SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.4a-12 or Section 240.14a-12
HARNISCHFEGER INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
(1) Title of each class of securities to which
transaction applies:
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(2) Aggregate number of securities to which
transactions applies:
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(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined):
-------------------------------------------------
(4) Proposed maximum aggregate value of
transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------
3) Filing Party:
------------------------------
4) Date Filed:
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<PAGE>
PRELIMINARY PROXY STATEMENT
[HARNISCHFEGER INDUSTRIES, INC. LOGO]
Notice of 1997
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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS;
TRANSACTIONS WITH MANAGEMENT 12
SUMMARY COMPENSATION TABLE 13
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE
COMPENSATION 16
PERFORMANCE GRAPH 19
PENSION PLAN TABLE 20
OPTION GRANTS 21
OPTION EXERCISES AND FISCAL YEAR-END VALUES 22
LONG-TERM INCENTIVE COMPENSATION 23
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS 24
PROPOSAL TO AMEND CHARTER TO INCREASE
AUTHORIZED SHARES 25
OTHER INFORMATION 26
<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
15, 1997, at 10:00 a.m. for the following purposes:
1. To elect four persons to the Corporation's Board of
Directors; and
2. To consider and vote upon a proposal to amend the
Corporation's Restated Certificate of Incorporation
to increase the number of authorized shares of Common
Stock from 100,000,000 to 150,000,000.
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
17, 1997 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 1997 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 20, 1997
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 1997 annual meeting of stockholders on Tuesday,
April 15, 1997, and at any adjournment or postponement
thereof. The proxy statement, proxy card and annual report
are being mailed to stockholders on or about February 20, 1997.
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 amendment to the Restated Certificate of Incorporation
and (c) in accordance with the best judgment of the persons
named in the proxy on any other matters which may properly
come before the meeting.
Any proxy may be revoked by the person executing it for any
reason at any time 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 at least 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 17, 1997 (the "Record Date") are
entitled to vote on all matters presented at the annual
meeting. As of the Record Date, shares of Common
Stock were outstanding and entitled to vote at the annual
meeting. Each share is entitled to one vote.
A majority of the shares entitled to vote, represented in
person or by proxy, constitutes a quorum. Under the
Corporation's bylaws, if a quorum is present, the affirma-
tive vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter is
required for the election of directors. The affirmative
vote of the holders of two-thirds of the outstanding shares
of Common Stock is required to approve the amendment to the
Restated Certificate of Incorporation. The independent in-
spector will count the votes and ballots. Abstentions 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 17, 1997 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 executive officers and
directors under the Executive Incentive Plan, the
Supplemental Retirement and Stock Funding Plan and 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.
<TABLE>
<CAPTION>
================================================================
<S> <C> <C>
Name and Address Shares Percent
of Beneficial Owner Owned of Class
================================================================
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 5,930,079(1) %
-----
Jennison Associates Capital Corp.
466 Lexington Avenue
Floor 18
New York, New York 10017-3151 4,091,002(2) 8.32%
Jeffery T. Grade (3) %
------- -----
John N. Hanson (4) %
------ -----
Francis M. Corby, Jr. (5) %
------ -----
K. Thor Lundgren (6) %
------ -----
Richard W. Schulze (7) %
------ -----
All executive officers and
directors as a group
(17 persons) (8)(9) %
------- -----
</TABLE>
Notes
(1) Based on information supplied to the Corporation by
FMR Corp., a parent holding company, in a Schedule
13G, amendment no. 3, filed with the Securities
and Exchange Commission in February, 1996.
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 40,500 shares Mr. Grade had a right to
acquire upon exercise of stock options, 906 shares
beneficially owned under the Profit Sharing Plan,
213,534 shares beneficially owned under the
Executive Incentive Plan, shares beneficially
owned under the Supplemental Retirement and Stock
Funding Plan and 178,229 shares of restricted
Common Stock. Also includes 10,023 shares assigned
to Mr. Grade's Executive Incentive Plan account as
a result of the "banked bonus" feature of that
Plan. Award of such shares is dependent upon
achievement of certain performance targets in
future years.
