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.
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(Name of Registrant as Specified in its Charter)
HARNISCHFEGER INDUSTRIES, INC.
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(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:
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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 1996
Annual Meeting of
Stockholders and
Proxy Statement
<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 14
PERFORMANCE GRAPH 18
PENSION PLAN TABLE 19
OPTION GRANTS 20
OPTION EXERCISES AND FISCAL YEAR-END VALUES 21
LONG-TERM INCENTIVE COMPENSATION 22
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS 23
PROPOSAL TO ADOPT THE HARNISCHFEGER
INDUSTRIES, INC. STOCK INCENTIVE PLAN 25
OTHER INFORMATION 31
ANNEX 1 - Harnischfeger Industries,
Inc. Stock Incentive Plan i
<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 Wyndham Hotel, 139 E.
Kilbourn Avenue, Milwaukee, Wisconsin, on Tuesday, April 9,
1996, 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 a proposal to approve the
Harnischfeger Industries, Inc. Stock Incentive Plan,
a copy of which is attached as Annex 1 to the
accompanying proxy statement; and
3. To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
Stockholders of record at the close of business on February
9, 1996 are entitled to receive notice of and to vote at
the annual meeting and any adjournment or postponement
thereof. A list of stockholders entitled to vote is
available at the Corporation's offices.
We hope that you will attend the 1996 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 12, 1996
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE.
<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 1996 annual meeting of stockholders on Tuesday,
April 9, 1996, and at any adjournment or postponement
thereof. The proxy statement, proxy card and annual report
are being mailed to stockholders on or about
February 15, 1996.
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 approval of the Harnischfeger Industries, Inc. Stock
Incentive Plan, and (c) in accordance with the best judg-
ment 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 before the polls close at the meeting
by filing with the Corporation's Secretary a written
revocation or duly executed form of proxy bearing a later
date or by voting in person at the meeting. The Corpora-
tion has appointed an officer of Boston EquiServe, transfer
agent for the Corporation, to act as an independent in-
spector at the annual meeting.
If a stockholder is a participant in the Harnischfeger
Industries, Inc. Employees' Savings Plan (the "401K Plan"),
the proxy also serves as voting instructions with respect
to shares allocated to the stockholder's 401K Plan account.
If voting instructions are not received for shares in the
401K Plan five days prior to the meeting, those shares will
be voted in the same proportion on a proposal as the
proportion of instructed votes for the 401K Plan.
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 February 9, 1996 (the "Record Date") are
entitled to vote on all matters presented at the annual
meeting. As of the Record Date, 48,914,874 shares of Com-
mon 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
required for the election of directors and approval of the
Harnischfeger Industries, Inc. Stock Incentive Plan. In
addition, under applicable New York Stock Exchange rules,
the total votes cast on the approval of the Harnischfeger
Industries, Inc. Stock Incentive Plan must represent over
50% of the shares entitled to vote thereon. The indepen-
dent inspector will count the votes and ballots. Ab-
stentions are considered as shares represented 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.
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 February 12, 1996 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. All shares
beneficially owned by the named executives under the
Executive Incentive Plan and the Supplemental Retirement
and Stock Funding Plan are voted by the trustee of the
Corporation's Deferred Compensation Trust as directed by
the Corporation's Management Policy Committee.
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Name and Address Shares Percent
of Beneficial Owner Owned of Class
- ------------------------------------------------------------
FMR Corp.
82 Devonshire Street
Boston, Massachusetts
02109 6,726,196(1) 13.57%
Jennison Associates
Capital Corp.
466 Lexington Avenue
Floor 18
New York, New York
10017-3151 4,091,002(2) 8.32%
Jeffery T. Grade 371,578(3) .76%
John N. Hanson 141,897(4) .28%
John A. McKay(5) 7,613(6) .02%
Francis M. Corby, Jr. 193,863(7) .39%
K. Thor Lundgren 117,757(8) .24%
All executive officers
and directors
as a group (18 persons) 920,682(9)(10) 1.87%
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Notes
(1) 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 June, 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,
reported being the beneficial owner of 6,239,915 or
12.69% of the Corporation's Common Stock as a
result of acting as investment adviser to several
investment companies registered under Section 8 of
the Investment Company Act of 1940. The ownership
of one investment company, Fidelity Magellan Fund,
resulted in reported ownership of 2,780,800 shares
or 5.83% of the Corporation's Common Stock.
<PAGE>
Notes (Continued)
(2) Based on information supplied to the Corporation by
Jennison Associates in a Schedule 13G filed with
the Securities and Exchange Commission on February
1, 1996. The 13G filed by Jennison reports that
Jennison has sole voting power with regard to
522,461 shares, shared voting power with regard to
2,884,377 shares and sole dispositive power with
regard to 4,091,002 shares.
(3) Includes 46,250 shares Mr. Grade had a right to
acquire upon exercise of stock options, 905 shares
beneficially owned under the Profit Sharing Plan,
176,533 shares beneficially owned under the
Executive Incentive Plan and 145,140 shares
beneficially owned by the named executives under
the Supplemental Retirement and Stock Funding Plan.
(4) Includes 12,691 shares Mr. Hanson had a right to
acquire upon exercise of stock options and 3,316
shares beneficially owned under the Executive
Incentive Plan.
(5) Mr. McKay retired from the Corporation as of
October 31, 1995, the end of the fiscal year.
(6) Includes 6,711 shares Mr. McKay beneficially owned
under the Executive Incentive Plan and 902 shares
Mr. McKay beneficially owned under the Profit
Sharing Plan.
(7) Includes 51,500 shares Mr. Corby had a right to
acquire upon exercise of stock options, 905 shares
beneficially owned under the Profit Sharing Plan,
44 shares beneficially owned under the 401K Plan,
91,992 shares beneficially owned under the
Executive Incentive Plan and 40,422 shares
beneficially owned under the Supplemental Retire-
ment and Stock Funding Plan. Also includes 3,500
shares held by Mr. Corby as custodian for his sons.
(8) Includes 59,000 shares Mr. Lundgren had a right to
acquire upon exercise of stock options, 146 shares
beneficially owned under the Profit Sharing Plan,
48,149 shares beneficially owned under the
Executive Incentive Plan and 6,462 shares
beneficially owned under the Supplemental
Retirement and Stock Funding Plan.
(9) Includes 227,841 shares which eight executive
officers had a right to acquire upon exercise of
stock options, 4,471 shares which eight executive
officers beneficially owned under the Profit
Sharing Plan, 986 shares which three executive
officers beneficially owned under the 401K Plan,
425,835 shares which eight executive officers
beneficially owned under the Executive Incentive
Plan, and 231,501 shares which four executive
officers beneficially owned under the Supplemental
Retirement and Stock Funding 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,
and 437 shares held by the spouses of two executive
officers.
<PAGE>
Notes (Continued)
(10) See the Notes under the headings "Election of
Directors" and "Continuing Directors" on pages 5,
6, 7 and 8 for additional information on beneficial
ownership of Common Stock by 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 February 12, 1996. 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 February
12, 1996) concerning each of the individuals nominated by
the Board of Directors for election at the 1996 annual
meeting. Each is presently a director whose term expires
in 1996. 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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Director Proposed Shares
Since Term Owned(1)
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Jeffery T. Grade Chairman of the Board and 1983 1999 371,578(2)
Chief Executive Officer since 1993.
President and Chief Executive Officer
from 1992 to 1993. President and Chief
Operating Officer from 1986 to 1992.
Director, Case Corporation, Coeur D'Alene
Mines Corporation, Crucible Materials
Corporation and Measurex Corporation.
Age 52.
Robert M. Gerrity Director and former President 1994 1999 1,000
and Chief Executive Officer of Ford New
Holland, now New Holland n.v., a London-
based agricultural and industrial
equipment manufacturer. Director, Libralter
Engineered Systems and Rubbermaid, Inc. Age 57.
Robert F. Schnoes Chairman, President and 1984 1999 7,778(3)
Chief 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 69.
Donald Taylor Principal, Sullivan Associates, 1979 1999 2,082(4)
specialists in Board of Director searches,
since 1992. Managing Director-USA, ANATAR
Investments Limited, a venture capital
specialist, from 1990 to 1992. Director,
Banta Corporation, Johnson Controls, Inc.
and The Enhancers, Inc. Age 68.
Notes
(1) Beneficial ownership of these shares consists of sole voting power and sole investment
power except as noted below. All shares beneficially owned under the Directors Stock
Compensation Plan are voted by the trustee of the Corporation's Deferred Compensation
Trust as directed by the Corporation's Management Policy Committee. None of the
nominees beneficially owned more than 1% of the Corporation's Common Stock.
(2) See Note (3) on Page 3.
<PAGE>
Notes (Continued)
(3) Includes 2,100 shares owned jointly with his wife and 5,678 shares beneficially owned
under the Directors Stock Compensation Plan.
(4) Includes 1,482 shares beneficially owned under the Directors Stock Compensation Plan.
</TABLE>
<PAGE>
CONTINUING DIRECTORS
The following table shows certain information concerning
the directors whose terms will continue after the 1996
annual meeting including principal occupation,
business experience and beneficial ownership of the
Corporation's Common Stock as of February 12, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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Director Current Shares
Since Term Owned(1)
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Donna M. Alvarado Principal of Aguila Inter- 1992 1997 500
national, an international business
development consulting firm based in
Columbus, Ohio, since 1994. President and
Chief Executive Officer of Quest Inter-
national, a non-profit educational organi-
zation based in Granville, Ohio, from 1989
to 1994. Director, Park National Bank. Age 47.
Harry L. Davis Professor of Creative Manage- 1987 1997 2,763(2)
ment 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 58.
Ralph C. Joynes Retired Vice Chairman, 1988 1997 4,128(3)
President and Chief Operating Officer of
USG Corporation, international manufacturer
of building materials and construction systems.
Age 67.
Herbert V. Kohler, Jr.Chairman of the Board and 1973 1997 700
President 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 56.
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Notes
(1) Beneficial ownership of these shares consists of sole voting power and sole investment
power except as noted below. All shares beneficially owned under the Directors Stock
Compensation Plan are voted by the trustee of the Corporation's Deferred Compensation
Trust as directed by the Corporation's Management Policy Committee. None of the
continuing directors beneficially owned 1% or more of the Corporation's Common Stock.
(2) Shares beneficially owned under the Directors Stock Compensation Plan.
(3) Includes 3,128 shares beneficially owned under the Directors Stock Compensation Plan.
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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Director Current Shares
Since Term Owned(1)
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John D. Correnti President, Chief Executive 1994 1998 169(2) Officer and director, Nucor Corporation, a
major U.S. steel producer headquartered
in Charlotte, North Carolina, since 1995.
President, Chief Operating Officer and
director of Nucor from 1991 to 1995. Vice
President, General Manager and Construction
Manager of Nucor from 1980 to 1991. Director,
CEM Corporation, Navistar International
Corporation and Southern Regional Board of
Wachovia Bank. Age 48.
Larry D. Brady President, FMC Corporation, 1995 1998 500(3)
a world leader production of chemicals and
machinery for industry, government and
agriculture, since 1993. Executive Vice
President from 1989 to 1993. Director of
FMC Corporation since 1989. Chairman
and Chief Executive Officer of FMC Gold
Company and Chairman of United Defense L.P.
Director, National Merit Scholarship
Foundation. Age 53.
Robert B. Hoffman Senior Vice President and 1994 1998 1,000
Chief Financial Officer of Monsanto Company,
a diversified company in chemicals,
pharmaceuticals, food products and agriculture
chemicals, since 1994. Vice President-
International of FMC Corporation, a
manufacturer of machinery and chemical
products, from 1990 to 1994. Vice Presi-
dent-Finance of FMC Corporation from 1988
to 1992. Director, Kemper Group of
Municipal Funds. Age 59.
