Stock over the option price of the option related to
the stock appreciation right. The amount of such charge or
credit is reduced by the applicable income tax effects and
depends on whether and to what extent such rights are
granted, limitations on the exercisability of the option to
which such rights are related, any additional conditions or
limitations placed upon such rights by the Committee at the
time of grant, the option price of the related option, and
the amount by which the fair market value of the Common
Stock exceeds the option price. In addition, the
retroactive grant of a stock appreciation right in
connection with an outstanding option where the option
price is less than the fair market value of the Common
Stock at the date of grant of the stock appreciation right
will require an immediate charge to income for the differ-
ence between such option price and the fair market value.
The description above of the effects of stock appreciation
rights on reported income conforms with generally accepted
accounting principles.
A charge to earnings will also be required with respect to
restricted stock awards. The amount of the charge will be
equal to the excess of the fair market value of the shares
at the time of the award over the purchase price, if any,
to the participant and such amount will be accrued over the
period in which the restrictions are in effect. The amount
of the charge could be based on the fair market value of
the shares at a later time depending on the nature of the
restrictions.
Federal Income Tax Consequences
The discussion of federal income tax consequences which
follows applies only to transactions occurring in 1995 or
thereafter. The consequences of transactions which
occurred in prior years may differ. The discussion which
follows applies only to exercises of options and to
dispositions of shares received on exercise occurring
during the lifetimes of employees. The consequences may
differ in the event an option is exercised, or any shares
received are disposed of, following the death of an
employee.
Taxation of Capital Gains
The Revenue Reconciliation Act of 1993 (the "Act") added a
36% and a 39.6% tax rate for the ordinary income of
individuals, effective January 1, 1993. However, the maxi-
mum tax rate on net capital gain income (i.e., net long-
term capital gain less net short-term capital loss) remains
at 28%.
In addition to the rate differential, the classification of
income as ordinary compensation income or capital gain is
relevant for taxpayers who have capital losses or
investment interest expense. Capital losses can be
deducted to the extent of capital gains. The deduction of
capital losses in excess of capital gains, however, is
limited to $3,000. Interest expense on debt incurred to
make investments may only be deducted to the extent of
investment income for the taxable year. Any excess
investment interest expense may be deducted in a subsequent
year if there is sufficient investment income. Prior to
1993, net capital gain income was treated as investment
income.
<PAGE>
To limit the opportunity of using lower-taxed net capital
gain income to increase the deduction of investment
interest expense, the Act changes the definition of
investment income to exclude net capital gain income
effective January 1, 1993. A taxpayer may elect to include
any portion of net capital gain income in measuring
investment income, but must then treat such net capital
gain income as ordinary income.
Capital gains are not treated as items of tax preference
for purposes of the alternative minimum tax.
The long-term capital gain holding period is 12 months.
Nonqualified Options
Insofar as the discussion which follows relates to the
exercise of a nonqualified option by an optionee who is a
director or officer (for purposes of Section 16(b)) of the
Corporation at the time of such exercise, or to the sale of
shares received on such exercise, it assumes that the
optionee has made a proper written election pursuant to
Section 83(b) of the Code (including filing of such
election with the Internal Revenue Service within thirty
days after such exercise) ("Section 83(b) election") to
include in the optionee's gross income for his or her tax
year in which the exercise occurs the excess of the fair
market value of such shares at the time of exercise over
the aggregate option price for such shares. If such is not
the case, the option shares issued to an officer or
director of the Corporation would as a result of the short-
swing profit rule under Section 16(b) be considered subject
to a substantial risk of forfeiture during the six-month
period following the exercise of the option and the
optionee's gross income would be measured when the
substantial risk of forfeiture lapses at the end of such
six-month period and would be included in the optionee's
tax year in which occurs the lapse of such substantial risk
of forfeiture.
The holder of a nonqualified option does not realize tax-
able income upon the grant of the option, nor is the
Corporation entitled, for income tax purposes, to a deduc-
tion. The excess of the fair market value of such shares
on the date the option is exercised over the option price
of such shares constitutes compensation taxable to the
optionee as ordinary income and is subject to withholding.
The Corporation is entitled to a deduction in computing its
federal income taxes in an amount equal to the compensation
taxable to the optionee as ordinary income. Such deduction
is available in the year in which or with which ends the
optionee's taxable year of exercise.
Upon the optionee's sale of option shares, if the selling
price exceeds the fair market value of the option shares on
the date of exercise, the excess is taxable to the optionee
as capital gain income (long or short-term, depending on
whether the optionee has then held the option shares for
more than 12 months) and no deduction is allowed to the
Corporation with respect to such excess. Should the sell-
ing price of the option shares be less than their fair
market value on the date of exercise, the difference is
treated as a capital loss to the optionee (long or short-
term, depending on whether the optionee has then held the
option shares for more than 12 months).
The previous paragraph assumes, for simplicity, that the
optionee's tax basis in the option shares sold is equal to
the fair market value of the option shares on the date of
exercise. While this would be the case if the optionee had
paid the option price for such shares in cash, it would not
normally be the case if the optionee paid the option price
in whole or in part by delivery of the Corporation's Common
Stock. In the latter case, the optionee's
<PAGE>
tax basis in the shares acquired would be equal to (i) the
tax basis of the Common Stock surrendered, with respect to
the number of shares so surrendered, and (ii) the fair
market value of the Common Stock with respect to the number
of shares received in excess of the number of shares deliv-
ered. Capital gain or loss on the sale of a particular
option share would be measured based on the difference
between the selling price and the optionee's actual tax
basis for such share. The optionee's holding period for
the shares acquired (i) would include the holding period of
the shares surrendered, with respect to the number of
shares so surrendered, and (ii) would begin on the exercise
date with respect to excess shares received. The long or
short-term nature of such gain or loss would depend upon
the holding period for such shares.
Incentive Stock Options
The holder of an incentive stock option does not realize
taxable income upon the grant or exercise of the option,
nor is the Corporation entitled, for income tax purposes,
to a deduction in respect of such grant or exercise.
The income tax treatment of any gain or loss realized upon
an optionee's disposition of option shares depends on the
timing of the disposition. If the option shares have been
held for more than 1 year and if more than 2 years have
elapsed since the date of grant, then (i) if the selling
price exceeds the option price, the excess is taxable to
the optionee as long-term capital gain, and (ii) if the
selling price is less than the option price, the difference
is treated as a long-term capital loss. In neither event
is any deduction allowed to the Corporation.