(4) Includes 26,941 shares Mr. Hanson had a right to
acquire upon exercise of stock options, 14,001
shares beneficially owned under the Executive
Incentive Plan and shares beneficially owned
under the Supplemental Retirement and Stock Funding
Plan. Also includes 2,223 shares assigned to Mr.
Hanson's Executive Incentive Plan account as a
result of the "banked bonus" feature of that Plan.
Award of such shares is dependent upon achievement
of certain performance targets in future years.
(5) Includes 50,750 shares Mr. Corby had a right to
acquire upon exercise of stock options, 906 shares
beneficially owned under the Profit Sharing Plan,
shares beneficially owned under the 401K
Plan, 111,645 shares beneficially owned under the
Executive Incentive Plan, shares
beneficially owned under the Supplemental Retire-
ment and Stock Funding Plan and 95,571 shares of
restricted Common Stock. Includes 3,500 shares
held by Mr. Corby as custodian for his sons. Also
includes 5,367 shares assigned to Mr. Corby's
Executive Incentive Plan account as a result of the
"banked bonus" feature of that Plan. Award of such
shares is dependent upon achievement of certain
performance targets in future years.
(6) Includes 48,250 shares Mr. Lundgren had a right to
acquire upon exercise of stock options, 146 shares
beneficially owned under the Profit Sharing Plan,
63,208 shares beneficially owned under the
Executive Incentive Plan, shares beneficially
owned under the Supplemental Retirement and Stock
Funding Plan and 74,057 shares of restricted Common
Stock. Also includes 4,194 shares assigned to Mr.
Lundgren's Executive Incentive Plan account as a
result of the "banked bonus" feature of that Plan.
Award of such shares is dependant upon achievement
of certain performance targets in future years.
(7) Mr. Schulze resigned as an executive officer of the
Corporation as of June 30, 1996 and retired from
the Corporation as of October 31, 1996.
(8) Includes shares which executive officers
had a right to acquire upon exercise of stock
options, shares which executive officers
beneficially owned under the Profit Sharing Plan,
shares which executive officers beneficially
owned under the 401K Plan, shares which
executive officers beneficially owned under the
Executive Incentive Plan, and shares which
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
<PAGE>
executive officer, 2,250 shares one executive
officer owned jointly with his spouse, and 437
shares held by the spouses of two executive
officers.
(9) Includes and shares for Mr. Herbert V.
Kohler and Mr. Robert Schnoes, respectively. Mr.
Kohler's term as a director expires as of the date
of the 1997 annual meeting and Mr. Schnoes is
retiring as a director as of the date of the 1997
annual meeting pursuant to the Board's mandatory
retirement policy. 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 and includes
shares of Common Stock that are issuable upon the exercise
of options exercisable within 60 days of February 17, 1997.
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
17, 1997) concerning each of the individuals nominated by
the Board of Directors for election at the 1997 annual
meeting. All of the nominees are presently directors whose
terms expire in 1997 and who are nominated to serve terms
ending at the annual meeting in 2000. 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 nominated by the Board.
<TABLE>
<CAPTION>
=================================================================================
<S> <C> <C>
Director Proposed Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------
Donna M. Alvarado Principal of Aguila International, 1992 2000 500
an international business
development consulting firm based
in Columbus, Ohio, since 1994.
President and Chief Executive
Officer of Quest International, a
non-profit educational
organization based in Granville,
Ohio, from 1989 to 1994. Director,
Park National Bank. Age 48.
Harry L. Davis Professor of Creative Management 1987 2000 3,814(2)
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 59.
John N. Hanson President and Chief Operating 1996 2000 (3)
Officer since 1996. Executive -----
Vice President and Chief
Operating Officer from 1995 to
1996. President and Chief
Executive Officer of Joy
Technologies Inc. from 1994
to 1995. President, Chief
Operating Officer and Director
of Joy Technologies Inc. from
1990 to 1995. Director, Manville
Corporation and Schuller
Corporation. Age 55.