Jean-Pierre Labruyere Chairman and Chief Executive 1994 1998 920(2)
of 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 57.
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Notes
(1) Beneficial ownership of these shares consists of sole voting power and sole investment
power except as noted below. All shares beneficially owned under the Directors Stock
Compensation Plan are voted by the trustee of the Corporation's Deferred Compensation
Trust as directed by the Corporation's Management Policy Committee. None of the
continuing directors beneficially owned 1% or more of the Corporation's Common Stock.
(2) Shares beneficially owned under the Directors Stock Compensation Plan.
(3) Shares held jointly with his wife.
</TABLE>
<PAGE>
BOARD MEETINGS, COMMITTEES,
AND COMPENSATION
The Board of Directors held six meetings during fiscal
1995. All incumbent directors attended at least 75% of the
total number of meetings of the Board and committees of
which they were members except Mr. Correnti who attended
50% of the meetings of the Board and committees of which he
was a member.
BOARD COMMITTEES
The Board has Audit, Human Resources, Finance and Strategic
Planning, Pension and Executive Committees.
Audit Committee
The members of the Audit Committee are Robert B. Hoffman
(Chair), John D. Correnti, Robert M. Gerrity, Ralph C.
Joynes, Jean-Pierre Labruyere and Donald Taylor. The func-
tions 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 pro-
posed budget for audit fees, (iii) review the results of
the annual audit with the independent auditors, (iv) review
the auditors' management letters with the independent audi-
tors 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
independent 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 1995.
Human Resources Committee
The members of the Human Resources Committee are Harry L.
Davis (Chair), Donna M. Alvarado, John D. Correnti, Robert
M. Gerrity, Robert F. Schnoes and Donald Taylor. The func-
tions of the Human Resources Committee are to: (i)
periodically review and approve the compensation structure
for the Corporation's key executives, 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 Supplemental Retirement and
Stock Funding Plans, (iii) periodically audit the executive
manpower of the Corporation 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. If approved by
stockholders at the annual meeting, the Human Resources
Committee will also administer the Stock Incentive Plan.
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 four
times during fiscal 1995.
Finance and Strategic Planning Committee
The members of the Finance and Strategic Planning Committee
are Ralph C. Joynes (Chair), Larry D. Brady, Harry L.
Davis, Robert M. Gerrity, Herbert V. Kohler and Robert F.
Schnoes. The functions of the Finance and Strategic Plan-
ning Committee are to: (i) periodically review with
<PAGE>
management 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 Corpora-
tion, (ii) review specific financial proposals of manage-
ment 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 rec-
ommendations to the Board as appropriate. The Finance and
Strategic Planning Committee met three times during fiscal
1995.
Pension Committee
The members of the Pension Committee are Donna M. Alvarado
(Chair), Larry D. Brady, Robert B. Hoffman, Herbert V.
Kohler and Jean-Pierre Labruyere. The functions of the
Pension Committee are to: (i) periodically review the in-
vestment policy of the Corporation's Pension and Investment
Committee, (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 sponsor
(a "Plan" or "Trust"), including the implementation by such
committees of the investment policy, (iii) make recommenda-
tions 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 amend-
ment 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 1995.
Executive Committee
The members of the Executive Committee are Jeffery T. Grade
(Chair), Donna M. Alvarado, Harry L. Davis, 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 met twice during fiscal 1995.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the
Corporation receive an annual retainer fee of $22,600, a
fee of $1,250 for each Board meeting attended and a fee of
$1,000 for each Board committee meeting attended. Com-
mittee chairs receive $1,250 for each committee 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
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
<PAGE>
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 a non-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. Payments 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.
<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
1995 for services rendered to the Corporation and its sub-
sidiaries during fiscal 1995, 1994 and 1993.
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation
Awards Payouts
Secur-
Other rities All
Name Annual Restricted Under Other
and Compen- Stock lying LTIP Compen-
Principal Year Salary Bonus sation Awards Options Payouts sation
Position ($) ($) ($) ($) /SARs ($) ($)
(1) (1) (2) (#) (3) (1)(4)
Jeffery T.
Grade 1995 $554,928 -- $359,989 $86,625 35,000 $79,377 $764,168
Chairman 1994 525,000 -- 252,026 -- 25,000 -- 661,805
and Chie 1993 493,753 -- 86,008 68,750 25,000 -- 203,284
Executive
Officer
John N.
Hanson (5) 1995 $301,153 $148,500 $38,060 -- 26,000 -- $720,721
Executive (6) (7)
Vice Presi-
dent and
Chief Operat-
ing Officer
John A. 1995 $350,696 -- $302,453 -- -- 100,982 $665,221
McKay (8) 1994 333,996 -- 160,613 -- -- -- 429,553
Chairman 1993 312,708 -- 60,002 40,625 20,000 -- 131,184
and Chief
Executive Officer
Beloit
Corporation
Francis M.
Corby, Jr. 1995 $295,025 -- $214,281 $43,312 21,000 $37,462 $409,374
Executive 1994 247,800 -- 131,779 -- 15,000 -- 315,019
Vice Presi- 1993 235,296 -- 50,772 34,375 15,000 -- 96,430
dent for
Finance and
Administration
K. Thor
Lundgren 1995 $232,332 -- $184,443 $63,000 21,000 $31,642 $322,735
Executive 1994 209,304 -- 104,499 -- 15,000 -- 265,143
Vice Presi- 1993 198,804 -- 40,126 25,000 15,000 -- 80,695
dent for
Law and
Government
Affairs
- -------------------------------------------------------------------------------
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
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
<PAGE>
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. Hanson who
became an executive officer during fiscal 1995 and who elected to convert 100% of his
1995 cash bonus into Common Stock under the plan. 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 values of the
differences between (i) the bonus amount converted and the market value of the shares
purchased and (ii) 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 "LTIP Payouts" and "All Other Com-pensation" columns. The "banked"
portion of any bonus is not reported in the Summary Com- pensation Table but is
reported in the Long-Term Incentive Plans - Awards Table on page 22.
(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 $31.50 per share
were: Jeffery T. Grade 11,000 ($346,500); John A. McKay 0 ($0.00); John N. Hanson 0
($0.00); Francis M. Corby, Jr. 5,500 ($173,250) and K. Thor Lundgren 4,000 ($126,000).
Dividends are paid on the restricted Common Stock at the same rate as on unrestricted
shares. All restricted stock vested during November, 1995.
(3) Represents the portion of the bonus earned in 1995 that resulted from bonuses that were
"banked" in prior years under the EVA Bonus Program described on page 22. Each of the
executives elected to defer these amounts under the Executive Incentive Plan.
(4) Includes the following amounts which represent bonuses earned in 1995 (net of amounts
reported under LTIP Payouts) 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 $752,483; John N. Hanson $77,819; John A. McKay $650,190; Francis M. Corby, Jr.
$400,054 and K. Thor Lundgren $315,042. Also includes $6,060 for each executive which
represents cash payments under the Profit Sharing Plan and the following amounts paid
by the Corporation during fiscal 1995 for group term life insurance premiums for the
benefit of the executives: Jeffery T. Grade $5,625; John N. Hanson $6,842; John A.
McKay $8,971;Francis M. Corby, Jr. $3,260 and K. Thor Lundgren $1,633.
(5) Information for Mr. Hanson covers the period since November 29, 1994, the date the
Corporation acquired Joy Technologies Inc. through a stock-for-stock merger.
(6) Cash bonus paid under Joy Technologies Inc. Management Incentive Plan.
(7) Includes $630,000 for Mr. Hanson which the Corporation became obligated to pay in
connection with the acquisition of Joy Technologies Inc. in fiscal 1995.
(8) Mr. McKay retired effective October 31, 1995.
</TABLE>
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee, which during fiscal 1995
consisted of the four outside directors listed at the end
of this report, met four times in fiscal 1995.
Additionally, an ongoing dialogue concerning compensation
and organizational development issues was maintained
throughout the year between the Committee Chairperson and
senior management.
In its deliberations on executive compensation, the
Committee considered both corporate performance and
individual contributions, relying on the personal knowledge
and experience of its members, as well as
compensation survey data from a large number of comparable
durable goods manufacturing companies, to reach its
decisions.
As reported in previous proxy statements, the Committee
continues to be guided in its compensation decisions by the
following fundamental considerations:
1. The need to attract and retain competent
management.
2. The desire to set pay levels which are competitive
with levels being paid in similar businesses.
3. The intent to reward management for a mix of
long-term 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 of comparable
companies) but that incentive opportunities should
allow for above average total compensation (75th
percentile of comparable companies) if the
performance of the Corporation so warrants.
6. The belief that management's interests should be
closely aligned with those of stockholders through
stock ownership in the Corporation.
Cash Compensation
Consistent with the considerations listed above, the
Committee uses compensation survey data from comparable
companies when determining the salary and incentive
compensation components of cash compensation. Beginning in
1994, the Corporation's key employee incentive compensation
(bonus) plans have been based on the concept of Economic
Value Added (EVA). Under EVA, focus is shifted from budget
performance to the returns produced on capital investment
in the business and managers are rewarded for adding and
creating economic value in their respective businesses.
The hurdle becomes the Corporation's weighted average
after-tax cost of capital and 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 302 executives participated in EVA based
incentive plans in 1995 with targeted bonus opportunities
ranging from 10% to 90% of base pay.
In those business units where the EVA incentive plan
produces bonuses in excess of 125% of the target two thirds
of the excess amount is "banked" for credit toward
incentive compensation in future years and may be forfeited
if future performance targets are not achieved.
<PAGE>
Companies which have adopted EVA have seen a positive
relationship between improved EVA and increased common
stock prices. While no promise of improved performance
should be inferred, the Committee believes that EVA is one
of the contributing factors toward improved stock
performance of the Corporation.
Profit Sharing
In fiscal 1995, the Corporation's Profit Sharing Plan was
more closely linked with Economic Value Added (EVA)
concepts. All domestic salaried and non-bargaining unit
hourly employees participated in this plan which paid a 3%
cash bonus for attainment of a major business unit's EVA
target. Corporate wide, approximately 200% of the EVA
target was attained and the average payment for 1995 was
approximately 6% of the first $100,000 of a participating
employee's base pay.
Stock-Based Compensation
The Committee administers a number of stock-based plans
which are designed to promote ownership by management of
the Corporation's Common Stock. The Committee strongly
believes that ownership by management of substantial
amounts of the Corporation's Common Stock is an important
linkage to shareholder value.
Stock Options
The Committee in its discretion may award stock options to
key contributors to the Corporation's success under the
Corporation's Incentive Stock Plan. Such grants give the
recipient the right to purchase the Corporation's 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. All option grants give the holder a ten year right
to purchase. Vesting occurs over a 42 month period.
Following a recommendation from the Committee, the Board is
asking shareholders to approve a new incentive stock plan
that will replace the Corporation's current Incentive Stock
Plan which was originally adopted in 1978 and would
otherwise expire in the near term. The new plan is similar
to plans in place at other companies. In general, it takes
into account developments occuring in this area since 1978,
updates option exercise procedures and gives the Committee
and the Corporation more flexibility in administering
stock-based compensation programs.
Restricted Common Stock
On limited occasions, the Committee has granted restricted
Common Stock to certain key executives with restrictions
tied to the attainment of specific performance objectives.
In 1990, the Committee approved a plan to provide certain
key executives the ability to earn restricted Common Stock
in fiscal 1991, 1992, 1993, and 1994 if, in each of these
years, the Corporation's return on equity ranked in the
upper half of a peer group of companies. Grants were
earned in the first three years of the plan, but
comparative fiscal performance in 1994 did not qualify.