If a disposition of option shares which are not subject to
a substantial risk of forfeiture occurs prior to the
elapsing of the two time periods referred to above (a
"disqualifying disposition"), then (i) if the selling price
exceeds the fair market value of the option shares on the
date the option was exercised, the excess of such fair
market value over the option price is taxable to the
optionee as ordinary income, and the excess of the selling
price over such fair market value is taxable to the
optionee as capital gain income (long or short-term,
depending on whether the optionee has held the option
shares for more than 12 months), (ii) if the selling price
exceeds the option price but does not exceed the fair
market value of the option shares on the date the option
was exercised, the excess of the selling price over the
option price is taxable to the optionee as ordinary income,
and (iii) if the selling price is less than the option
price, the difference is treated as a capital loss to the
optionee (long or short-term, depending on whether the
optionee has then held the option shares for more than 12
months). If, however, the disposition is a sale to a
related party (as defined in Section 267(b) of the Code to
include, for example, a member of the optionee's family or
a corporation majority-owned by the optionee) or a gift,
then the excess of the fair market value of the option
shares on the date the option was exercised (or, if
applicable, the date the substantial risk or forfeiture
lapses) over the option price is taxable to the optionee as
ordinary income. The amount of any income taxable to the
optionee as ordinary compensation income on a disqualifying
disposition may be subject to withholding. The Corporation
is entitled to a deduction in computing its federal income
taxes for the year of disposition in an amount equal to any
amount taxable to the optionee as ordinary income.
Because of the short-swing profit rule under Section 16(b),
option shares acquired by an officer or director (for pur-
poses of Section 16(b)) of the Corporation pursuant to the
exercise of an option will be considered to be subject to a
substantial risk of forfeiture during the six month
<PAGE>
period commencing on the issuance of such option shares to
the officer or director. The preceding paragraph describes
certain tax effects arising from the disposition of option
shares which are not subject to a substantial risk of
forfeiture. Where option shares are issued to an officer
(for purposes of Section 16)b)) or director and, according-
ly, are considered subject to a substantial risk of
forfeiture (assuming no Section 83(b) election is filed),
the tax effects set forth above are modified by reference
to the date the substantial risk of forfeiture lapses
rather than to the date of exercise. Accordingly, if a
disposition of option shares which are subject to a
substantial risk of forfeiture occurs prior to the elapsing
of the two time periods referred to above, then (i) if the
selling price exceeds the fair market value of the option
shares on the date the substantial risk of forfeiture
lapses, the excess of such fair market value over the
option price is taxable to the optionee as ordinary income,
and the excess of the selling price over such fair market
value is taxable to the optionee as capital gain income
(long or short-term, depending on whether the optionee has
held the option shares for more than 12 months following
the lapse of the substantial risk of forfeiture), (ii) if
the selling price exceeds the option price but does not
exceed the fair market value of the option shares on the
date the substantial risk of forfeiture lapses, the excess
of the selling price over the option price is taxable to
the optionee as ordinary income, and (iii) if the selling
price is less than the option price, the difference is
treated as a capital loss to the optionee (long or short-
term depending on whether the optionee has held the option
shares for more than 12 months following the lapse of the
substantial risk of forfeiture). Option holders subject to
Section 16(b) should consult with their personal tax
advisor about the desirability of making a protective
Section 83(b) election.
The previous paragraphs assume, for simplicity, that the
optionee's tax basis in the option shares disposed of is
equal to the option price. While this would be the case if
the optionee had paid the option price for such shares in
cash, it would not normally be the case if the optionee had
paid the option price in whole or in part by delivery of
the Corporation's Common Stock. In the latter case, the
basis and holding period of the shares received would de-
pend on, among other things, (i) the number of shares
surrendered, (ii) the basis of the shares surrendered, and
(iii) whether the surrendered shares had been received on
the exercise of an incentive stock option and held for one
year or less from exercise and two years or less from the
date of grant of the option. In addition, the surrender of
shares received on exercise of an incentive stock option
which have been held less than one year from the exercise
and two years from the date of grant of such option will be
a disqualifying disposition and may trigger the recognition
of ordinary compensation income by the optionee and a
corresponding deduction by the Corporation. Capital gain
or loss on the sale of a particular option share would be
measured based on the difference between the selling price
and the optionee's actual tax basis in such share
(increased by the amount of ordinary compensation income
recognized by the optionee on the disposition, if any), and
the long or short-term nature of such gain or loss would
depend upon the adjusted holding period for such share.
Under proposed regulations, if an optionee exercises an
incentive stock option with other shares and later disposes
of some of the shares received, the optionee is first
deemed to dispose of those shares received which have the
lowest tax basis.
For the reasons set forth below, an optionee may in certain
circumstances be subject to an alternative minimum tax.
<PAGE>
The Plan provides that tandem stock appreciation rights may
be granted subsequent to the issuance of an incentive stock
option. Such a grant may cause the incentive stock option
to be treated as a nonqualified stock option.
Alternative Minimum Tax
An optionee may in certain circumstances be subject to an
alternative minimum tax. An optionee's alternative minimum
tax liability for a tax year is equal to the excess, if
any, of (i) either 26% or 28% (depending on the optionee's
filing status and income level) of the optionee's alter-
native minimum taxable income for such tax year in excess
of an exemption amount (such exemption amount being from $0
to $45,000, depending on the optionee's filing status and
income level) over (ii) the optionee's regular income tax
liability for such tax year. In general, alternative
minimum taxable income for a tax year means the optionee's
taxable income (without regard to any net operating loss
deduction), computed with certain adjustments and increased
by the amount of the optionee's tax preference items, if
any. Up to 90 percent of the optionee's alternative
minimum taxable income may be offset by the optionee's
alternative minimum tax net operating loss, if any.
The amount of alternative minimum tax paid by an optionee
in taxable years beginning after 1986 which is attributable
to timing preferences and adjustments will be available as
a credit against the optionee's regular income tax
liability (but not against alternative minimum tax liabili-
ty) in future years.
The amount by which the fair market value of Common Stock
(determined as of the exercise date) received through the
exercise of an incentive stock option exceeds the option
price is an adjustment to alternative minimum taxable
income and is considered a timing adjustment for purposes
of the credit for alternative minimum tax paid in prior
years. The amount of such adjustment will be added to the
basis of the stock received for purposes of computing the
optionee's alternative minimum taxable income in the
future. This discussion assumes that any officer or
director (within the meaning of Section 16(b)), makes a
timely Section 83(b) election with respect to the receipt
of shares on exercise of an incentive stock option; to the
extent that a Section 83(b) election is not made, the
timing and amount of adjustments to alternative minimum
taxable income would be affected in a manner similar to
that described above for non-qualified options under the
regular federal income tax.
The spread on exercise of an incentive stock option is
treated as a timing adjustment regardless of whether the
stock received on exercise is later disposed of in a
disqualifying disposition.
Stock Appreciation Rights
The federal income tax consequences applicable to stock
appreciation rights granted in connection with options are
similar in substance to those applicable to nonqualified
options. Thus, the optionee will not recognize taxable
income at the time a stock appreciation right is granted
and the Corporation will not be entitled to any deduction
by reason of the grant of such stock appreciation right.
Upon the exercise of any stock appreciation right by a
holder who is not a director or officer for the purpose of
Section 16(b), the holder of such right will recognize
taxable ordinary income (and the Corporation will be
entitled to a corresponding deduction in computing its
taxable income in the year of exercise) in the amount equal
to the incremental value payment due from the Corporation.