Ralph C. Joynes Retired Vice Chairman, President 1988 2000 4,787(4)
and Chief Operating Officer of
USG Corporation, international
manufacturer of building materials
and construction systems. Age 68.
- ---------------------------------------------------------------------------------
</TABLE>
Notes
(1) Beneficial ownership of these shares
consists of sole voting power and sole
investment power except as noted
below. None of the continuing
directors beneficially owned 1% or
more of the Corporation's Common
Stock.
(2) Shares beneficially owned under the
Directors Stock Compensation Plan.
(3) See note 4 on page 3.
(4) Includes 3,787 shares beneficially
owned under the Directors Stock
Compensation Plan.
<PAGE>
CONTINUING DIRECTORS
The following table shows certain information concerning
the directors whose terms will continue after the 1997
annual meeting including principal occupation, business
experience and beneficial ownership of the Corporation's
Common Stock as of February 17, 1997.
<TABLE>
<CAPTION>
=============================================================================
<S> <C> <C>
Director Current Shares
Since Term Owned(1)
- ------------------------------------------------------------------------------
Larry D. Brady President of FMC Corporation, 1995 1998 978(2)
a world leader in production
of chemicals and machinery for
industry, government and
agriculture, since 1993.
Director of FMC Corporation
since 1989. Chairman of
United Defense L.P. Director,
National Merit Scholarship
Foundation and National
Association of Manufacturers.
Age 54.
Francis M. Corby, Jr Executive Vice President, 1996 1998 (3)
Finance and Administration -----
since 1995. Senior Vice
President, Finance and Chief
Financial Officer from 1986
to 1995. Age 53.
John D. Correnti President, Chief Executive 1994 1998 798 (4)
Officer and director of Nucor
Corporation, a major steel
producer headquartered
in Charlotte, North Carolina,
since 1996. President, Chief
Operating Officer and Director
of Nucor, from 1991
to 1995. Director, CEM Corporation,
Navistar International Corporation
and North Carolina Board of
Wachovia Bank. Age 49.
Robert B. Hoffman Senior Vice President and Chief 1994 1998 1,000
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. Director,
Kemper Group of Municipal Funds
and Boatman's Trust Company. Age 60.
Jean-Pierre Labruyere Chairman and Chief Executive 1994 1998 1,802(4)
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 59.
- --------------------------------------------------------------------------------
Notes
(1) Beneficial ownership of these shares consists of
sole voting power and sole investment power except
as noted below. None of the continuing directors
beneficially owned 1% or more of the Corporation's
Common Stock.
(2) Includes 500 shares held jointly with his wife and
478 shares beneficially owned under the Directors
Stock Compensation Plan.
(3) See note 5 on page 3.
(4) Shares beneficially owned under the Directors Stock
Compensation Plan.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
=================================================================================
<S> <C> <C>
Director Proposed Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------
Jeffery T. Grade Chairman and Chief Executive 1983 1999 (2)
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 53.
Robert M. Gerrity Chairman and Chief Executive Officer 1994 1999 1,000
of Antrim Group Inc., a Michigan
based technology corporation, since
December, 1996. Director and
former President 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, Rubbermaid, Inc. and
Standard Motor Products, Inc. Age 59.
Donald Taylor Principal in Sullivan Associates, 1979 1999 2,167(3)
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.,
Superior Services, Inc. and
The Enhancers, Inc. Age 69.
- ------------------------------------------------------------------------------------
</TABLE>
Notes
(1) Beneficial ownership of these shares
consists of sole voting power and sole
investment power except as noted
below. None of the nominees
beneficially owned more than 1% of the
Corporation's Common Stock.
(2) See note 3 on page 3.
(3) Includes 1,567 shares beneficially
owned under the Directors Stock
Compensation Plan.