The Committee determined to provide an additional grant to
the participants to be made at the end of fiscal 1995 if,
in 1995, the Corporation met the return on equity criteria
described above. The performance goal for fiscal 1995 was
met and all restricted stock under the 1990 plan was
earned. Under the terms of the plan, all restrictions have
been lifted. No restricted stock grants are contemplated
for fiscal 1996.
<PAGE>
Stock in Lieu of Bonus
As stated above, the Committee believes that it is
important for management to become significant stockholders
in the Corporation. Accordingly, under the Executive
Incentive Plan as adopted by the Committee and approved by
stockholders at the 1992 annual meeting, selected
participants in the Corporation's designated bonus program
may elect to receive all or a part of their incentive
compensation in stock in lieu of cash payments.
This plan, strongly supported by the Committee, encourages
approximately 50 members of senior management to convert up
to 100% of their cash bonuses into Common Stock of the
Corporation. As both an inducement and due to restrictions
placed on the sale of the stock, the plan allows executives
to convert their bonuses into stock at a 25% discount from
the current market price. This stock must be placed in a
grantor trust maintained by the Corporation and may not be
accessed until the executive retires or terminates
employment. Dividends remain in the account and are used
to buy additional shares, also at a 25% discount.
Since inception, participants in this plan have deferred
incentive compensation equivalent to a total of 871,393
shares, further aligning their interests with those of
stockholders.
Chief Executive Officer Compensation
The performance and contributions of the Chairman and Chief
Executive Officer, Jeffery T. Grade, were reviewed at
length by the Committee at its October, 1994 and 1995
meetings.
Recognizing the continued and significant progress the
Corporation has made as a result of his leadership, Mr.
Grade's base pay was increased at the October,
1995 meeting from $555,000 per year to $600,000, an
increase of 8.1%. Based on outside survey data, Mr.
Grade's new base salary is slightly below the 50th
percentile for comparable companies, the 50th
percentile being the Committee's stated compensation
benchmark. The Committee believes that Mr. Grade's salary
is in line with that paid to Chief Executive Officers of
comparable companies and is appropriate for the size of the
Corporation and his scope of responsibilities.
Under the terms of the Corporation's Executive Incentive
Plan, Mr. Grade earned incentive compensation of $831,860
for fiscal 1995, including $79,377 credited to Mr. Grade's
1995 incentive compensation as a result of amounts "banked"
in 1994. In addition, $256,377 was "banked" in 1995 under
the EVA method of calculating incentive compensation and
will be available to be included in incentive compensation
calculations in future years or forfeited under terms of
the plan. The amount of the 1995 bonus was determined by
the Corporation's corporate performance which equaled 202%
of the 1995 target, entitling Mr. Grade and certain other
senior executives to an incentive equal to 202% of their
individual bonus targets, which, in Mr. Grade's case, was
90% of base pay.
The total cash compensation earned, including amounts
deferred under the Executive Incentive Plan, by Mr. Grade
in 1995 was $1,392,848 (excluding the banked portion of his
1995 bonus, but including the amount banked in 1994 and
payable in 1995 and the 1995 Profit Sharing payment). The
comparable total cash payment in 1995 by similar companies
at the 75th percentile (the Committee's total compensation
target) was $1,321,700.
In addition to cash compensation, Mr. Grade was granted
options to purchase 35,000 shares of the Corporation's
Common Stock at a price of $31.25 per share, the closing
price on the day of the
<PAGE>
option grant. In each of the previous four years, Mr.
Grade had been granted options to purchase 25,000 shares.
The Committee determined an increase was warranted given
Mr. Grade's performance and leadership and the Committee's
continuing desire to promote ownership of the Corporation's
stock by management. Mr. Grade also earned 2,750 shares of
restricted stock that vested in November, 1995, under the
terms of the restricted stock program described above.
Section 162(m)
Section 162(m) of the Internal Revenue Code limits to $1
million the deductibility of the compensation paid in a
taxable year by a publicly held corporation to the Chief
Executive Officer and any other executive officer whose
compensation is required to be reported in the Summary
Compensation Table. However, qualified performance- based
compensation is not subject to the deduction limit if
certain conditions are met. It is the Committee's intent
to take the necessary steps to satisfy these 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.
In Summary
Considering the Corporation's continued strong performance
and its aggressiveness in enhancing stockholder value, the
Committee believes that the compensation paid to senior
executives is in line with performance and is comparable to
that being paid in similar corporations.
Respectfully,
Robert F. Schnoes (Chair)
Harry L. Davis
Ralph C. Joynes
Donald Taylor
<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, 1990 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>
10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
S & P 500 100 134 147 169 175 221
Machinery Group 100 147 144 206 231 257
Harnischfeger 100 141 137 179 206 263
Machinery Group=CAT, DE, HPH, ID, MTW, 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>
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Years of Service
- ----------------------------------------------------------------------------------------
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
1,700,000 382,500 510,000 637,500 765,000 892,500 1,020,000
- ----------------------------------------------------------------------------------------
</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"
bonuses are not included.
The years of service credited for each of the executive officers named in the
Summary Compensation Table are: Jeffery T. Grade, 27 years; John N. Hanson, 6
years; John A. McKay, 18 years; Francis M. Corby, Jr., 15 years and K. Thor
Lundgren, 4 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 offsets 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>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Name (#) in Fiscal Year ($/sh) Date (2) Value (($)(3)
Jeffery T. Grade 35,000 5.49% $31.25 Oct. 9, 2005 $469,350
John N. Hanson 26,000 4.08% $31.25 Oct. 9, 2005 $348,660
John A. McKay -- -- -- -- --
Francis M. Corby,
Jr. 21,000 3.29% $31.25 Oct. 9, 2005 $281,610
K. Thor Lundgren 21,000 3.29% $31.25 Oct. 9, 2005 $281,610
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) were granted.
(2) Unless earlier terminated, options expire ten years
from the date of grant (October 9, 1995) 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 9, 1996, 25% on April 9, 1997, 25% on April 9,
1998 and 25% on April 9, 1999), provided however that
upon the occurrence of a Change in Control as
defined in the Corporation's Deferred Compensation
Trust all options become 100% exercisable.
(3) 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 26%, risk-free rate
of return of 6.06%, dividend yield of 1.28% 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 of shares acquired
on exercise of options, the value realized and the number
and value of options outstanding at the end of the last
fiscal year.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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-
Shares Fiscal Year-End (#) End ($)(2)
Acquired
on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------
Jeffery T. Grade 100,750 $860,053 18,750 72,600 $179,625 $339,938
John N. Hanson -- -- 6,191(4) 26,000 96,456 6,500
John A. McKay 67,000 623,852 - -- -- --
Francis M. Corby,
Jr. 25,000 181,238 35,000 43,500 421,213 203,963
K. Thor Lundgren -- -- 42,500 43,500 501,788 203,963
- -----------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) are outstanding.
(2) Based on the market value of the stock on the date of exercise less the
exercise price and withholding tax paid by the recipient.
(3) 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 $31.50.
(4) Options under the Joy Technologies Inc. Stock Option Plan (the "Joy
Option Plan"). As a consequence of the merger of the Corporation and
Joy Technologies Inc. in November, 1994, all options that had been
granted under the Joy Option Plan to any Joy Technologies Inc.
employees were converted into options to purchase the Corporation's
Common Stock.
<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 method of calculating
incentive compensation 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 otherwise repay
negative balances in the Bonus Bank.
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 executives elected to defer his cash bonus for
fiscal 1995.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------
Name Number of Shares, Units or other Rights (#) (1)
Jeffery T. Grade 10,881
John N. Hanson 1,125
John A. McKay --
Francis M. Corby, Jr. 5,785
K. Thor Lundgren 4,556
- ----------------------------------------------------------------
(1) Reflects Common Stock purchased through conversion
of each executive's banked bonus at a 25% discount
on the purchase price of $31.415 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 $256,377;
John N. Hanson $26,514; John A. McKay 0.00; Francis
M. Corby, Jr., $136,301; and K. Thor Lundgren
$107,338.
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Corporation has employment agreements with three of 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
provisions.
Employment Contracts
Employment agreements were entered into in 1992 with Mr.
Grade, Mr. Corby, Mr. Lundgren and Mr. McKay and, with the
exception of Mr. McKay's agreement, were modified in 1995
to update job titles, the definition of change-in-control
and certain other provisions. The employment agreement with
Mr. McKay was terminated following his October 31, 1995
retirement and a separate consulting agreement between the
Corporation and Mr. McKay was terminated in February, 1996
upon payment by the Corporation of $599,101 to Mr. McKay.
The employment 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.
The agreements with Mr. Grade and Mr. Corby provide supple-
mental pension benefits to give credit for the executives'
years of service with their immediate former employers.
Pursuant to these provisions, Mr. Grade and Mr. Corby were
credited with 15 and 6 years of service, respectively. Any
supplemental pension benefits will be reduced by any pen-
sion 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 except in the case of a change-in-control.
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 without "Good Reason"
(as defined in the agreements) 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, 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
<PAGE>
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 present value of supplemental
retirement benefits determined as if the executive were
employed by the Corporation an additional three years; (c)
payment of any previously deferred compensation; (d)
payment of any other benefits to which the executive would
be entitled under the terms of any other benefit plans; and
(e) 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.
In connection with his retirement effective October 31,
1995, Mr. McKay 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 Mr. Grade, Mr. Corby and Mr. Lundgren under
the provisions of their agreements had their agreements
been terminated by the Corporation on January 1, 1996 other
than for Cause, disability or death, or if the executives
had terminated the agreements for Good Reason, exclusive of
amounts that may be necessary to offset any excise tax
liability, any possible bonus related to fiscal 1996,
supplemental retirement benefits resulting from three
additional years of service and any offsets for pension
benefits payable by former employers and in addition to ac-
crued benefits under the Executive Incentive and Supple-
mental Retirement and Stock Funding Plans and other accrued
benefits, are: Mr. Grade, $3,500,000; Mr. Corby,
$2,000,000 and Mr. Lundgren, $1,500,000.
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
distributed to the participants.
<PAGE>
PROPOSAL TO ADOPT THE HARNISCHFEGER INDUSTRIES, INC. STOCK
INCENTIVE PLAN
The Human Resources Committee of the Board of Directors
(the "Committee") has recommended adoption of a new
incentive stock plan, the Harnischfeger Industries, Inc.
Stock Incentive Plan (the "Plan"), to replace the
Corporation's current Incentive Stock Plan which was
originally adopted in 1978 and would otherwise expire in
the near term. The Plan is similar to plans in place at
other companies. In general, it takes into account
developments in the area since 1978, updates option
exercise procedures, contains provisions that are designed
to comply with recent changes in the Internal Revenue Code
of 1986, as amended (the "Code"), affecting the ability of
the Corporation to claim tax deductions for compensation
paid, and provides more flexibility in administering stock-
based compensation programs. Accordingly, the Plan is
submitted to the shareholders for approval, as more fully
described below.
The Plan will become effective only if approved by
shareholders as described below, in which event it will
become effective as of the date of such approval and will
terminate ten years thereafter. Also upon approval of the
Plan, the Corporation's current Incentive Stock Plan will
terminate as to the granting of further awards under that
plan. Awards previously granted under the Corporation's
current Incentive Stock Plan will continue to be governed
by the terms of that plan. If the Plan is not approved,
the Corporation's current Incentive Stock Plan will
continue in effect until its expiration.