In the event a holder receives Common Stock upon the exer-
cise of a stock appreciation right and
such holder is a director or officer for purposes of
Section 16(b) at the time of
<PAGE>
such exercise, the shares received by such holder would, as
a result of the short-swing profit rule under Section
16(b), be considered subject to a substantial risk of
forfeiture during the six-month period following the
exercise of the stock appreciation right and (in the
absence of a Section 83(b) election as described below) the
holder's gross income would be measured when the sub-
stantial risk of forfeiture lapses at the end of such six
month period and would be included in the holder's tax year
in which occurs the lapse of such substantial risk of
forfeiture. The holder's holding period would begin on the
lapse of the substantial risk of forfeiture. The
Corporation's deduction would arise at that time. If,
however, a holder subject to Section 16(b) makes a written
election pursuant to Section 83(b) of the Code (including
the filing of such election with the Internal Revenue
Service within 30 days after the exercise of such stock
appreciation right) to include in the holder's gross income
for his or her tax year in which the exercise of the stock
appreciation occurs the fair market value of such shares at
the time of exercise, the tax consequences would generally
be the same as described above for employees not subject to
section 16(b).
If an optionee sells Common Stock received upon exercise of
a stock appreciation right, the amount by which the sale
price exceeds the fair market value of such shares at the
time of the exercise of such stock appreciation right will
be taxable to the optionee as capital gain (long or short-
term, depending on whether the optionee held the Common
Stock for more than 12 months), provided the Common Stock
is a capital asset.
If the Common Stock received upon exercise of a stock
appreciation right is sold for an amount less than the fair
market value of such Common Stock at the time the stock
appreciation right was exercised, the optionee will
recognize a capital loss (long or short-term, depending on
whether the optionee held the Common Stock for more than 12
months).
The disposition of Common Stock acquired pursuant to the
exercise of a stock appreciation right will generally not
have any federal income tax consequences for the
Corporation.
Restricted Stock
Certain restrictions which the Committee may impose with
respect to restricted stock, such as a right on the part of
the Corporation to repurchase the stock if the recipient's
employment with the Corporation terminates within a certain
period at a price which is equal to the lesser of the fair
market value of the stock at repurchase or the price
originally paid for the stock by the recipient, will cause
the stock to be subject to a substantial risk of
forfeiture. Unless a Section 83(b) election is made a
recipient of restricted stock which is subject to a
substantial risk of forfeiture will not recognize taxable
income on the receipt of the stock. Instead, the recipient
will recognize ordinary income, subject to withholding,
when such substantial risk of forfeiture lapses, equal to
the fair market value of the restricted stock at the time
the substantial risk of forfeiture lapses less any amount
paid by the employee for such stock.
If a valid Section 83(b) election is made (including the
filing of such election with the Internal Revenue Service
within thirty days after the grant of the restricted
stock), the recipient of the restricted stock will include
in his or her gross income as ordinary income the excess
(if any) of the fair market value of the restricted stock
(determined at the time the stock is granted) over the
amount paid (if any) for such stock. If the holder of re-
stricted stock subject to a substantial risk of forfeiture
has made a valid Section 83(b) election and later must
forfeit such stock pursuant to a restriction, such holder
will realize capital loss (long or
<PAGE>
short-term depending upon whether the holder held the stock
for more than twelve months) equal to the excess, if any,
of the amount originally paid for the stock over the amount
received upon such forfeiture.
Certain restrictions on stock imposed by the Committee may
not constitute a substantial risk of forfeiture. In such a
case, the recipient of such restricted stock will recognize
taxable income upon receipt of such stock equal to the
excess of the fair market value of such stock (determined
at the time the stock is granted) over the amount paid (if
any) for such stock.
If restricted stock is issued to a recipient who is a
director or officer for purposes of Section 16(b) at the
time of issuance, the restricted stock will, as a result of
the short-swing profit rule under Section 16(b), be
considered subject to a substantial risk of forfeiture
during the six-month period following receipt (or longer,
if the restricted stock is subject to another restriction
which constitutes a substantial risk of forfeiture).
The Corporation will be entitled to a deduction in
computing its federal income taxes in the amount equal to
the ordinary income recognized by the recipient of
restricted stock. Such deduction will be allowed for the
taxable year of the Corporation in which or with which ends
the taxable year in which the recipient of restricted stock
recognized ordinary income.
Upon the sale or other disposition of restricted stock, the
holder will realize capital gain or loss (long or short-
term depending on whether the holder held the stock for
more than 12 months) equal to the difference between the
sale price and tax basis of such stock. The tax basis of
such stock will generally equal the price paid for such
stock (if any) plus any ordinary income recognized with
respect to the receipt of such stock. A recipient's
holding period with respect to restricted stock will
generally begin on the day after such stock is transferred
to the recipient; however, the holding period with respect
to restricted stock which is subject to a substantial risk
of forfeiture will not begin until the day after the lapse
of such substantial risk of forfeiture (unless a valid
Section 83(b) election is filed, in which case the holding
period begins on the day after the stock is transferred).
Recipients of restricted stock should consult their
personal tax advisor regarding whether such stock is
subject to a substantial risk of forfeiture and whether it
is desirable to make a Section 83(b) election.
Listing, Registration and Compliance
with Laws and Regulations
Each option, stock appreciation right and grant of
restricted stock is subject to the condition that the
Corporation is not obligated to issue any shares if at any
time the Board determines that the listing, registration or
qualification of the Common Stock subject to such option,
stock appreciation right or grant upon any securities
exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection
with, the granting of such option, stock appreciation right
or restricted stock or the purchase or issue of shares
thereunder unless such listing, registration,
qualification, consent or approval is effected or obtained
free of any conditions not acceptable to the Board.
Amendment and Termination
The Board may terminate the Plan at any time with respect
to shares for which options have not theretofore been
granted. The Board may amend the Plan from time to time,
in its sole discretion, but no
<PAGE>
amendment shall impair (without his consent) the rights of
an employee to any option or stock appreciation right or
restricted stock theretofore granted; and further, the
Board may not, without the authorization and approval of
stockholders: (i) increase the maximum amount of shares
which may be issued in the aggregate under the Plan (except
as described above to make adjustments in connection with a
reorganization, stock split, merger and certain changes in
the Common Stock), (ii) extend the termination date of the
Plan or of any option or stock appreciation right granted
under the Plan, or (iii) enlarge the class of employees
eligible to receive options, stock appreciation rights or
restricted stock. Unless sooner terminated, the Plan will
terminate on January 31, 1998. Upon termination of the
Plan: (i) no additional options, stock appreciation rights
or restricted stock will be granted under the Plan, (ii)
options or stock appreciation rights which have not
expired, terminated, been exercised or surrendered prior to
the termination of the Plan may be exercised in accordance
with their terms and the terms of the Plan, (iii) all
restricted stock which has been granted will vest or be
forfeited in accordance with the terms of their respective
grants, and (iv) the Committee will continue to have its
full powers under the Plan, except with respect to granting
options, stock appreciation rights or restricted stock.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
P HARNISCHFEGER INDUSTRIES, INC.