<PAGE>
BOARD MEETINGS, COMMITTEES,
AND COMPENSATION
The Board of Directors held six meetings during fiscal
1996. 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
71% of the meetings of the Board and committees of which he
was a member and Mr. Labruyere who attended 73% 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
Current 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
functions of the Audit Committee are to: (i) recommend for
appointment independent auditors for the Corporation, (ii)
review and approve the scope of the annual audit and 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
three times during fiscal 1996.
Human Resources Committee
Current 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 functions 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 1996 Stock Incentive, the
1988 Incentive Stock, the Executive Incentive and the
Supplemental Retirement and Stock Funding Plans, (iii)
periodically review the executive manpower of the Corpora-
tion and make recommendations to the Board as appropriate
and (iv) receive, consider and present to the Board for its
consideration nominations to fill vacancies in the Board of
Directors. Stockholders who wish to recommend persons to
become directors of the Corporation should direct their
recommendations to the Human Resources Committee in care of
the Corporation. The Human Resources Committee met seven
times during fiscal 1996.
Finance and Strategic Planning Committee
Current 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.
<PAGE>
The functions of the Finance and Strategic Planning Com-
mittee are to: (i) periodically review with 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 Corporation, (ii) review
specific financial proposals of management which require
Board approval and make recommendations to the Board as
appropriate, (iii) review with management the strategic
plans of management for the Corporation and (iv) review
specific recommendations of management relating to
acquisitions, divestitures and other strategic activities
requiring approval of the Board and make recommendations to
the Board as appropriate. The Finance and Strategic Plan-
ning Committee met twice during fiscal 1996.
Pension Committee
Current 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 investment policy of the Corporation's Pension and
Investment Committee, (ii) periodically review the actions
and performance of the Pension and Investment Committee and
any other administrative committees for retirement plans
and trusts for which the Corporation sponsors or may hereafter sponsor
(a "Plan" or "Trust"), including the implementation by
such committees of the investment policy, (iii) make
recommendations to the Board regarding the
membership of the Pension and Investment Committee, (iv)
review the need for the establishment of any new Plan or
Trust, the termination of any existing Plan or Trust and
the adoption of any amendment to any single Plan that would
result in an increase in current Plan liabilities in excess
of $5,000,000 and (v) report to the Board on the activities
and findings of the Committee and make recommendations to
the Board based on these findings. The Pension Committee
met twice during fiscal 1996.
Executive Committee
Current 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 did not meet during fiscal 1996.
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.
In 1991, the Corporation established a Directors Stock Com-
pensation Plan under which non-employee directors are
allowed to elect to defer up to 100% of their fees by con-
verting 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 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
<PAGE>
highest per-share price actually paid in connection with
such Change in Control and cash proceeds will be distrib-
uted to the participants.
In 1992, the Corporation established a Service Compensation
Plan for Directors which provided that, upon leaving the
Board (other than removal for cause), a director who had
been a non-employee director for at least five years would
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.
At its February 10, 1997 meeting, the Board determined to
replace the Service Compensation Plan with an incentive
compensation plan for outside directors based on the same
Economic Value Added ("EVA") performance targets used for
the Corporation's Executive Incentive Plan. Accordingly,
the Board eliminated the Service Compensation Plan and
converted accrued benefits under the Service Compensation
Plan to stock to be held in trust until a director's status
as a director terminates. The Directors Stock Compensation
Plan was amended to provide that, starting in 1997, non-employee
directors will be eligible to earn annual incentive compensation
awards in addition to annual retainer and meeting fees.
Incentive Compensation for non-employee directors is
determined by multiplying $25,000 by a figure which
represents the EVA performance of the Corporation in a
given year expressed as a percentage of the EVA performance
target for that year. Incentive compensation
awards are converted into Common Stock under
the Directors Stock Compensation Plan and held in trust
until the director's status as a director terminates.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
The Human Resources Committee performs the functions of the
compensation committee of the board of directors. The
current 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.