The purpose of the Plan is to enable the Corporation and
its subsidiaries and other Affiliates (as defined in the
Plan) to attract, retain and motivate officers and
employees and to provide the Corporation and its
Affiliates with the ability to provide incentives directly
linked to the performance of the Corporation's businesses
and increases in economic value and shareholder value.
The Plan has been designed to comply with recent tax law
changes which impose limits on the ability of a public
company to claim tax deductions for compensation paid to
certain highly compensated executives. Section 162(m) of
the Code generally denies a corporate tax deduction for
annual compensation exceeding $1,000,000 paid to the chief
executive officer and the four other most highly
compensated officers of a public company. Certain types of
compensation, including performance-based compensation, are
generally excluded from this deduction limit. In an effort
to ensure that any stock awards under the Plan will qualify
as performance-based compensation, which is generally
deductible, the Plan is being submitted to shareholders for
approval at the annual meeting. While the Corporation
believes compensation payable pursuant to the Plan will be
deductible for federal income tax purposes under most
circumstances, there can be no assurance in this regard.
Moreover, under certain circumstances such as death,
disability and change in control (all as defined in the
Plan), compensation not qualified under Section 162(m) of
the Code may be payable. By approving the Plan, the
shareholders will be approving, among other things, the
performance measures, eligibility requirements and limits
on various stock awards contained therein. The affirmative
vote of a majority of the votes entitled to be cast by the
holders of the shares of the Corporation's Common Stock
represented at the annual meeting and entitled to vote
thereon (provided that the total vote cast represents over
50% of the voting power
<PAGE>
of all the shares entitled to vote) is required to approve
the Plan. Such vote will also satisfy the shareholder
approval requirements of Section 422 of the Code with
respect to the grant of Incentive Stock Options ("ISOs"),
Section 162(m) of the Code and Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") ("Rule 16b-3").
The Board of Directors unanimously recommends a vote FOR
approval of the Plan.
Set forth below is a summary of certain important features
of the Plan, which summary is qualified in its entirety by
reference to the actual plan attached as Annex 1 to this
Proxy Statement:
Administration. The Plan will be administered by the
Committee or such other committee of the Board as the Board
may from time to time designate. The Committee will be
composed of not less than two "disinterested persons" for
purposes of Rule 16b-3 who also qualify as "outside
directors" for purposes of Section 162(m) of the Code.
Among other things, the Committee will have the authority,
subject to the terms of the Plan, to select officers and
employees to whom awards may be granted, to determine the
type of award as well as the number of shares of Common
Stock to be covered by each award, and to determine the
terms and conditions of any such awards. The Committee
also will have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable, to interpret
the terms and provisions of the Plan and any awards issued
thereunder and to otherwise supervise the administration of
the Plan. All decisions made by the Committee pursuant to
the Plan will be final and binding.
Eligibility. Officers and salaried employees of the
Corporation and its Affiliates designated by the Committee
who are responsible for or contribute to the management,
growth and profitability of the Corporation are eligible to
be granted awards under the Plan. No grant will be made
under the Plan to a director who is not an officer or a
salaried employee. The initial determination of persons
eligible to participate in the Plan will be made by the
Committee after the Plan becomes effective. It is not
possible to estimate at this time the number of persons who
will be eligible to participate in the Plan.
Plan Features. The Plan authorizes the issuance of up to
2,000,00 shares of Common Stock pursuant to the grant or
exercise of stock options, including ISOs, nonqualified
stock options, stock appreciation rights (" SARs"),
restricted stock and performance units, but not more than
250,000 shares may be issued as restricted stock. No
single participant may be granted awards pursuant to the
Plan covering in excess of 100,000 shares of Common Stock
in any one calendar year and no participant may be granted
performance units in any one calendar year payable in cash
in an amount that would exceed $1,000,000. Subject to such
limits, the shares available under the Plan can be divided
among the various types of awards and among the
participants as the Committee deems appropriate. The
shares subject to grant under the Plan are to be made
available from authorized but unissued shares or from
treasury shares as determined from time to time by the
Committee. Awards may be granted for such terms as the
Committee may determine, except that the term of an ISO may
not exceed ten years from its date of grant. No awards
outstanding on the termination date of the Plan shall be
affected or impaired by such termination. Awards will not
be transferable except by will and the laws of descent and
distribution and, in the case of nonqualified stock options
and any related SARs, as a gift to an optionee's children.
The Committee will have broad authority to fix the terms
and conditions of individual agreements with participants.
As indicated above, several types of stock-related grants
can be made under the Plan.
<PAGE>
A summary of these grants is set forth below:
Stock Options. The Plan authorizes the Committee to grant
options to purchase Common Stock at an exercise price (the
"option price") which cannot be less than 100% of the fair
market value of such stock on the date of grant. The Plan
permits optionees, with the approval of the Committee, to
pay the exercise price of options in cash, stock (valued at
its fair market value on the date of exercise) or a
combination thereof. As noted above, options may be
granted either as ISOs or nonqualified options. The
principal difference between ISOs and nonqualified options
is their tax treatment. See "Federal Income Tax
Consequences."
SARs. The Plan authorizes the Committee to grant SARs in
conjunction with all or part of any stock option granted
under the Plan. An SAR entitles the holder to receive upon
exercise the excess of the fair market value of a specified
number of shares of Common Stock at the time of exercise
over the option price per share specified in the related
stock option. Such amount will be paid to the holder in
shares of Common Stock (valued at its fair market value on
the date of exercise), cash or a combination thereof, as
the Committee may determine. An SAR may be granted in
conjunction with a contemporaneously granted ISO or a
previously or contemporaneously granted nonqualified option
under the Plan. SARs granted under the Plan may also be
granted with nonqualified options previously granted under
the Corporation's current Incentive Stock Plan. Since the
exercise of an SAR is an alternative to the exercise of an
option, the option will be canceled to the extent that the
SAR is exercised and the SAR will be canceled to the extent
the option is exercised.
Restricted Stock. The Plan authorizes the Committee to
grant restricted stock to individuals upon such terms and
conditions and with such restriction periods as the
Committee may designate. The Committee may, prior to
granting shares of restricted stock, designate certain
participants as "Covered Employees" upon determining that
such participants are or are expected to be "covered
employees" within the meaning of Section 162(m)(3) of the
Code, and will provide that restricted stock awards to
these Covered Employees cannot vest unless applicable
performance goals established by the Committee within the
time period prescribed by Section 162(m) of the Code are
satisfied. These performance goals must be based on the
attainment of specified criteria established by the
Committee, including economic value added, earnings per
share from continuing operations, operating income,
revenues, cash flow, retained earnings, return on assets,
return on invested capital, return on sales, market share,
equity growth, net worth growth, achieving strategic
objectives, customer satisfaction, project quality, project
milestones, shareholder return (measured in terms of stock
price appreciation) and/or total shareholder return
(measured in terms of stock price appreciation and/or
dividend growth), return on equity, and individual
performance measures. Such performance goals also may be
based on the attainment of specified levels of the
Corporation's performance under one or more of the measures
described above relative to the performance of other
corporations. Performance goals based on the foregoing
factors are hereinafter referred to as "Performance Goals."
With respect to Covered Employees, all Performance Goals
must be objective performance goals satisfying the
requirements for "performance-based compensation" within
the meaning of Section 162(m)(4) of the Code. The
Committee also may condition the vesting of restricted
stock awards to participants who are not Covered Employees
upon the satisfaction of these or other applicable
performance goals. The provisions of restricted stock
awards (including any applicable Performance Goals) need
not be the same with respect to each participant. During
the restriction period, the Committee may require that the
stock certificates evidencing restricted shares be held by
the
<PAGE>
Corporation. Restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. Other than
these restrictions on transfer and any other restrictions
the Committee may impose, the participant will have all the
rights of a holder of stock holding the class of stock that
is the subject of the restricted stock award.
Performance Units. The Plan authorizes the Committee to
grant performance units. Performance units may be
denominated in shares of Common Stock or cash, or may
represent the right to receive dividend equivalents with
respect to shares of Common Stock, as determined by the
Committee. Performance units will be payable in cash or
shares of Common Stock if applicable Performance Goals
(based on one or more of the measures described in the
section entitled "Restricted Stock" above) determined by
the Committee are achieved during an award cycle. An award
cycle will consist of a period of consecutive fiscal years
or portions thereof designated by the Committee over which
performance units are to be earned. At the conclusion of a
particular award cycle, the Committee will determine the
number of performance units granted to a participant which
have been earned in view of applicable Performance Goals
and shall deliver to such participant (i) the number of
shares of Common Stock equal to the value of performance
units determined by the Committee to have been earned
and/or (ii) cash equal to the value of such earned
performance units. The Committee may, in its discretion,
permit participants to defer the receipt of performance
units on terms and conditions established by the Committee.
The Committee will have the authority to determine the
officers and employees to whom and the time or times at
which performance units shall be awarded, the number of
performance units to be awarded to any participant, the
duration of the award cycle and any other terms and
conditions of an award. In the event that a participant's
employment is involuntarily terminated or in the event of
the participant's retirement, the Committee will have the
discretion to waive in whole or in part any or all
remaining payment limitations, provided, however, that the
satisfaction of applicable Performance Goals by a
designated Covered Employee cannot be waived unless such
Covered Employee's employment is terminated by death,
disability or change in control.
Tax Offset Bonuses and Loans. Under the Plan, the
Committee may grant participants receiving awards the right
to receive cash payments, in amounts to be specified by the
Committee at the time such awards are granted, for the
purpose of assisting such participants in paying taxes at
the time such awards become taxable income to the
participants. The Plan also provides that the Corporation
may make loans to participants, using Common Stock as
security, to facilitate the payment of the exercise price,
if any, plus applicable income taxes payable as a result of
the award.
Amendment and Discontinuance. The Plan may be amended,
altered or discontinued by the Board, but no amendment,
alteration or discontinuance may be made which would (i)
impair the rights of an optionee under an option or a
recipient of an SAR, restricted stock award or performance
unit award previously granted without the optionee's or
recipient's consent, except such an amendment made to
qualify the Plan for the exemption provided by Rule 16b-3
or (ii) disqualify the Plan from the exemption provided by
Rule 16b-3. Except as expressly provided in the Plan, the
Plan may not be amended without shareholder approval to the
extent such approval is required by law or agreement.
Changes in Capitalization; Change in Control. The Plan
provides that, in the event of any change in corporate
capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, share
exchange, separation, spin-off or other distribution of
stock or property of the Corporation, or any reorganization
or partial
<PAGE>
or complete liquidation of the Corporation, the Committee
or the Board may make such substitutions or adjustments in
the aggregate number and kind of shares reserved for
issuance under the Plan, in the number, kind and option
price of shares subject to outstanding stock options and
SARs, and in the number and kind of shares subject to other
outstanding awards granted under the Plan as may be
determined to be appropriate by the Committee or the Board,
in its sole discretion. The Plan also provides that in the
event of a change in control (as defined in the Plan) of
the Corporation (i) any SARs and stock options outstanding
as of the date of the change of control which are not then
exercisable and vested will become fully exercisable and
vested, (ii) the restrictions applicable to restricted
stock will lapse and such restricted stock shall become
free of all restrictions and fully vested and (iii) all
performance units will be considered to be earned and
payable in full and any restrictions will lapse and such
performance units will be settled in cash as promptly as
practicable. The holders of options (other than options
granted to holders subject to Section 16(b) of the Exchange
Act that were granted not more than six months before the
change in control) will have the right, for a period of 90
days after such date, to surrender such options in exchange
for a cash payment based on the change in control price (as
defined in the Plan). However, if settlement in cash would
disqualify a transaction from pooling-of-interests
accounting treatment, the Committee may substitute stock.