R ANNUAL MEETING OF STOCKHOLDERS - MARCH 6, 1995
O
X Proxy Solicited by the Board of Directors
Y
The undersigned holder of Common Stock of HARNISCHFEGER INDUSTRIES, INC. hereby
appoints JEFFERY T. GRADE and JOHN A. McKAY, and each of them, as the undersigned's
proxies, with power of substitution, to vote as indicated on the reverse hereof on items
(1) and (2) and in their discretion upon such other business as may properly come before
the meeting, all shares of Common Stock of the undersigned in Harnischfeger Industries,
Inc. at the annual meeting of stockholders to be held at the Vogel Hall of the Performing
Arts Center, 123 E. State Street, Milwaukee, Wisconsin on Monday, March 6, 1995 at 10:00
a.m. and at all adjournments thereof. Without limiting the generality of the foregoing,
the aforesaid proxies are hereby expressly authorized to vote their proxy as indicated.
Unless otherwise instructed, this proxy will be voted FOR all nominees listed in item 1
and FOR item 2.
(IMPORTANT-TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE
SIDE
<PAGE>
Please mark
/x/ votes as in
this example
The Board of Directors recommends a vote FOR Item 1 and FOR Item 2.
FOR AGAINST ABSTAIN
1. To elect four directors to 2. To amend the 1988 / / / / / /
serve for terms of three Incentive Stock Plan.
years.
Nominees: John D. Correnti,
Don H. Davis, Jr.,
Robert B. Hoffman and
Jean-Pierre Labruyere
FOR WITHHELD
/ / ALL / / FROM ALL
NOMINEES NOMINEES
- -------------------------------- MARK HERE MARK HERE
FOR, except vote withheld from the FOR ADDRESS / / IF YOU PLAN / /
following nominee(s): CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign exactly as your name appears. If acting as
attorney, executor, trustee or in representative capacity,
sign name and title.
Signature(s): Date:
-------------------- ------------
Signature(s): Date:
-------------------- ------------
</TABLE>
<PAGE>
EXHIBIT 1
HARNISCHFEGER INDUSTRIES, INC. 1988 INCENTIVE STOCK PLAN
(as amended February 3, 1992)
HARNISCHFEGER INDUSTRIES, INC. 1988 INCENTIVE STOCK PLAN
Table of Contents
Article Page
1 Introduction 1
1.1 Plan Name, Effective Date 1
1.2 Purpose 1
1.3 Plan Administrator 2
1.4 Company Shares Reserved for
the Plan 2
2 Administration of the Plan 3
2.1 Plan Administrator 3
2.2 Plan Administrator's Powers 3
2.3 Actions by Plan
Administrator 5
3 Plan Participants 5
3.1 Eligibility 5
3.2 Participation 6
3.3 Grant Date 7
4 Terms and Conditions of Options and
Stock Appreciation Rights 7
4.1 Terms and Conditions of
Options 7
4.2 Terms and Conditions of
Stock Appreciation
Rights 10
4.3 Method of Exercising Options
and Stock Appreciation
Rights 12
5 Terms and Conditions of Restricted
Company Shares 13
5.1 Terms and Conditions of
Restricted Company
Shares 13
5.2 Vesting 14
5.3 Forfeitures 14
5.4 Issuance of Share
Certificates 14
6 General Provisions 15
6.1 Stockholder Rights 15
6.2 Listing, Registration and
Compliance with Laws
and Regulations 15
6.3 Non-Transferability of
Options, Stock
Appreciation Rights,
and Restricted
Company Shares 16
6.4 Adjustments for Changes in
Company Shares 17
6.5 Loan Agreement Restrictions 17
6.6 Indemnification 17
6.7 Withholding of Taxes 18
6.8 No Employment Rights
Conferred 19
6.9 Notice of Early Disposition
of Company Shares 19
6.10 Cancellation of Options 19
6.11 Continued Availability of
Company Shares Under
Unexercised Options and
Forfeited Restricted
Stock Grants 19
6.12 No Strict Construction 20
6.13 Choice of Law 20
6.14 Successors 21
6.15 Severability 21
7 Amendment and Termination 21
7.1 Amendment 21
7.2 Termination 21
HARNISCHFEGER INDUSTRIES, INC. 1988 INCENTIVE STOCK PLAN
ARTICLE 1
Introduction
1.1 Plan Name, Effective Date. Harnischfeger
Industries, Inc. 1988 Incentive Stock Plan (the "Plan") is
established effective February 8, 1988 by Harnischfeger
Industries, Inc. (the "Company").
1.2 Purpose. The purpose of the Plan is to
provide key employees of the Company and its subsidiaries
with additional incentive to increase their efforts on the
Company's behalf and to remain in or enter into the employ
of the Company and its subsidiaries by granting to such
employees from time to time, at the discretion of the plan
administrator:
(a) incentive stock options (within the
meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"))
to purchase shares of common stock of the
Company ("Company Shares"),
(b) nonqualified stock options (meaning
all options granted under the Plan which are
not designated by the plan administrator at the
time of grant as incentive stock options) to
purchase Company Shares,
(c) stock appreciation rights, but only
in connection with incentive stock options and
nonqualified stock options granted under the
Plan, and
(d) restricted Company Shares, according
to the terms of Article 5.
By virtue of the benefits available under the Plan,
employees who are responsible for the future growth and
continued success of the Company have an opportunity to
participate in the appreciation in the value of Company
Shares, which furnishes such employees with an additional
incentive to work for and contribute to such appreciation
through the growth and success of the Company.
1.3 Plan Administrator. As provided in Article
2, the Plan is administered by a committee of two or more
members of the Board of Directors of the Company (the "plan
administrator").
1.4 Company Shares Reserved for the Plan.
2,280,000 Company Shares (which may be authorized and
unissued shares or treasury shares and which number is
subject to adjustment as provided in Section 6.4) shall be
reserved for issuance under the Plan, reduced by the sum of
the following: (i) all Company Shares which are purchased
after 1987 upon the exercise of purchase options at any
time granted under the Harnischfeger Industries, Inc. 1978
Incentive Stock Plan (the "1978 Plan") or this Plan, (ii)
all Company Shares for which payment of incremental value
is made after 1987 by reason of the exercise of stock
appreciation rights at any time granted under the 1978 Plan
or this Plan to the extent of a) the Company Shares
received upon such exercise of stock appreciation rights
and b) the number of Company Shares subject to incentive
stock options granted in tandem with any such stock
appreciation rights, (iii) the number of Company Shares
determined by dividing the value of the cash or other
consideration issued by the Company by reason of a
surrender after 1987 of any option by the per share market
value on the surrender date (provided that if a new option
is substituted for a surrendered option, the new option
will (regardless of the exercise price prescribed therein)
be deemed to have a value of zero for purposes of this
clause (iii)) and (iv) the number of restricted Company
Shares granted and not forfeited.
ARTICLE 2
Administration of the Plan
2.1 Plan Administrator. The Plan is
administered by a committee consisting of two or more
directors of the Company appointed by the Board of
Directors of the Company, each of whom has not, during the
one year prior to or during service as an administrator of
the Plan, been granted or awarded equity securities of the
Company pursuant to the Plan or any other plan of the
Company other than a plan meeting the requirements of
paragraphs (c)(2)(i)(A)-(D) of Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934 as amended.