During fiscal 1995, the Corporation retained Sullivan
Associates, Inc., specialists in board of director
searches, to assist the Corporation in identifying
candidates to become directors of the Corporation. Mr.
Taylor is a principal in Sullivan Associates, Inc. and is
compensated by Sullivan Associates, Inc. in proportion to
amounts paid to Sullivan Associates by the Corporation.
The Corporation paid Sullivan Associates, Inc. $37,525 for
director search services in fiscal 1995 and $50,000 in
fiscal 1996 for such services and has paid Sullivan
Associates, Inc. $36,805 to date in fiscal 1997 for such
services.
TRANSACTIONS WITH MANAGEMENT
From time to time, the Corporation uses The Relocation
Center to assist executives who are required by the
Corporation to change their places of residence. The
Corporation paid The Relocation Center $405,000 during
fiscal 1995 to purchase the home of Mr. Hanson and $64,205
in 1996 in connection with marketing the home. Also in
fiscal 1996, the Corporation paid The Relocation Center
$875,000 to purchase the home of Mr. Grade in fulfillment
of an obligation that was incurred by the Corporation in
1983 when Mr. Grade relocated to Milwaukee. The Corporation
receives the proceeds from the sale of the homes.
Prior to the acquisition of Joy Technologies Inc. ("JTI")
by the Corporation, JTI lent Mr. Hanson $240,000 in
connection with a program whereby executives of JTI were
lent money to purchase stock in JTI to encourage ownership
of JTI stock. The loan matures on July 1, 1997 and Mr.
Hanson pays interest on the balance at the annual rate of
6.22%. The Corporation succeeded to the loan as a result
of the JTI acquisition. The Corporation holds 10,000
shares of Common Stock as collateral for repayment of
the loan.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to,
earned by or paid to the Corporation's Chief Executive
Officer and each of the executive officers other than the
Chief Executive Officer who were serving as executive
officers at the end of fiscal 1996 for services rendered to
the Corporation and its subsidiaries during fiscal 1996,
1995 and 1994. Information is also included for Richard W.
Schulze who resigned as an executive officer on June 30,
1996 and retired from the Corporation as of October 31,
1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation
Awards Payouts
Secur-
Other rities All
Name Annual Restricted Under Other
and Compen- Stock lying LTIP Compen-
Principal Year Salary Bonus sation Awards Options Payouts sation
Position ($) ($) ($) ($) /SARs ($) ($)
(1) (1) (2) (#) (3) (1)(4)
Jeffery T.
Grade 1996 600,000 -- 390,183 -- 42,000 253,998 750,102
Chairman and 1995 554,928 -- 359,989 86,625(5) 35,000 79,377 764,168
Chief 1994 525,000 -- 252,026 -- 25,000 -- 661,805
Executive
Officer
John N. 1996 381,691 253,750 104,295 -- 31,000 22,683 244,232
Hanson (6) 1995 301,153 148,500 38,060 -- 26,000 -- 720,721
President 1994 (7) (8)
and Chief
Operating
Officer
Francis M. 1996 324,000 -- 242,694 -- 26,000 129,288 409,794
Corby, Jr. 1995 295,025 -- 214,281 43,312(5) 21,000 37,462 409,374
Executive 1994 247,800 -- 131,779 -- 15,000 -- 315,019
Vice President
for Finance
and
Administration
K. Thor 1996 250,920 -- 198,859 -- 26,000 104,433 317,520
Lundgren 1995 232,332 -- 184,443 63,000(5) 21,000 31,642 322,735
Executive 1994 209,304 -- 104,499 -- 15,000 -- 265,143
Vice President
for Law and
Government
Affairs
Richard W. 1996 222,720 322,721 43,439(9) -- -- -- 2,958,688
Schulze 1995 212,200 -- 162,278(9) 35,439(5) 15,000 28,815 291,875
Senior Vice 1994 192,184 -- 122,062 -- 15,000 -- 241,495
President
and Special
Assistant to
the Chairman
and CEO
- -----------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) Participants in the Executive Incentive Plan may
elect to defer up to 100% of their cash bonuses by
converting such bonuses into Common Stock at a 25%
discount from the average closing price
<PAGE>
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 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 50% of his 1996 cash bonus into
Common Stock under the plan and Mr. Schulze who
retired in 1996. 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 Compensation" columns. The "banked"
portion of any bonus is not reported in the Summary
Compensation Table but is reported in the Long-Term
Incentive Plans - Awards Table on page 23.