The Plan provides that the Committee is also authorized to
establish such other stock option cash out rights relating
to holders of options subject to Section 16(b) of the
Exchange Act as it deems appropriate.
Federal Income Tax Consequences. The following discussion
is intended only as a brief summary of the federal income
tax rules relevant to stock options, SARs, restricted stock
and performance units. The laws governing the tax aspects
of awards are highly technical and such laws are subject to
change.
Nonqualified Options and SARs. Upon the grant of a
nonqualified option (with or without an SAR), the optionee
will not recognize any taxable income and the Corporation
will not be entitled to a deduction. Upon the exercise of
such an option or an SAR, the excess of the fair market
value of the shares acquired on the exercise of the option
over the option price (the "spread"), or the consideration
paid to the optionee upon exercise of the SAR, will
constitute compensation taxable to the optionee as ordinary
income. In determining the amount of the spread or the
amount of consideration paid to the optionee, the fair
market value of the stock on the date of exercise is used,
except that in the case of an optionee subject to the six
month short-swing profit recovery provisions of Section
16(b) of the Exchange Act (generally officers and directors
of the Corporation), the fair market value will be
determined six months after the date on which the option
was granted (if such date is later than the exercise date)
unless such optionee elects to be taxed based on the fair
market value at the date of exercise. Any such election
(a "Section 83(b) election") must be made and filed with
the IRS within 30 days after exercise in accordance with
the regulations under Section 83(b) of the Code. The
Corporation, in computing its federal income tax, will
generally be entitled to a deduction in an amount equal to
the compensation taxable to the optionee.
ISOs. An optionee will not recognize taxable income on the
grant or exercise of an ISO. However, the spread at
exercise will constitute an item includible in alternative
minimum taxable income, and thereby may subject the
optionee to the alternative minimum tax. Such alternative
minimum tax may be payable even though the optionee
receives no cash upon the exercise of the ISO with which to
pay such tax.
Upon the disposition of shares of stock acquired pursuant
to the exercise of an ISO after the later of (i) two years
from the date of grant of the ISO or (ii) one year after
the transfer of the shares to the optionee (the "ISO
Holding Period") the optionee will recognize long-term
capital gain or loss, as the case may be, measured by the
difference between the stock's selling price and the
exercise price. The Corporation is not entitled to a tax
deduction by reason of the grant or exercise of an ISO, or
by reason of a disposition of stock received upon exercise
of an
<PAGE>
ISO if the ISO Holding Period is satisfied. Different rules
apply if the optionee disposes of the shares of stock
acquired pursuant to the exercise of an ISO before the
expiration of the ISO Holding Period.
Restricted Stock. A participant who is granted restricted
stock may make a Section 83(b) election to have the grant
taxed as compensation income at the date of receipt, with
the result that any future appreciation (or depreciation)
in the value of the shares of stock granted shall be taxed
as capital gain (or loss) upon a subsequent sale of the
shares. However, if the participant does not make a
Section 83(b) election, then the grant will be taxed as
compensation income at the full fair market value on the
date that the restrictions imposed on the shares expire.
Unless a participant makes a Section 83(b) election, any
dividends paid on stock subject to the restrictions are
compensation income to the participant and compensation
expense to the Corporation. The Corporation is generally
entitled to an income tax deduction for any
compensation income taxed to the participant, subject to
the provisions of Section 162(m) of the Code.
Performance Units. A participant who has been granted a
performance unit award will not realize taxable income
until the applicable award cycle expires and the
participant is in receipt of the stock distributed in
payment of the award or an equivalent amount of cash, at
which time such participant will realize ordinary income
equal to the full fair market value of the shares delivered
or the amount of cash paid. At that time, the Corporation
generally will be allowed a corresponding tax deduction
equal to the compensation taxable to the award recipient,
subject to the provisions of Section 162(m) of the Code.
New Plan Benefits. It cannot be determined at this time
what benefits or amounts, if any, will be received by or
allocated to any person or group of persons under the Plan
if the Plan is approved or what benefits or amounts would
have been received by or allocated to any person or group
of persons for the last fiscal year if the Plan had been in
effect. These determinations will be made by the
Committee. On February 9, 1996, the closing price of the
Corporation's Common Stock on the New York Stock Exchange
was $34.75.
The Plan is attached hereto as Annex 1 and should be read
in its entirety by stockholders.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE HARNISCHFEGER INDUSTRIES, INC. STOCK INCENTIVE PLAN.
<PAGE>
OTHER INFORMATION
Auditors
The Board of Directors has selected Price Waterhouse as
independent accountants for the fiscal year ending October
31, 1996. Price Waterhouse has served the Corporation as
auditors since 1925. A representative of Price Waterhouse
will be present at the 1996 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 1996 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 1997
annual meeting must be received by the Corporation not
later than October 18, 1996 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 $5500, 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 12, 1996
<PAGE>
THE HARNISCHFEGER INDUSTRIES, INC. STOCK INCENTIVE PLAN
ANNEX 1
Section 1. Purpose; Definitions
The purpose of the Plan is to give the Corporation and
its Affiliates a competitive advantage in attracting,
retaining and motivating officers and employees and to
provide the Corporation and its Affiliates with the ability
to provide incentives more directly linked to the
performance of the Corporation's businesses and increases
in economic value and shareholder value.
For purposes of the Plan, the following terms are defined
as set forth below:
a. "Affiliate" means (i) a corporation at least fifty
percent of the common stock or voting power of which is
owned, directly or indirectly by the Corporation, and (ii)
any other corporation or other entity controlled by the
Corporation and designated by the Committee from time to
time as such.
b. "Award" means a Stock Appreciation Right, Stock
Option, Restricted Stock or Performance Unit.
c. "Award Cycle" shall mean a period of consecutive
fiscal years or portions thereof designated by the
Committee over which Performance Units are to be earned.
d. "Board" means the Board of Directors of the
Corporation.
e. "Cause" means (i) willful and continued failure to
substantially perform the reasonably assigned duties with
the Corporation which are consistent with the participant's
position and, in the event of a Change in Control, those
duties assigned prior to the Change in Control, other than
any such failure resulting from incapacity due to physical
or mental illness, or (ii) participant's willful engagement
in illegal conduct which is materially and demonstratably
injurious to the Corporation. For purposes of this
definition, no act, or failure to act, on participant's
part shall be considered "willful" unless done, or omitted
to be done, in knowing bad faith and without reasonable
belief that the action or omission was in, or not opposed
to, the best interests of the Corporation. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the
advice of counsel for the Corporation shall be conclusively
presumed to be done, or omitted to be done, in good faith
and in the best interests of the Corporation.
f. "Change in Control" and "Change in Control Price"
have the meanings set forth in Sections 10(b) and (c),
respectively.
g. "Code" means the Internal Revenue Code of l986, as
amended from time to time, and any successor thereto.
h. "Commission" means the Securities and Exchange
Commission or any successor agency.
i. "Committee" means the Committee referred to in
Section 2.
j. "Common Stock" means common stock, par value $1.00
per share, of the Corporation.
k. "Corporation" means Harnischfeger Industries, Inc., a
Delaware corporation.
l. "Covered Employee" shall mean a participant
designated prior to the grant of shares of Restricted Stock
or Performance Units by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3)
of the Code in the year in which Restricted Stock or
Performance Units are taxable to such participant.
m. "Disability" means permanent and total disability as
determined under procedures established by the Committee
for purposes of the Plan.
n. "Disinterested Person" shall mean a member of the
Board who qualifies as a disinterested person as defined in
Rule 16b-3(c)(2), as promulgated by the Commission under
the Exchange Act, or any
<PAGE>
successor definition adopted by the Commission, and as an
"outside director" for purposes of Section 162(m) of the
Code.
o. "Early Retirement" of an employee means Termination
of Employment with the Corporation or an Affiliate at a
time when the employee is entitled to early retirement
benefits pursuant to the early retirement provisions of the
applicable pension plan of such employer.
p. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor
thereto.
q. "Fair Market Value" means, except as provided in
Sections 5(j) and 6(b)(ii)(2), as of any given date, the
mean between the highest and lowest reported sales prices
of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any
other national securities exchange on which the Common
Stock is listed or on NASDAQ. If there is no regular public
trading market for such Common Stock, the Fair Market Value
of the Common Stock shall be determined by the Committee in
good faith.
r. "Incentive Stock Option" means any Stock Option
designated as, and qualified as, an "incentive stock
option" within the meaning of Section 422 of the Code.
s. "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option.
t. "Normal Retirement" of an employee means retirement
from active employment with the Corporation or Affiliate at
or after age 65.
u. "Performance Goals" means the performance goals
established in writing by the Committee prior to the grant
of Restricted Stock or Performance Units. Such Performance
Goals may comprise one or any combination of the following:
specified levels of economic value added, earnings per
share from continuing operations, operating income,
revenues, cash flow, retained earnings, return on assets,
return on invested capital, return on sales, market share,
equity growth, net worth growth, achieving strategic
objectives, customer satisfaction, product quality, project
milestones, shareholder return (measured in terms of stock
price appreciation) and/or total shareholder return
(measured in terms of stock price appreciation and/or
dividend growth), return on equity, and individual
performance measures. Such Performance Goals also may be
based upon the attainment of specified levels of
performance of the Corporation or one or more Affiliates
under one or more of the measures described above relative
to the performance of other corporations. With respect to
Covered Employees, all Performance Goals shall be objective
performance goals satisfying the requirements for
"performance-based compensation" within the meaning of
Section 162(m)(4) of the Code, and shall be set by the
Committee within the time period prescribed by Section
162(m) of the Code and related regulations.
v. "Performance Unit" means an award made pursuant to
Section 8.
w. "Plan" means the Harnischfeger Industries, Inc. Stock
Incentive Plan, as set forth herein and as hereinafter
amended from time to time.
x. "Restricted Stock" means an award granted under
Section 7.
y. "Retirement" means Normal or Early Retirement.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as
amended from time to time.
aa. "Stock Appreciation Right" means a right granted
under Section 6.
bb. "Stock Option" means an option granted under Section
5.
cc. "Termination of Employment" means the termination
of the participant's employment with the Corporation and
any Affiliate. A participant employed by an Affiliate
shall also be deemed to incur a Termination of Employment
if the Affiliate ceases to be an Affiliate and the
participant does not immediately thereafter become an
employee of the Corporation or another Affiliate.
In addition, certain other terms used herein have
definitions given to them in the first place in which they
are used.
<PAGE>
Section 2. Administration.
The Plan shall be administered by the Human Resources
Committee of the Board or such other committee of the
Board, as the Board may from time to time determine,
composed solely of not less than two Disinterested Persons,
each of whom shall be appointed by and serve at the
pleasure of the Board. The Committee shall have full
authority to grant Awards pursuant to the terms of the Plan
to officers and employees of the Corporation and its
Affiliates. Among other things, the Committee shall have
the authority, subject to the terms of the Plan:
(a) to select the officers and employees to whom Awards
may from time to time be granted;
(b) to determine whether and to what extent Incentive
Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock and Performance Units
or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to
be covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award
granted hereunder (including, but not limited to, the
option price (subject to Section 5(a)), any vesting
condition, restriction or limitation (which may be related
to the performance of the participant, the Corporation or
any Affiliate) and any vesting acceleration or forfeiture
waiver regarding any Award and the shares of Common Stock
relating thereto, based on such factors as the Committee
shall determine;
(e) to modify, amend or adjust the terms and conditions
of any Award, at any time or from time to time, including
but not limited to Performance Goals; provided, however,
that the Committee may not adjust upwards the amount
payable to a designated Covered Employee with respect to a
particular Award upon the satisfaction of applicable
Performance Goals;
(f) to determine to what extent and under what
circumstances Common Stock and other amounts payable with
respect to an Award shall be deferred; and
(g) to determine under what circumstances an Award
may be settled in cash or Common Stock under Sections 5(j)
and 8(b)(i).
The Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time
deem advisable, to interpret the terms and provisions of
the Plan and any Award issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the
administration of the Plan.
The Committee may act only by a majority of its
members then in office, except that the members thereof may
(i) delegate to an officer of the Corporation the authority
to make decisions pursuant to paragraphs (c), (f), (g), (h)
and (i) of Section 5 (provided that no such delegation may
be made that would cause Awards or other transactions under
the Plan to cease to be exempt from Section 16(b) of the
Exchange Act) and (ii) authorize any one or more of their
number or any officer of the Corporation to execute and
deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to
delegated authority pursuant to the provisions of the Plan
with respect to any Award shall be made in the sole
discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any
express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan
shall be final and binding on all persons, including the
Corporation and its Affiliates and Plan participants.
Section 3. Common Stock Subject to Plan; Other
Limitations.
The total number of shares of Common Stock reserved
and available for issuance under the Plan shall be
2,000,000, but no more than 250,000 shares of Common Stock
may be issued as Restricted Stock. No participant may be
granted Awards covering in excess of 100,000 shares of
Common Stock in any one calendar year. Shares subject to
an Award under the Plan may be authorized and unissued
shares or may be treasury shares. No participant may be
granted
<PAGE>
Performance Units in any one calendar year payable in cash
in an amount that would exceed $1,000,000.
Subject to Section 7(c)(iv), if any shares of Restricted
Stock are forfeited for which the participant did not
receive any benefits of ownership (as such phrase is
construed by the Commission or its staff), or if any Stock
Option (and related Stock Appreciation Right, if any)
terminates without being exercised, or if any Stock
Appreciation Right is exercised for cash, shares subject to
such Awards shall again be available for use in connection
with Awards under the Plan.
In the event of any change in corporate capitalization,
such as a stock split, or a corporate transaction, such as
any merger, consolidation, separation, including a spin-off,
or other distribution of stock or property of the
Corporation, any reorganization (whether or not such
reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete
liquidation of the Corporation, the Committee or Board may
make such substitution or adjustments in the aggregate
number and kind of shares reserved for issuance under the
Plan, in the number, kind and option price of shares
subject to outstanding Stock Options and Stock Appreciation
Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other
equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; provided,
however, that Awards previously made shall not be reduced
or eliminated and the number of shares subject to any Award
shall always be a whole number. Such adjusted option price
shall also be used to determine the amount payable by the
Corporation upon the exercise of any Stock Appreciation
Right associated with a Stock Option.
Section 4. Eligibility.
Officers and salaried employees of the Corporation and
its Affiliates who are responsible for or contribute to the
management, growth and profitability of the business of the
Corporation and its Affiliates are eligible to be granted
Awards under the Plan. No grant shall be made under this
Plan to a director who is not an officer or a salaried
employee of the Corporation or an Affiliate.
Section 5. Stock Options.
Stock Options may be granted alone or in addition to
other Awards granted under the Plan and may be of two
types: Incentive Stock Options and Nonqualified Stock
Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time
approve.
The Committee shall have the authority to grant any
optionee Incentive Stock Options, Nonqualified Stock
Options or both types of Stock Options (in each case with
or without Stock Appreciation Rights); provided, however,
that grants hereunder are subject to the aggregate limit on
grants to individual participants set forth in Section 3.
Incentive Stock Options may be granted only to employees of
the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock
Option is not designated as an Incentive Stock Option or
even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Nonqualified Stock
Option.
Stock Options shall be evidenced by option agreements,
the terms and provisions of which may differ. An option
agreement shall indicate on its face whether it is intended
to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option
shall occur on the date the Committee by resolution selects
an individual to be a participant in any grant of a Stock
Option, determines the number of shares of Common Stock to
be subject to such Stock Option to be granted to such
individual and specifies the terms and provisions of the
Stock Option. The Corporation shall notify a participant
of any grant of a Stock Option, and a written option
agreement or agreements shall be duly executed and
delivered by the Corporation to the participant. Such
agreement or agreements shall become effective upon
execution by the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered nor shall any discretion
or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or,
without the consent of the optionee affected, to disqualify
any Incentive Stock Option under such Section 422.
<PAGE>
Stock Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such
additional terms and conditions as the Committee shall deem
desirable:
(a) Option Price. The option price per share of
Common Stock purchasable under a Stock Option shall be
determined by the Committee and set forth in the option
agreement, and shall not be less than the Fair Market Value
of the Common Stock subject to the Stock Option on the date
of grant.
(b) Option Term. The term of each Stock Option shall
be fixed by the Committee, but no Incentive Stock Option
shall be exercisable more than 10 years after the date the
Stock Option is granted.
(c) Exercisability. Except as otherwise provided
herein, Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments,
the Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the
Committee may at any time accelerate the exercisability of
any Stock Option.
(d) Method of Exercise. Subject to the provisions of
this Section 5, Stock Options may be exercised, in whole or
in part, at any time during the option term by giving
written notice of exercise to the Corporation specifying
the number of shares of Common Stock subject to the Stock
Option to be purchased.
Such notice shall be accompanied by payment in full of
the purchase price by certified or bank check or such other
instrument as the Corporation may accept. If approved by
the Committee, payment in full or in part may also be made
in the form of unrestricted Common Stock already owned by
the optionee of the same class as the Common Stock subject
to the Stock Option and, in the case of the exercise of a
Nonqualified Stock Option, Restricted Stock subject to an
Award hereunder which is of the same class as the Common
Stock subject to the Stock Option (based, in each case, on
the Fair Market Value of the Common Stock on the date the
Stock Option is exercised); provided, however, that, in the
case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares of Common Stock
of the same class as the Common Stock subject to the Stock
Option may be authorized only at the time the Stock Option
is granted.
If payment of the option exercise price of a Nonqualified
Stock Option is made in whole or in part in the form of
Restricted Stock, the number of shares of Common Stock to
be received upon such exercise equal to the number of
shares of Restricted Stock used for payment of the option
exercise price shall be subject to the same forfeiture
restrictions to which such Restricted Stock was subject,
unless otherwise determined by the Committee.
In the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the
Corporation, together with a copy of irrevocable
instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds to pay the
purchase price, and, if requested by the Corporation, the
amount of any federal, state, local or foreign withholding
taxes. To facilitate the foregoing, the Corporation may
enter into agreements for coordinated procedures with one
or more brokerage firms.
In addition, in the discretion of the Committee, payment
for any shares subject to a Stock Option may also be made
by instructing the Committee to withhold a number of such
shares having a Fair Market Value on the date of exercise
equal to the aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full
payment therefor has been made. Subject to any forfeiture
restrictions that may apply if a Stock Option is exercised
using Restricted Stock, an optionee shall have all of the
rights of a shareholder of the Corporation holding the
class or series of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote
the shares and the right to receive dividends), when the
optionee has given written notice of exercise, has
<PAGE>
paid in full for such shares and, if requested, has given
the representation described in Section 14(a).
(e) Nontransferability of Stock Options. No Stock
Option shall be transferable by the optionee other than (i)
by will or by the laws of descent and distribution or (ii)
in the case of a Nonqualified Stock Option, pursuant to (a)
a qualified domestic relations order (as defined in the
Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder) or (b) a
gift to such optionee's children, whether directly or
indirectly or by means of a trust or partnership or
otherwise, if expressly permitted under the applicable
option agreement. All Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee or by
the guardian or legal representative of the optionee or, in
the case of a Nonqualified Stock Option, its alternative
payee pursuant to a qualified domestic relations order or a
gift permitted under the applicable option agreement, it
being understood that the terms "holder" and "optionee"
include the guardian and legal representative of the
optionee named in the option agreement and any person to
whom an option is transferred by will or the laws of
descent and distribution or, in the case of a Nonqualified
Stock Option, pursuant to a qualified domestic relations
order or a gift permitted under the applicable option
agreement.
(f) Termination by Death. Unless otherwise determined by
the Committee, if an optionee's employment terminates by
reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent then exercisable, or
on such accelerated basis as the Committee may determine,
for a period of one year (or such other period as the
Committee may specify in the option agreement) from the
date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Unless
otherwise determined by the Committee, if an optionee's
employment terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised by
the optionee, to the extent it was exercisable at the time
of termination, or on such accelerated basis as the
Committee may determine, for a period of three years (or
such shorter period as the Committee may specify in the
option agreement) from the date of such termination of
employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such
three-year period (or such shorter period), any unexercised
Stock Option held by such optionee shall, notwithstanding
the expiration of such three-year (or such shorter) period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of one year
from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock
Option.
(h) Termination by Reason of Retirement or Good Reason.
Unless otherwise determined by the Committee, if an
optionee's employment terminates by reason of Retirement or
for Good Reason (as defined in a written employment
agreement), any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it
was exercisable at the time of such Retirement or
termination for Good Reason, or on such accelerated basis
as the Committee may determine, for a period of three years
(or such shorter period as the Committee may specify in the
option agreement) from the date of such termination of
employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such
three-year (or such shorter) period any unexercised Stock
Option held by such optionee shall, notwithstanding the
expiration of such three-year (or such shorter) period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of one year
from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by
reason of Retirement or for Good Reason, if an Incentive
Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of
the Code, such Stock Option will thereafter be treated as a
Nonqualified Stock Option.
<PAGE>
(i) Other Termination. Unless otherwise determined by
the Committee, if an optionee incurs a Termination of
Employment for any reason other than death, Disability,
Retirement or Good Reason, any Stock Option held by such
optionee shall thereupon terminate, except that such Stock
Option, to the extent then exercisable, or on such
accelerated basis as the Committee may determine, may be
exercised for the lesser of three months from the date of
such Termination of Employment or the balance of such Stock
Option's stated term if such Termination of Employment of
the optionee is involuntary; provided, however, that if the
optionee dies within such three-month period, any
unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-month period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of one year
from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter. Notwithstanding the foregoing, if an optionee
incurs a Termination of Employment at or after a Change in
Control (as defined in Section 10(b)), other than by reason
of death, Disability or Retirement, any Stock Option held
by such optionee shall be exercisable for the lesser of (1)
six months and one day from the date of such Termination of
Employment, and (2) the balance of such Stock Option's
stated term. In the event of Termination of Employment, if
an Incentive Stock Option is exercised after the expiration
of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
(j) Cashing Out of Stock Option. On receipt of written
notice of exercise, the Committee may elect to cash out all
or part of the portion of the shares of Common Stock for
which a Stock Option is being exercised by paying the
optionee an amount, in cash or Common Stock, equal to the
excess of the Fair Market Value of the Common Stock over
the option price times the number of shares of Common Stock
for which the Option is being cashed out on the effective
date of such cash-out.
Cash-outs pursuant to this Section 5(j) relating to
Options held by optionees who are actually or potentially
subject to Section 16(b) of the Exchange Act shall comply
with the provisions of Rule 16b-3, to the extent
applicable, and, in the case of cash-outs of Non-Qualified
Stock Options held by such optionees, the Committee may
determine Fair Market Value under the pricing rule set
forth in Section 6(b)(ii)(2).