Subject to the foregoing, the Board of Directors of the
Company shall have the power to determine the number of
plan administrative committee members and to change such
number from time to time. The Board of Directors may from
time to time appoint members who qualify under the above
criteria to the plan administrative committee in
substitution for, or (where the number of members has been
increased) in addition to, members previously appointed and
may fill vacancies, however caused. Any plan
administrative committee member may be removed by the Board
of Directors at any time without cause. No individual may
be appointed as a committee member who shall not be a
director of the Company at the time of such appointment.
An individual shall automatically cease to be a plan
administrative committee member at the time such individual
ceases to be a director of the Company.
2.2 Plan Administrator's Powers. Except as
otherwise specifically provided and in addition to the
powers, rights and duties specifically given to the plan
administrator elsewhere in the Plan, the plan administrator
shall have the following powers, rights an duties:
(a) To determine (i) the key employees of
the Company and its subsidiaries to whom
restricted Company Shares, incentive stock
options, nonqualified stock options and stock
appreciation rights shall be granted (provided
that no restricted Company Shares, option or
stock appreciation rights may be granted to an
individual at a time when the individual owns,
or would own after the grant of such Company
Shares or the exercise of such option, stock
possessing more than 10 percent of the total
combined voting power of all classes of stock
of the Company), (ii) the time or times at
which such restricted Company Shares, options
and stock appreciation rights shall be granted
(provided that no restricted Company Shares,
options and no stock appreciation rights may be
granted after January 31, 1998), and (iii) the
number of Company Shares to be granted as
restricted Company Shares or to be covered
under each incentive stock option or
nonqualified stock option and any related stock
appreciation right granted under the Plan.
(b) To establish all of the terms and
conditions governing the rights and obligations
of a key employee with respect to any such
restricted Company Shares, incentive stock
option, nonqualified stock option or stock
appreciation right granted to such employee,
including but not limited to (i) the option
price of Company Shares covered under each such
option or stock appreciation right (which
option price shall not be less than 100 percent
of the fair market value of a Company Share on
the date the applicable option is granted) and
whether upon the exercise of an option such
price may be paid in cash or Company Shares, or
partially in each, (ii) the length of the
period during which an option or stock
appreciation right may be exercised, (iii) the
time or times during each such applicable
period when each option or stock appreciation
right may be partially or fully exercised,
including the power to accelerate the
exercisability of any previously granted option
or stock appreciation right, (iv) whether a
stock appreciation right which has been
exercised shall be partially or fully paid by
the issuance of Company Shares, (v) any
conditions precedent to be satisfied before an
option or a stock appreciation right may be
exercised, (vi) any restrictions on resale of
any Company Shares received as restricted
Company Shares or on exercise of an option or
stock appreciation right and whether the
Company shall have any repurchase rights with
respect to such Company Shares, (vii) the form
of the instruments evidencing any option or
stock appreciation right granted under the Plan
or effecting an exercise by a holder thereof of
any option or stock appreciation right, and the
form of the instruments evidencing the granting
of restricted Company Shares, and (viii) the
vesting schedule applicable to each grant of
restricted Company Shares and whether the
vesting schedule for a restricted Company Share
shall be accelerated at any time.
(c) To construe and interpret the Plan
and the terms of restricted Company Shares,
options and stock appreciation rights granted
under the Plan, to adopt, amend and rescind
such rules and regulations as may be necessary
for the efficient administration of the Plan
and as are consistent with its terms, and to
remedy ambiguities, inconsistencies or
omissions.
Each action taken and decision made by the plan
administrator within the scope of the authority delegated
to it by this Plan or by the Board of Directors shall be
binding and conclusive on all persons interested in the
Plan.
2.3 Actions by Plan Administrator. The plan
administrator shall hold its meetings at such times and
places as it may determine and may make such rules and
regulations for the conduct of its business as it considers
advisable. A majority of the members of the plan
administrative committee shall constitute a quorum and any
action taken by a majority of the members present at a
meeting at which a quorum of members is present shall be
considered an act of the plan administrator. The plan
administrator also may take fully effective actions by a
written instrument signed by a majority of the members of
the plan administrative committee. The plan administrative
committee may select one of its members as its chairman and
may appoint a secretary of the committee (who need not be a
member of the committee).
ARTICLE 3
Plan Participants
3.1 Eligibility. Each key employee of the
Company and its subsidiaries shall be eligible to be
designated by the plan administrator as the recipient of
restricted Company Shares, an incentive stock option or
nonqualified stock option and stock appreciation rights
under the Plan. In making determinations as to the
employees to be granted restricted Company Shares, options
and stock appreciation rights, the plan administrator may
take into account the nature of the services rendered or
expected to be rendered by the respective employees, their
present and potential contributions to the Company's
success, the anticipated number of years of service
remaining and such other factors as the plan administrator
in its discretion considers relevant. The term "key
employee" shall include officers as well as other employees
of the Company and its subsidiaries (including employees
who also are directors of the Company or one of its
subsidiaries) who have managerial, supervisory,
professional, engineering or similar responsibilities.
Neither any member of the plan administrative committee nor
any member of the Board of Directors who is not an employee
of the Company or its subsidiaries shall be eligible to be
granted an option, any stock appreciation rights or
restricted Company Shares under the Plan.
3.2 Participation. The plan administrator may
from time to time grant to key employees restricted Company
Shares, incentive stock options to purchase Company Shares,
nonqualified stock options to purchase Company Shares and,
in addition at its sole discretion, stock appreciation
rights in connection with such incentive stock options or
nonqualified stock options. The plan administrator may
grant more than one restricted Company Share, option or
stock appreciation right to the same key employee. Each
stock appreciation right granted under the Plan must be
granted in connection with all or a portion of an incentive
stock option or nonqualified stock option granted under the
Plan. However, a stock appreciation right may be granted
concurrently with the granting of an option or at any time
thereafter during the term of the option; provided that at
the time of such grant the individual to whom the stock
appreciation right is granted is a key employee of the
Company or of one of its subsidiaries. No restricted
Company Share, option or stock appreciation right may be
granted to any key employee who on the effective date of
the grant is not in the employ of the Company or one of its
subsidiaries. (Key employees who have received grants of
restricted Company Shares or options under the Plan are
sometimes referred to herein as "participants"). The
Company will from time to time grant to such key employees
as may be selected by the plan administrator the restricted
Company Shares, options and stock appreciation rights
designated to be granted by the plan administrator, subject
to the terms and conditions established by the plan
administrator and the terms and conditions herein provided.
3.3 Grant Date. The effective date of the
grant of a restricted Company Share, option or stock
appreciation right (the "grant date") shall be the date
specified by he plan administrator in its determination or
designation relating to the granting of such restricted
Company Shares, option or stock appreciation right:
provided that the plan administrator may not designate a
grant date with respect to any restricted Company Shares,
option or stock appreciation right which is earlier than
the date on which the granting of such share, option or
stock appreciation right is approved by the plan
administrator.
ARTICLE 4
Terms and Conditions of Options and Stock Appreciation
Rights
4.1 Terms and Conditions of Options. As
provided in Section 2.2, options granted under the Plan
shall be in such quantity, at such price, subject to such
terms and conditions and evidenced in such form as shall be
determined from time to time by the plan administrator;
provided that all options shall in any event be subject to
the following terms and conditions:
(a) Option Price. The option price per
Company Share, which may be different in each
case, shall be fixed by the plan administrator
at or before the time the plan administrator
approves the granting of the option.