(2) 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 $40.00 per share were: Jeffery T. Grade 178,229
($7,129,160); Francis M. Corby, Jr. 95,571
($3,822,840) and K. Thor Lundgren 74,057
($2,962,280). Dividends are paid on the restricted
Common Stock at the same rate as on unrestricted
shares.
(3) Represents the portion of the bonus earned in 1996
that resulted from bonuses that were "banked" in
prior years under the EVA Bonus Program described
on page 23. Each of the executives elected to
defer these amounts under the Executive Incentive
Plan except Mr. Hanson who elected to defer 50% of
these amounts and Mr. Schulze who retired in 1996.
(4) Includes the following amounts which represent
bonuses earned in 1996 (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 $739,800; John N. Hanson
$235,312; Francis M. Corby, Jr. $399,492 and K.
Thor Lundgren $309,384. Also includes $4,830 for
each executive which represents cash payments under
the Profit Sharing Plan and the following amounts
paid by the Corporation during fiscal 1996 for
group term life insurance premiums for the benefit
of the executives: Jeffery T. Grade $5472; John N.
Hanson $4090; Francis M. Corby, Jr. $5,472 ; K.
Thor Lundgren $3,306 and Richard W. Schulze $7,758.
Also includes $2,946,100 paid to Mr. Schulze in
connection with the termination of his employment
agreement.
(5) Represents the market value on the date of grant of
Restricted Common Stock granted in 1995 under the
1990 Restricted Stock Award Plan. This restricted
stock vested during fiscal 1995.
(6) 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.
(7) Cash bonus paid under Joy Technologies Inc.
Management Incentive Plan.
<PAGE>
(8) 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.
(9) Includes auto lease payments of $32,327 and $50,819
for 1996 and 1995, respectively.
<PAGE>
HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE
COMPENSATION
The Human Resources Committee, which currently consists of
six outside directors, met seven times during fiscal 1996.
Additionally, an ongoing dialogue concerning compensation
and organizational development issues was maintained
throughout the year between the Committee Chairperson and
senior management of the Corporation.
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.
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.
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 after-tax 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.
Approximately 350 executives participated in EVA based
incentive plans in 1996 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.
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.
<PAGE>
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 business unit's EVA target.
Corporate wide, the average payment for 1996 was
approximately 5.5% of a participating employee's base pay.
For purposes of the plan the maximum base pay which can be
used for calculations is $100,000.
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 significant
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 1996 Stock Incentive 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.
Restricted Common Stock
The Corporation's 1988 Incentive Stock and 1996 Stock
Incentive Plans provide for the granting of qualified and
nonqualified options, stock appreciation rights and
restricted stock to key employees. In fiscal 1996,
restricted stock covering 347,857 shares was granted under
the 1988 Incentive Stock Plan. The restricted stock was
issued in connection with the cancellation of employment
agreements with three senior executive officers. After
considering the principal economic elements of the
agreements, the present and anticipated future costs of
such agreements to the Corporation and the costs and
benefits of using restricted stock as consideration for
cancellation of the agreements, the Committee directed the
Corporation to use restricted stock to cancel the
agreements. Such shares are subject to restrictions and
forfeiture under certain circumstances.
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 70 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 just over a million
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, 1996 meeting.
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
<PAGE>
October, 1996 meeting from $600,000 per year to $660,000,
an increase of 10.0%. Based on outside survey data, Mr.