(k) Change in Control Cash-Out. Notwithstanding any
other provision of the Plan, during the 90-day period from
and after a Change in Control (the "Exercise Period"),
unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not
the Stock Option is fully exercisable and in lieu of the
payment of the exercise price for the shares of Common
Stock being purchased under the Stock Option and by giving
notice to the Corporation, to elect (within the Exercise
Period) to surrender all or part of the Stock Option to the
Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the
Change in Control Price per share of Common Stock shall
exceed the exercise price per share of Common Stock under
the Stock Option (the "Spread") multiplied by the number of
shares of Common Stock granted under the Stock Option as to
which the right granted under this Section 5(k) shall have
been exercised; provided, however, that if the Change in
Control is within six months of the date of grant of a
particular Stock Option held by an optionee who is an
officer or director of the Corporation and is subject to
Section 16(b) of the Exchange Act, no such election shall
be made by such optionee with respect to such Stock Option
prior to six months from the date of grant. However, if
the end of such 90-day period from and after a Change in
Control is within six months of the date of grant of a
Stock Option held by an optionee who is an officer or
director of the Corporation and is subject to Section 16(b)
of the Exchange Act, such Stock Option shall be canceled in
exchange for a cash payment to the optionee, effected on
the day which is six months and one day after the date of
grant of such Option, equal to the Spread multiplied by the
number of shares of Common Stock granted under the Stock
Option. The Committee is further authorized to establish
such other Stock Option cash out rights and terms and
conditions relating thereto for optionees who are actually
or potentially subject to Section 16(b) of the Exchange Act
as deemed appropriate by the Committee, either in the
documents granting such Stock Options or separate
agreements.
<PAGE>
Section 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may
be granted in conjunction with all or part of any Stock
Option granted under the Plan. In the case of a
Nonqualified Stock Option, such rights may be granted
either at or after the time of grant of such Stock Option.
Stock Appreciation Rights also may be granted with respect
to options (other than options intended to qualify as
"incentive stock options" within the meaning of Section 422
of the Code) granted under the Harnischfeger Industries,
Inc. 1988 Incentive Stock Plan (the "Old Plan") ("Old
Options"). In the case of an Incentive Stock Option, such
rights may be granted only at the time of grant of such
Stock Option. A Stock Appreciation Right shall terminate
and no longer be exercisable upon the termination or
exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an
optionee in accordance with Section 6(b) by surrendering
the applicable portion of the related Stock Option or Old
Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the optionee
shall be entitled to receive an amount determined in the
manner prescribed in Section 6(b). Stock Options and Old
Options which have been so surrendered shall no longer be
exercisable to the extent the related Stock Appreciation
Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights
shall be subject to such terms and conditions as shall be
determined by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Stock
Options and Old Options to which they relate are
exercisable in accordance with the provisions of Section 5
and this Section 6; provided, however, that a Stock
Appreciation Right shall not be exercisable during the
first six months of its term by an optionee who is actually
or potentially subject to Section 16(b) of the Exchange
Act, except that this limitation shall not apply in the
event of death or Disability of the optionee prior to the
expiration of the six-month period.
(ii) Upon the exercise of a Stock Appreciation
Right, an optionee shall be entitled to receive an amount
in cash, shares of Common Stock or both equal in value to
the excess of the Fair Market Value of one share of Common
Stock over the option price per share specified in the
related Stock Option or Old Option multiplied by the number
of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the
right to determine the form of payment.
In the case of Stock Appreciation Rights relating to
Stock Options and Old Options held by optionees who are
actually or potentially subject to Section 16(b) of the
Exchange Act, the Committee:
(1) may require that such Stock Appreciation
Rights be exercised for cash only in accordance with the
applicable provisions of Rule 16b-3; and
(2) in the case of Stock Appreciation Rights
relating to Nonqualified Stock Options and Old Options,
shall provide that the amount to be paid in cash upon
exercise of such Stock Appreciation Rights during a Rule
16b-3 "window period" shall be based on the highest of the
daily means between the highest and lowest reported sales
prices of the Common Stock on the New York Stock Exchange
or other national securities exchange on which the shares
are listed or on NASDAQ, as applicable, on any day during
such "window period."
(iii) Stock Appreciation Rights shall be
transferable only to permitted transferees of the
underlying Stock Option in accordance with Section 5(e) or
the underlying Old Option in accordance with the provisions
of the Old Plan.
(iv) Upon the exercise of a Stock Appreciation
Right, the Stock Option or Old Option or part thereof to
which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares
of Common Stock to be issued under the Plan, but only to
the extent of the number of shares as to which the Stock
Appreciation Right is exercised at the time of exercise.
<PAGE>
Section 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be
awarded either alone or in addition to other Awards granted
under the Plan. The Committee shall determine the officers
and employees to whom and the time or times at which grants
of Restricted Stock will be awarded, the number of shares
to be awarded to any participant (subject to the aggregate
limit on grants to individual participants set forth in
Section 3), the conditions for vesting, the time or times
within which such Awards may be subject to forfeiture and
any other terms and conditions of the Awards, in addition
to those contained in Section 7(c).
The Committee shall in the case of Covered Employees, and
may in the case of other participants, condition the
vesting of Restricted Stock upon the attainment of
Performance Goals established before or at the time of
grant. The Committee may, in addition to requiring
satisfaction of any applicable Performance Goals, also
condition vesting upon the continued service of the
participant. The provisions of Restricted Stock Awards
(including the applicable Performance Goals) need not be
the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock
shall be evidenced in such manner as the Committee may deem
appropriate, including book-entry registration or issuance
of one or more stock certificates. Any certificate issued
in respect of shares of Restricted Stock shall be
registered in the name of such participant and shall bear
an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Award, substantially in
the following form:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Harnischfeger
Industries, Inc. Stock Incentive Plan and a Restricted
Stock Agreement. Copies of such Plan and Agreement are on
file at the offices of Harnischfeger Industries, Inc. at
13400 Bishops Lane, Brookfield, Wisconsin 53005".
The Committee may require that the certificates
evidencing such shares be held in custody by the
Corporation until the restrictions thereon shall have
lapsed and that, as a condition of any Award of Restricted
Stock, the participant shall have delivered a stock power,
endorsed in blank, relating to the Common Stock covered by
such Award.
(c) Terms and Conditions. Shares of Restricted Stock
shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan
(including Section 5(d)) and the Restricted Stock Agreement
referred to in Section 7(c)(vi), during the period, if any,
set by the Committee, commencing with the date of such
Award for which such participant's continued service is
required (the "Restriction Period"), and until the later of
(i) the expiration of the Restriction Period and (ii) the
date the applicable Performance Goals (if any) are
satisfied, the participant shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber shares of
Restricted Stock; provided that the foregoing shall not
prevent a participant from pledging Restricted Stock as
security for a loan, the sole purpose of which is to
provide funds to pay the option price for Stock Options.
Within these limits, the Committee may provide for the
lapse of restrictions based upon period of service in
installments or otherwise and may accelerate or waive, in
whole or in part, restrictions based upon period of service
or upon performance; provided, however, that in the case of
Restricted Stock with respect to which a participant is a
Covered Employee, any applicable Performance Goals have
been satisfied.
(ii) Except as provided in this paragraph (ii)
and Section 7(c)(i) and the Restricted Stock Agreement, the
participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the
Corporation holding the class or series of Common Stock
that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to
receive any cash dividends. If so determined by the
Committee in the applicable Restricted Stock Agreement and
subject to Section 14(f) of the Plan, (1) cash dividends on
the class or series of Common Stock that is the subject of
the Restricted Stock Award shall be automatically deferred
and reinvested in additional Restricted Stock, held subject
to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to
dividends, and (2) dividends payable in Common Stock shall
be paid in
<PAGE>
the form of Restricted Stock of the same class as the
Common Stock with which such dividend was paid, held
subject to the vesting of the underlying Restricted Stock,
or held subject to meeting Performance Goals applicable
only to dividends.
(iii) Except to the extent otherwise provided in
the applicable Restricted Stock Agreement, any applicable
employment agreement and Sections 7(c)(i), 7(c)(iv) and
10(a)(ii), upon a participant's Termination of Employment
for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all shares
still subject to restriction shall be forfeited by the
participant.
(iv) Except to the extent otherwise provided in
Section 10(a)(ii) or any applicable written employment
agreement, in the event that a participant retires or such
participant's employment is involuntarily terminated (other
than for Cause), the Committee shall have the discretion to
waive in whole or in part any or all remaining restrictions
(other than, in the case of Restricted Stock with respect
to which a participant is a Covered Employee, satisfaction
of the applicable Performance Goals unless the
participant's employment is terminated by reason of death
or Disability) with respect to any or all of such
participant's shares of Restricted Stock.
(v) If and when the applicable Performance Goals
are satisfied and the Restriction Period expires without a
prior forfeiture of the Restricted Stock, unlegended
certificates for such shares shall be delivered to the
participant upon surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be
subject to the terms of, a Restricted Stock Agreement.
Section 8. Performance Units.
(a) Administration. Performance Units may be awarded
either alone or in addition to other Awards granted under
the Plan. Performance Units may be denominated in shares
of Common Stock or cash, or may represent the right to
receive dividend equivalents with respect to shares of
Common Stock, as the Committee shall determine. The
Committee shall determine the officers and employees to
whom and the time or times at which Performance Units shall
be awarded, the form and number of Performance Units to be
awarded to any participant (subject to the aggregate limit
on grants to individual participants set forth in Section
3), the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in
Section 8(b).
The Committee shall condition the settlement of
Performance Units upon the continued service of the
participant, attainment of Performance Goals, or both. The
provisions of such Awards (including the applicable
Performance Goals) need not be the same with respect to
each recipient.
(b) Terms and Conditions. Performance Units Awards shall
be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the
Performance Unit Agreement referred to in Section 8(b)(vi),
Performance Units may not be sold, assigned, transferred,
pledged or otherwise encumbered during the Award Cycle. At
the expiration of the Award Cycle, the Committee shall
evaluate actual performance in light of the Performance
Goals for such Award and shall determine the number of
Performance Units granted to the participant which have
been earned and the Committee may then elect to deliver
cash, shares of Common Stock, or a combination thereof, in
settlement of the earned Performance Units, in accordance
with the terms thereof.
(ii) Except to the extent otherwise provided in
the applicable Performance Unit Agreement and Sections
8(b)(iii) and 10(a)(iii) or any applicable written
employment agreement, upon a participant's Termination of
Employment for any reason during the Award Cycle or before
the applicable Performance Goals are satisfied, the rights
to the shares still covered by the Performance Units Award
shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in
Section 10(a)(iii) or any applicable written employment
agreement, in the event that a participant's employment is
involuntarily terminated (other than for Cause), or in the
event a participant retires, the Committee shall have the
discretion to waive in whole or in part any or all
remaining
<PAGE>
payment limitations (other than, in the case of Performance
Units with respect to which a participant is a Covered
Employee, satisfaction of the applicable Performance Goals
unless the participant's employment is terminated by reason
of death or Disability) with respect to any or all of such
participant's Performance Units.
(iv) A participant may elect to further defer
receipt of the Performance Units payable under an Award (or
an installment of an Award) for a specified period or until
a specified event, subject in each case to the Committee's
approval and to such terms as are determined by the
Committee (the "Elective Deferral Period"). Subject to any
exceptions adopted by the Committee, such election must
generally be made prior to commencement of the Award Cycle
for the Award (or for such installment of an Award).
(v) If and when the applicable Performance Goals
are satisfied and the Elective Deferral Period expires
without a prior forfeiture of the Performance Units,
payment in accordance with Section 8(b)(i) hereof shall be
made to the participant.
(vi) Each Award shall be confirmed by, and be
subject to the terms of, a Performance Unit Agreement.
Section 9. Tax Offset Bonuses
At the time an Award is made hereunder or at any time
thereafter, the Committee may grant to the participant
receiving such Award the right to receive a cash payment in
an amount specified by the Committee, to be paid at such
time or times (if ever) as the Award results in
compensation income to the participant, for the purpose of
assisting the participant to pay the resulting taxes, all
as determined by the Committee and on such other terms and
conditions as the Committee shall determine.