However, no option shall have an option price
per Company Share of less than 100 percent of
the fair market value of a Company Share on the
grant date of the option. For this purpose
"fair market value" of a Company Share as of
any date shall be determined in such manner as
shall be prescribed in good faith by the plan
administrator; provided that in the absence of
specific instructions by the plan administrator
to the contrary, the fair market value of a
Company Share as of any date shall be equal to
the last per share sales price reported for a
Company Share for such date in The Wall Street
Journal or, if no sales of Company Shares are
reported for such date in The Wall Street
Journal, for the next succeeding date for which
sales of Company Shares are so reported in The
Wall Street Journal.
(b) Term and Exercisability of Options.
The term of each option granted under the Plan
shall be for a period not exceeding ten years
from the grant date, as established by the plan
administrator at or before the time the plan
administrator grants the option. No option
shall be exercisable (i) during the first six
full calendar months commencing on or after the
grant date, (ii) following the exercise of a
stock appreciation right related to such option
(but only to the extent the stock appreciation
right or portion thereof that has been
exercised covered the same Company Shares that
were covered by the option), or (iii) on or
following the tenth anniversary of the grant
date (or any earlier date which is the day
following the last day of the term of the
option). Unless the plan administrator
determines otherwise in the original terms of
an option, and subject to subsection (d) next
below and other applicable provisions of the
Plan, each option shall become exercisable in
accordance with the following table based upon
the number of full calendar months elapsed from
the grant date of the option:
If the Number of The Percentage of
Full Calendar Months Company Shares
Elapsed From the Covered By the
Grant Date Equals Option Shall Be
-------------------- ------------------
Less than 6 months 0
At least 6 months but
less than 18 months 25%
At least 18 months but
less than 30 months 50%
At least 30 months but
less than 42 months 75%
42 months or more 100%
Further, unless the plan administrator
determines otherwise, in the case of a
participant who will reach his "normal
retirement date" (as defined in Harnischfeger
Corporation Salaried Employees Retirement Plan)
less than 42 months from the grant date of an
option, the number of Company Shares which
shall become exercisable at the beginning of
each twelve calendar month period subsequent to
the initial six calendar month period
commencing on or following the grant date shall
be the total number of Company Shares specified
in the option multiplied by a fraction, the
numerator of which is 100% and the denominator
of which is the whole number (but not less than
one) of complete twelve month periods between
the date following such initial six calendar
month period and the participant's normal
retirement date.
(c) Special Incentive Stock Option Terms.
The terms of each incentive stock option
granted under the Plan shall include those
terms which are required by Section 422 of the
Code and such other terms not inconsistent
therewith as the plan administrator may
determine. Each option which is designated by
the plan administrator as an incentive stock
option shall be considered to have contained
from the outset such terms and provisions as
shall be necessary to entitle such intended
incentive stock option to the tax treatment
afforded by the Code to incentive stock options
under Section 422 of the Code. If any
agreement covering such an intended incentive
stock option granted under the Plan does not
explicitly include any terms required to
entitle such intended incentive stock option to
the tax treatment afforded by the Code to
incentive stock options, then all of such
required terms and provisions shall be
considered implicit in such agreement and such
intended incentive stock option shall be
considered to have been granted subject to such
required terms and conditions.
(d) Early Terminations of Options. If a
participant ceases to be employed by the
Company and all of its subsidiaries prior to
the end of the six full months commencing on
the grant date of an option, the option shall
terminate effective as of the date of the
participant's termination of employment and no
portion of the terminated option shall be
exercisable after that date. If a
participant's termination of employment occurs
following the six full months commencing on or
after the grant date of an option the following
shall apply with respect to such option:
(i) Except as provided in (iii) and
(iv) below, the participant shall, during
the three months commencing on his date
of termination of employment, have the
right at his discretion to partially or
fully exercise the unexercised portion of
the option which was exercisable at the
time of his termination of employment.
(ii) If a participant shall die
prior to his termination of employment or
following his termination of employment
but within the three month period
described in subparagraph (i) next above,
the unexercised portion of the option
which was exercisable at the time of the
participant's death may be partially or
fully exercised within the twelve month
period commencing on the date of the
participant's death by the participant's
estate or by any person who has acquired
the right to exercise such option by
bequest or inheritance or by reason of
the laws of descent and distribution.
(iii) If a participant's employment
is terminated by the Company or any of
its subsidiaries for cause, any
unexercised portion of an option granted
to the participant shall terminate
effective as of the participant's date of
termination of employment and no portion
thereof shall be exercisable thereafter.
For this purpose, termination "for cause"
means termination as a result of the
failure of the participant to carry out
the duties assigned to him as a result of
his incompetence, willful neglect or
willful serious misconduct, as determined
by the Company.
(iv) Notwithstanding the foregoing,
the unexercised portion of any option
shall, to the extent permitted by
applicable law, terminate immediately
upon the employment of a participant by a
competitor of the Company or of one of
its subsidiaries.
4.2 Terms and Conditions of Stock Appreciation
Rights. As provided in Section 2.2, stock appreciation
rights granted under the Plan shall be subject to such
terms and conditions and shall be evidenced by agreements
in such form as shall be determined from time to time by
the plan administrator. In general (i) stock appreciation
rights shall be exercisable at such time or times and to
the extent that the incentive stock option or nonqualified
stock option, or portion thereof, to which the stock
appreciation right is related is exercisable, and (ii) upon
the termination, exercise or expiration of an option or
portion thereof to which a stock appreciation right is
related, such stock appreciation right shall terminate and
shall not thereafter be exercisable. However,
notwithstanding that the option or portion thereof related
to a stock appreciation right may be exercisable, each
stock appreciation right may be exercised only during a
window period (as described below), a stock appreciation
right may not be exercised until after the end of the six
full calendar months commencing on or after the date such
stock appreciation right is granted (except that this
limitation shall not apply in the case of the death or
disability of a participant if the option or portion
thereof to which the stock appreciation right is related is
exercisable) and a stock appreciation right related to an
incentive stock option shall not be exercisable on any date
on which the fair market value of a Company Share is less
than the option price provided for in the related incentive
stock option. A stock appreciation right granted to a
participant shall entitle the participant upon his exercise
of such right to surrender the related option or portion
thereof and receive an amount (herein called the
"incremental value") equal to the excess of the fair market
value on the date of such exercise of the Company Shares
subject to such surrendered option or portion thereof over
the option price of such Company Shares as provided in such
option. The incremental value shall be paid by the Company
all in cash, all in Company Shares or in any combination of
cash and Company Shares, as the plan administrator shall
determine in its sole discretion, which determination shall
be made after considering any preference expressed by the
participant exercising the stock appreciation right. Any
participant who wishes to express such a preference shall
notify the plan administrator in writing of his preference
and, if such participant expresses a preference to receive
cash in whole or in part, such writing shall be delivered
to the Company, in care of the plan administrator, during
the period (hereinafter the "window period") beginning on
the third business day following the date of release for
publication of an annual or quarterly summary statement of
the sales and earnings of the Company and its consolidated
subsidiaries and ending on the twelfth business day
following such date. In the event a participant does not
duly notify the plan administrator of any preference, and
in the absence of any express determination by the plan
administrator to the contrary, each payment of incremental
value which shall become due by reason of any exercise of a
stock appreciation right shall be made in cash. In the
event any Company Shares shall be delivered to satisfy all
or any part of any incremental value obligation arising by
reason of any exercise of a stock appreciation right, the
dollar amount of such obligation satisfied by such delivery
of Company Shares shall be considered to be equal to the
fair market value of a Company Share as of the date of
exercise multiplied by the number of Company Shares
delivered. No fractional Company Shares shall be issued to
make any payment of incremental value, and the cash and
Company Shares payable in each case shall be adjusted in
such manner as shall be prescribed by the plan
administrator to avoid the issuance of any fractional
Company Shares. Upon exercise of a stock appreciation
right and surrender of the related option or portion
thereof, such option, to the extent surrendered, shall be
considered to have been exercised and shall not thereafter
be exercisable, and to the extent Company Shares covered
under the option have not been used to pay the incremental
value, such Company Shares shall no longer be reserved
under the Plan.