Grade's new base salary is slightly above 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 $993,798
for fiscal 1995, including $96,379 credited to Mr. Grade's
1996 incentive compensation as a result of amounts "banked"
in 1994 and $157,619 credited in 1996 as a result of
amounts "banked" in 1995. In addition, $129,600 was
"banked" in 1996 under the EVA method of calculating
incentive compensation and will be available to be included
in incentive compensation calculations in future years.
The amount of the 1996 bonus was determined by the
Corporation's corporate performance which exceeded the 1996
EVA target by 61%, entitling Mr. Grade and certain other
senior executives to an incentive equal to 161% of their
individual bonus targets, which, in Mr. Grade's case, was
90% of base pay.
The total cash compensation earned by Mr. Grade in 1996 was
$1,598,628 (excluding the banked portion of his 1996 bonus,
but including the amounts banked in 1994 and 1995 and
payable in 1996 and the 1996 Profit Sharing payment). In
addition to cash compensation, Mr. Grade was granted
options to purchase 42,000 shares of the Corporation's
Common Stock at a price of $37.88 per share, the closing
price on the day of the option grant. Mr. Grade had been
granted options to purchase 25,000 shares in 1994 and
35,000 shares in 1995. The Committee determined that an
increase was warranted given Mr. Grade's performance,
leadership and the Committee's continuing desire to promote
ownership of the Corporation's stock by management.
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 continues to be 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,
Harry L. Davis (Chair)
Donna M. Alvarado
John D. Correnti
Robert M. Gerrity
Robert F. Schnoes
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 AGCO Corporation, Case
Corporation, Caterpillar Inc., Deere & Co., and
Harnischfeger Industries, Inc. AGCO Corporation and Case
Corporation were added to the Heavy Machinery subgroup on
July 1, 1996 while Clark Equipment, Indresco, Inc.,
Manitowoc Co. and Nacco Industries were removed from the
subgroup. AGCO Corporation began trading on April 16, 1992
and Case Corporation began trading on June 24, 1996. 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>
10/31/91 10/31/92 10/31/93 10/31/94 10/31/95 10/31/96
S & P 500 100 110 126 131 166 206
Machinery Group 100 84 168 231 280 339
Harnischfeger 100 97 127 146 187 240
Machinery Group = AG, CAT, CSE, DE, HPH
</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
- ----------------------------------------------------------------------------------------
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
1,900,000 427,500 570,000 712,500 855,000 997,500 1,140,000
- ----------------------------------------------------------------------------------------
</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, 28 years; John N. Hanson, 7 years;
Francis M. Corby, Jr., 16 years; K. Thor Lundgren, 5 years;
and Richard W. Schulze, years.
Benefits are based both upon years of service and the
highest consecutive five year average annual salary and
incentive compensation during the last ten calendar years
of service. Estimated benefits under the retirement plan
are subject to the provisions of the Internal Revenue Code
which limit the annual benefits which may be paid from a
tax qualified retirement plan. Amounts in excess of such
limitations will either be paid from the general funds of
the Corporation or funded with Common Stock under the terms
of the Supplemental Retirement and Stock Funding Plan. The
estimated benefits in the table above do not reflect off-
sets under the plan of 1.25% per year of service (up to a
maximum of 50%) of the Social Security benefit.
<PAGE>
OPTION GRANTS
The following table sets forth information about stock
option grants during the last fiscal year to the five
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<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 42,000 8.56% $37.88 Oct. 13, 2006 $802,200
John N. Hanson 31,000 6.31% $37.88 Oct. 13, 2006 $592,100
Francis M. Corby,
Jr. 26,000 5.30% $37.88 Oct. 13, 2006 $496,600
K. Thor Lundgren 26,000 5.30% $37.88 Oct. 13, 2006 $496,600
Richard W. Schulze -- -- -- -- --
- ----------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) were granted.