Section 10. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other
provision of the Plan to the contrary, in the event of a
Change in Control:
(i) Any Stock Options and Stock Appreciation
Rights outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and
vested shall become fully exercisable and vested to the
full extent of the original grant.
(ii) The restrictions applicable to any
Restricted Stock shall lapse, and such Restricted Stock
shall become free of all restrictions and become fully
vested and transferable to the full extent of the original
grant.
(iii) All Performance Units shall be considered
to be earned and payable in full and any deferral or other
restriction shall lapse and such Performance Units shall be
settled in cash as promptly as is practicable.
(b) Definition of Change in Control. For purposes of
the Plan, a "Change in Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then
outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (2) the combined
voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election
of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that for purposes of this
subparagraph (i), the following acquisitions shall not
constitute a Change in Control: (x) any acquisition by the
Corporation, (y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the
Corporation or (z) any acquisition by any corporation
pursuant to a transaction which complies with clauses (x),
(y) and (z) of subsection (iii) of this Section 10(b); or
(ii) Individuals who, as of the effective date of
the Plan, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming
a director subsequent to the effective date of the Plan
whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at
least two-
<PAGE>
thirds (2/3) of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board; but, excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Incumbent Board; or
(iii) Consummation of a reorganization, merger,
consolidation, or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless following
such Business Combination, (x) all of the individuals and
entities who were the beneficial owners, respectively, of
the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 80% of, respectively, the then
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Corporation
or all or substantially all of the Corporation's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (y) no
Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Corporation or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting
securities of such corporation except to the extent that
such ownership existed prior to the Business Combination
and (z) at least two-thirds (2/3) of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
(c) Change in Control Price. For purposes of the Plan,
"Change in Control Price" means the higher of (i) the
highest reported sales price, regular way, of a share of
Common Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on
which such shares are listed or on NASDAQ during the 60-day
period prior to and including the date of a Change in
Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Business Combination, the
highest price per share of Common Stock paid in such tender
or exchange offer or Business Combination; provided,
however, that (x) in the case of a Stock Option which (A)
is held by an optionee who is an officer or director of the
Corporation and is subject to Section 16(b) of the Exchange
Act and (B) was granted within 240 days of the Change in
Control, then the Change in Control Price for such Stock
Option shall be the Fair Market Value of the Common Stock
on the date such Stock Option is exercised or deemed
exercised and (y) in the case of Incentive Stock Options
and Stock Appreciation Rights relating to Incentive Stock
Options, the Change in Control Price shall be in all cases
the Fair Market Value of the Common Stock on the date such
Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in
any such transaction described above consists all or in
part of securities or other non-cash consideration, the
value of such securities or other non-cash consideration
shall be determined in the sole discretion of the Incumbent
Board.
Section 11. Loans.
The Corporation may make loans to a participant in
connection with Awards subject to the following terms and
conditions and such other terms and conditions not
inconsistent with the Plan as the Committee shall impose
from time to time, including without limitation the rate of
interest, if any, and whether such loan shall be recourse
or non-recourse.
<PAGE>
No loan made under the Plan shall exceed the sum of (i)
the aggregate price payable with respect to the Award in
relation to which the loan is made, plus (ii) the amount of
the reasonably estimated combined amounts of Federal and
state income taxes payable by the participant.
No loan shall have an initial term exceeding ten (10)
years; provided that the loans under the Plan shall be
renewable at the discretion of the Committee; and provided,
further, that the indebtedness under each loan shall become
due and payable, as the case may be, on a date no later
than (i) one year after Termination of Employment due to
death, Retirement or Disability, or (ii) the day of
Termination of Employment for any reason other than death,
Retirement or Disability.
Loans under the Plan may be satisfied by the
participant, as determined by the Committee, in cash or,
with the consent of the Committee, in whole or in part in
the form of unrestricted Common Stock already owned by the
participant where such Common Stock shall be valued at Fair
Market Value on the date of such payment.
When a loan shall have been made, Common Stock with a
Fair Market Value on the date of such loan equivalent to
the amount of the loan shall be pledged by the participant
to the Corporation as security for payment of the unpaid
balance of the loan. Any portions of such Common Stock
may, in the discretion of the Committee, be released from
time to time as it deems not to be needed as security.
The making of any loan is subject to satisfying all
applicable laws, as well as any regulations and rules of
the Federal Reserve Board and any other governmental agency
having jurisdiction.
Section 12. Term, Amendment and Termination.
The Plan will terminate 10 years after the effective date
of the Plan. Under the Plan, Awards outstanding as of such
date shall not be affected or impaired by the termination
of the Plan.
The Board may amend, alter, or discontinue the Plan, but
no amendment, alteration or discontinuation shall be made
which would (i) impair the rights of an optionee under a
Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award or Performance Unit Award thereto-
fore granted without the optionees or recipient's consent,
except such an amendment made to cause the Plan to qualify
for the exemption provided by Rule 16b-3, or (ii)
disqualify the Plan from the exemption provided by Rule
16b-3. In addition, no such amendment shall be made
without the approval of the Corporation's shareholders to
the extent such approval is required by law or agreement.
The Committee may amend the terms of any Stock Option or
other Award theretofore granted, prospectively or
retroactively, but no such amendment shall impair the
rights of any holder without the holder's consent except
such an amendment made to cause the Plan or Award to
qualify for the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have
authority to amend the Plan to take into account changes in
law and tax and accounting rules, as well as other
developments and to grant Awards which qualify for
beneficial treatment under such rules without shareholder
approval.
Section 13. Unfunded Status of Plan.
It is presently intended that the Plan constitute an
"unfunded" plan for incentive and deferred compensation.
The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan
to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines,
the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
Section 14. General Provisions.
(a) The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and
agree with the Corporation in writing that such person is
acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any
restrictions on transfer.
<PAGE>
Notwithstanding any other provision of the Plan or
agreements made pursuant thereto, the Corporation shall not
be required to issue or deliver any certificate or
certificates for shares of Common Stock under the Plan
prior to fulfillment of all of the following conditions:
(1) The listing or approval for listing upon
notice of issuance, of such shares on the New York Stock
Exchange, Inc., or such other securities exchange or market
system as may at the time be the principal market for the
Common Stock;
(2) Any registration or other qualification of
such shares of the Corporation under any state or federal
law or regulation, or the maintaining in effect of any such
registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable; and
(3) The obtaining of any other consent, approval,
or permit from any state or federal governmental agency
which the Committee shall, in its absolute discretion after
receiving the advice of counsel, determine to be necessary
or advisable.
(b) Nothing contained in the Plan shall prevent the
Corporation or any Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any
employee any right to continued employment nor shall it
interfere in any way with the right of the Corporation or
any Affiliate to terminate the employment of any employee
at any time.
(d) No later than the date as of which an amount first
becomes includible in the gross income of the participant
for federal income tax purposes with respect to any Award
under the Plan, the participant shall pay to the
Corporation, or make arrangements satisfactory to the
Corporation regarding the payment of, any federal, state,
local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise
determined by the Corporation, withholding obligations may
be settled with Common Stock, including Common Stock that
is part of the Award that gives rise to the withholding
requirement. The obligations of the Corporation under the
Plan shall be conditional on such payment or arrangements,
and the Corporation and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems
appropriate, including the making of irrevocable elections,
for the settlement of withholding obligations with Common
Stock.
(e) At the time of Award, the Committee may provide in
connection with any Award that any shares of Common Stock
received as a result of such Award shall be subject to a
right of first refusal pursuant to which the participant
shall be required to offer to the Corporation any shares
that the participant wishes to sell at the then Fair Market
Value of the Common Stock, subject to such other terms and
conditions as the Committee may specify at the time of
Award.
(f) The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall
only be permissible if sufficient shares of Common Stock
are available under Section 3 for such reinvestment (taking
into account then outstanding Stock Options and other
Awards).
(g) The Committee shall establish such procedures as it
deems appropriate for a participant to designate a
beneficiary to whom any amounts payable in the event of the
participant's death are to be paid or by whom any rights of
the participant, after the participant's death, may be
exercised.
(h) In the case of a grant of an Award to any employee
of an Affiliate, the Corporation may, if the Committee so
directs, issue or transfer the shares of Common Stock, if
any, covered by the Award to the Affiliate, for such lawful
consideration as the Committee may specify, upon the
condition or understanding that the Affiliate will transfer
the shares of Common Stock to the employee in accordance
with the terms of the Award specified by the Committee
pursuant to the provisions of the Plan.
(i) Notwithstanding any other provision of the Plan, if
any right granted pursuant to this Plan would make a Change
in Control transaction ineligible for pooling of interests
accounting under APB No. 16 that but for the nature of such
grant would
<PAGE>
otherwise be eligible for such accounting treatment, the
Committee may, at its discretion, but shall not be required
to, substitute for the cash payable pursuant to such grant
Common Stock (or the common stock of the issuer for which
the Common Stock is being exchanged in such Change in
Control transaction) with a Fair Market Value equal to the
cash that would otherwise be payable hereunder.
(j) The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference
to principles of conflict of laws.
Section 15. Effective Date of Plan.
The Plan shall be effective as of the date it is approved
by the affirmative votes of the holders of a majority of
the Common Stock present, or represented, and entitled to
vote at a meeting duly held in accordance with the
applicable laws of the State of Delaware (provided, that
the total vote cast represents 50% of the voting power of
all the shares of Common Stock entitled to vote).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
P HARNISCHFEGER INDUSTRIES, INC.
R ANNUAL MEETING OF STOCKHOLDERS - APRIL 9, 1996
0 This Proxy Solicited on Behalf of the Board of Directors
X
Y The undersigned hereby appoints Jeffery T. Grade and K. Thor Lundgren, and each of
them, proxies, with power of substitution, to vote the shares of stock of Harnischfeger
Industries, Inc. which the undersigned is entitled to vote, as specified on the reverse side
of this card, and, if applicable, hereby directs the trustee of employee benefit plan(s)
shown on the reverse side hereof to vote the shares of stock of Harnischfeger Industries,
Inc. allocated to the account(s) of the undersigned or otherwise which the undersigned is
entitled to vote pursuant to such employee benefit plan(s), as specified on the reverse side
of this card, at the Annual Meeting of Stockholders to be held on April 9, 1996 at 10:00
a.m., CST, at the Wyndham Hotel, 139 E. Kilbourn Avenue, Milwaukee, Wisconsin, and at any
adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES WILL BE
VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE VOTED FOR ALL NOMINEES FOR
DIRECTORS IN PROPOSAL 1 AND FOR PROPOSAL 2, AND IT AUTHORIZES THE ABOVE DESIGNATED PROXIES
AND TRUSTEE, AS APPLICABLE, TO VOTE IN ACCORDANCE WITH THEIR JUDGEMENT ON SUCH OTHER BUSINESS
AS MAY COME BEFORE THE MEETING.
(IMPORTANT-TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE
SIDE
<PAGE>
/ X / Please mark
votes as in
this example
The Board of Directors recommends a vote FOR Proposals 1 and 2.
FOR AGAINST ABSTAIN
1. To elect four directors 2. To adopt the Harnischfeger / / / / / /
to serve for terms of Industries, Inc. Stock
three years. Incentive Plan.
Nominees:Jeffery T. Grade,
Robert M. Gerrity, 3. To transact such other business as may
Robert F. Schnoes properly come before the Annual Meeting and
and Donald Taylor any adjournment or postponement thereof.
FOR WITHHELD
/ / / /
/ /
--------------------------------------
For all nominees except as noted above.
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
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>