4.3 Method of Exercising Options and Stock
Appreciation Rights. An option shall be exercised by a
written notice to the plan administrator and payment of the
option price to the Company, in care of the plan
administrator. Payment of the option price may be made, at
the discretion of the optionee, (i) in cash (including
check, bank draft, or money order, (ii) by delivery of
Company Shares (valued at the fair market value thereof on
the date of exercise) or (iii) by delivery of a combination
of cash and common stock provided, however, that the plan
administration may, in any instance, in order to prevent
any possible violation of law, require the option price to
be paid in cash and further provided that the right to
deliver Company Shares in payment of the option price may
be limited or denied in any option agreement. A stock
appreciation right shall be exercised by written notice to
the plan administrator at such time as is permitted in
accordance with the provisions of Section 4.2 and by
surrender of the option or portion thereof to which the
stock appreciation right relates. At the time or exercise
of an option or stock appreciation right a participant may
request that Company Shares to be issued with respect to
the exercise of the option or which may be issued with
respect to the exercise of the stock appreciation right be
issued in the name of the participant and another person
jointly with right of survivorship.
ARTICLE 5
Terms and Conditions of Restricted Company Shares
5.1 Terms and Conditions of Restricted Company
Shares. As provided in Section 2.2, Company Shares granted
under the Plan shall be subject to such terms, conditions
and restrictions, and shall be evidenced by such agreements
as shall be determined from time to time by the plan
administrator. All grants of Company Shares shall in any
event be subject to the following terms, conditions and
restrictions:
(a) The purchase price, if any, will be
determined by the plan administrator.
(b) Restricted Company Shares may be
subject to restrictions on the sale or other
disposition thereof, rights of the Company to
reacquire such restricted Company Shares at the
purchase price, if any, originally paid
therefor upon termination of the employee's
employment within specified periods,
representation by the employee that he or she
intends to acquire restricted Company Shares
for investment and not for resale, and such
other restrictions, conditions and terms as the
plan administrator deems appropriate.
(c) The participant shall be entitled to
all dividends paid with respect to restricted
Company Shares during the period of restriction
and shall not be required to return any such
dividends to the Company in the event of the
forfeiture of the restricted Company Shares.
(d) The participant shall be entitled to
vote the restricted Company Shares during
the period of restriction.
(e) The plan administrator shall
determine whether restricted Company Shares are
to be delivered to the participant with an
appropriate legend imprinted on the certificate
or if the shares are to be deposited in escrow
pending removal of the restrictions.
5.2 Vesting. Each participant shall be vested
in the Company Shares granted under this Article 5
according to such schedule and such performance factors
affecting vesting as the plan administrator determines at
the time of grant. As provided in Section 2.2, the plan
administrator shall have the power to accelerate the
vesting schedule. Whenever the term "vested" or "fully
vested" are used in this Plan with reference to restricted
Company Shares, the meaning of those terms shall be
determined by reference to the vesting schedule.
5.3 Forfeitures. If a participant terminates
employment before his Company Shares are vested or before
fulfillment of the applicable performance factors, the
participant shall forfeit such Company Shares under terms
established by the plan administrator and they shall again
be available for issuance under Section 1.4.
5.4 Issuance of Share Certificates. Share
certificates for the number of restricted Company Shares
granted will be issued in the name of each participant at
the time of grant and shall be delivered pursuant to
subsection 5.1(e). A participant may request that Company
Shares be issued in the name of the participant and another
person jointly with right of survivorship.
ARTICLE 6
General Provisions
6.1 Stockholder Rights. A participant shall
not have any dividend, voting or other stockholder rights
by reason of a grant of an option or a grant of a stock
appreciation right prior to the issuance of any Company
Shares pursuant to the proper exercise of all or any
portion of such option or stock appreciation right. A
participant shall have dividend, voting and other
stockholder rights with respect to restricted Company
Shares except as provided in Section 6.3 or otherwise
provided at the time of grant.
6.2 Listing, Registration and Compliance with
Laws and Regulations. Each restricted Company Share,
option and stock appreciation right granted to a
participant shall be subject to the condition that the
Company shall not be obligated to issue any Company Shares
to the participant regardless of whether such participant
attempts to exercise or has exercised the option or stock
appreciation right, in whole or in part, if at any time the
Board of Directors shall determine, in its discretion, that
the listing, registration or qualification of Company
Shares subject to such grant, option or stock appreciation
right upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition
or, or in connection with, the granting of such restricted
Company Share, option or stock appreciation right or the
issue or purchase of Company Shares thereunder unless such
listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors. The Company
shall not by reason of the granting of any restricted
Company Share, option or stock appreciation right under
this Plan have any obligation to register the Company
Shares subject to such option under the Securities Act of
1933, as amended, or to maintain in effect any registration
of such Company Shares which may be made at any time under
such Act. In this connection, the form of restricted
Company Share, stock option and stock appreciation right
agreements to be used under the Plan may provide, among
other things, that a participant shall represent that all
Company Shares are being purchased for investment and not
with a view to resale in connection with a distribution of
such Company Shares.
6.3 Non-transferability of Options, Stock
Appreciation Rights and Restricted Company Shares. During
a participant's lifetime any option or stock appreciation
right granted under the Plan shall be exercisable only by
the participant and shall not be transferred (except by
will or the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act,
or the rules thereunder), pledged or hypothecated in any
way and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of an option or
stock appreciation right, contrary to the provisions
hereof, or upon the levy of any attachment or similar
process upon the rights and privileges conferred hereby,
such option or stock appreciation right shall immediately
become null and void. Company Shares granted under the
provisions of Article 5 shall not be transferred until such
Shares have become fully vested and nonforfeitable, and any
attempt to sell, assign, pledge, hypothecate or otherwise
encumber such Shares shall result in their forfeiture
according to the terms of Section 5.3.
6.4 Adjustments for Changes in Company Shares.
In order to prevent dilution or enlargement of restricted
Company Shares, options or stock appreciation rights, in
the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger,
consolidation or other change in Company Shares, the Board
of Directors shall make appropriate changes in the
aggregate number and type of Company Shares reserved for
grant as restricted Company Shares, options and stock
appreciation rights under this Plan, in the number and type
of Company Shares subject to grant as restricted Company
Shares and subject to unexercised options and stock
appreciation rights, in the option price per Company Share
specified in unexercised options and in stock appreciation
rights relating to unexercised options.
6.5 Loan Agreement Restrictions. Each option
and stock appreciation right shall be subject to the
condition that the Company shall not be obliged to (i)
issue any Company Shares to a participant, regardless of
whether such participant attempts to exercise or has
exercised an option or stock appreciation right, in whole
or in part, or (ii) make any payment to a participant upon
the surrender of a stock appreciation right, if at any time
the Board of Directors shall determine, in its discretion,
that the issuance of such Company Shares or the payment of
cash would be in violation of any covenant contained in any
of the Company's loan agreements or other contracts, as now
or from time to time hereafter in effect.
6.6 Indemnification. No member of the plan
administrative committee shall be liable, in the absence of
bad faith, for any act or omission with respect to his
service on the committee relating to the Plan. Service on
the plan administrative committee shall constitute service
as a director of the Company so that members of the plan
administrative committee shall be entitled to
indemnification and reimbursement as directors of the
Company to the full extent provided for at any time by law,
the Company's Certificate of Incorporation, the Company's
By-Laws and in any insurance policy or other agreement
intended for the benefit of the Company's directors.
6.7 Withholding of Taxes. The Company shall be
entitled, if the plan administrator considers it necessary
or desirable, to withhold (in cash or Company Shares), or
secure payment from the participant in lieu of withholding,
the amount of any withholding or other payment required of
the Company under the tax withholding provisions of the
Code, any state's income tax act or any other applicable
law with respect to any amount payable and Company Shares
issuable under such participant's exercised options or
stock appreciation rights or as restricted Company Shares,
provided, however, that with respect to any Section 16
Officer (as defined below) any decision by the Company to
withhold Company Shares and any withholding of Company
Shares by the Company from a Section 16 Officer shall only
be made during a window period and provided further that no
Company Shares shall be withheld under the provisions of
this Section 6.7 that are issuable under options, stock
appreciation rights or restricted stock granted to the
Section 16 Officer less than six months before the date
either the decision to withhold or the withholding is to
take place. A Section 16 Officer is a participant who is
or at any time during the prior six months has been
designated by the Company as a Section 16 Officer for
purposes of Section 16 of the Securities Exchange Act of
1934. Subject to the discretion of the Company, no
distribution will be made to the participant until all tax
withholding obligations have been satisfied and, if Company
Shares are withheld pursuant to this Section 6.7, until the
window period during which the Company Shares are withheld.
6.8 No Employment Rights Conferred. Nothing in
the Plan or in any option, stock appreciation right or
restricted Company Share granted under the Plan shall
confer any right on an employee to continue in the employ
of the Company or any subsidiary or shall interfere in any
way with the right of the Company or any subsidiary at any
time to terminate his employment with or without cause or
to adjust his compensation.
6.9 Notice of Early Disposition of Company
Shares. As a condition of participation in the Plan each
participant agrees that he will give prompt notice to the
plan administrator of any disposition of Company Shares
acquired upon the exercise of an incentive stock option if
such disposition occurs within either two years after the
grant date of an incentive stock option or one year after
the receipt of such Company Shares by the participant
following his exercise of the incentive stock option.
6.10 Cancellation of Options. By express
written agreement a participant and the plan administrator
may agree that any previously granted option is thereby
canceled as of the date of the agreement and, at its
discretion, the plan administrator may subsequently grant
to such a participant who has voluntarily surrendered and
canceled a prior option one or more new or substitute
similar or different options under the plan.
6.11 Continued Availability of Company Shares
Under Unexercised Options and Forfeited Restricted Stock
Grants. If an option granted under the Plan terminates or
expires without being wholly exercised, if Company Shares
as to which an option has been exercised shall for any
reason not be issued, or if restricted Company Shares are
forfeited, restricted Company Shares or a new option (and
at the discretion of the plan administrator a related stock
appreciation right) may be granted under the Plan covering
the number of Company Shares to which such termination,
expiration, forfeiture, failure to issue or reacquisition
relates; provided, however, that to the extent Company
Shares are issued in connection with the exercise of a
stock appreciation right or a stock appreciation right
granted in connection with an incentive stock option is
exercised, the related option shall, solely for purposes of
determining the total number of Company Shares available
for grant under the Plan, be deemed to have been exercised,
and the Company Shares issued upon the exercise of such
stock appreciation right or which otherwise would have been
issued upon the exercise of an incentive stock option
related to such stock appreciation right shall not
thereafter be available for any further grants under the
Plan.
6.12 No Strict Construction. No rule of strict
construction shall be applied against the Company, the plan
administrator or any other person in the interpretation of
any of the terms of the plan, any option agreement or stock
appreciation right agreement or restricted Company Share
agreement, any option or stock appreciation right or
restricted Company Share granted under the plan or any rule
or procedure established by the plan administrator.
6.13 Choice of Law. Each option, stock
appreciation right, and restricted Company Share granted
under the Plan shall be considered to be a contract under
the laws of the State of Wisconsin and, for all purposes,
the Plan and each option, stock appreciation right, and
restricted Company Share granted under the Plan shall be
construed in accordance with and governed by the laws of
the State of Wisconsin.
6.14 Successors. This Plan is binding on and
will inure to the benefit of any successor to the Company,
whether by way of merger, consolidation, purchase or
otherwise.
6.15 Severability. If any provision of the
Plan or an option or stock appreciation right or restricted
Company Share agreement shall be held illegal or invalid
for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan or such
agreement, and the Plan and such agreement shall each be
construed and enforced as if the invalid provisions had
never been set forth therein.
ARTICLE 7
Amendment and Termination
7.1 Amendment. The Board of Directors may
amend the Plan from time to time, in its sole discretion,
but no amendment shall:
(a) without a participant's consent
impair his rights to any option or stock
appreciation right or restricted Company Share
theretofore granted; or
(b) without the authorization and
approval of the Company's stockholders (i)
increase the maximum number of Company Shares
which may be issued in the aggregate under the
Plan, except as provided in Section 6.4, (ii)
extend the termination date of the Plan or of
any option or stock appreciation right granted
under the Plan, or (iii) enlarge the class of
employees eligible to receive options or stock
appreciation rights or restricted Company
Shares under the Plan.
7.2 Termination. The Board of Directors may
terminate the Plan at any time with respect to Company
Shares which have not theretofore been granted or for which
options have not theretofore been granted. Unless earlier
terminated, the Pan will terminate at the close of business
on January 31, 1998. Following the termination of the
Plan, all options or stock appreciation rights which prior
to the Plan termination have not expired, terminated or
been exercised or surrendered may be exercised in
accordance with their terms and the terms hereof, all
restricted Company Shares which have been granted may vest
or be forfeited in accordance with the terms of their grant
and the terms hereof, and the plan administrator shall
continue to have its full powers under the Plan, except
with respect to the granting of restricted Company Shares,
options or stock appreciation rights under the Plan.