(2) Unless earlier terminated, options expire ten years
from the date of grant (October 13, 1996) 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
13, 1997, 25% on April 13, 1998, 25% on April 13,
1999 and 25% on April 13, 2000), 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 29.45%, risk-free
rate of return of 6.54%, dividend yield of 1.06%
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 ($)(3)
Acquired
on Value
Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------
Jeffery T. Grade 37,750 $479,858 8,750 45,000 $ 75,563 $525,750
John N. Hanson -- -- 12,691(4) 19,500 205,954 170,625
Francis M. Corby, Jr.6,000 75,390 27,000 45,500 852,475 315,450
K. Thor Lundgren -- -- 59,000 27,000 1,121,300 315,450
Richard W. Schulze(5) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------
</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 $40.00.
(4) Includes 6,191 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.
(5) All options held by Mr. Schulze were cancelled
during fiscal 1996 in connection with termination
of his employment agreement.
<PAGE>
LONG-TERM INCENTIVE COMPENSATION
As described in the Human Resources Committee Report on
Executive Compensation, incentive compensation for senior
executives 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 deferred 100% of his cash bonus for
fiscal 1996 except Mr. Hanson who elected to defer 50% of
his cash bonus and Mr. Schulze who retired in 1996.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Name Number of Shares, Units
or other Rights (#) (1)
Jeffery T. Grade 4,474
John N. Hanson 1,423
Francis M. Corby, Jr. 2,416
K. Thor Lundgren 1,871
Richard W. Schulze 0
(1) Reflects Common Stock purchased through conversion
of each executive's banked bonus at a 25% discount
on the purchase price of $38.625 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 $129,600;
John N. Hanson $41,223; Francis M. Corby, Jr.,
$69,984; and K. Thor Lundgren $54,199.
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment contracts between the Corporation
and any of its executive officers.
The Executive Incentive Plan and the Supplemental
Retirement and Stock Funding Plan provide for the
distribution of accrued benefits following termination of a
participant's employment with the Corporation.
These plans also 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 the highest per-share price actu-
ally paid in connection with such Change in Control and
cash proceeds will be distributed to the participants. The
1996 Stock Incentive Plan provides that, upon a Change in
Control, all outstanding option grants become exercisable
and all restrictions on restricted stock terminate and such
stock becomes fully vested.
Existing options and restricted stock granted under the
1988 Incentive Stock Plan contain provisions that, upon a
Change in Control, all such options become exercisable and
all restrictions on restricted stock terminate and such
stock becomes fully vested.
<PAGE>
PROPOSAL TO AMEND CHARTER TO INCREASE AUTHORIZED SHARES
The proposed amendment to the Restated Articles of Incorporation
would increase the authorized number of shares of
the Corporation's Common Stock from 100,000,000 to
150,000,000. Approximately 48,000,000 shares are currently
outstanding.
Although the current number of authorized shares is sufficient
to meet all presently known requirements, the Board
of Directors believes that it is desirable that the
Corporation have the flexibility to issue a substantial number
of shares of Common Stock without further stockholder
action. The availability of additional shares will enhance
the Corporation's flexibility in connection with possible
future actions, such as stock dividends, stock splits,
financings, employee benefit programs, corporate mergers,
acquisitions of property, the funding of business expansions
or for other corporate purposes. The Board of Directors will
determine whether, when and on what terms the
issuance of shares may be warranted in connection with any
of those purposes.
Other than the issuance of Common Stock under employee
benefit plans, the Corporation does not currently have any
intentions, plans or agreements to issue additional shares
of Common Stock.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED
AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION
AS BEING IN THE BEST INTERESTS OF THE CORPORATION AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF
THE AMENDMENT.
<PAGE>
OTHER INFORMATION
Auditors
The Board of Directors has selected Price Waterhouse as
independent accountants for the fiscal year ending October
31, 1997. Price Waterhouse has served the Corporation as
auditors since 1925. A representative of Price Waterhouse
will be present at the 1997 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 1997 annual meeting.
Should any additional matters properly come before
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 , 1997 in order to be considered for
inclusion in the Corporation's proxy statement and proxy
for that meeting under SEC Rule 14a-8. In addition, the
Corporation's bylaws require that stockholder proposals
must be received by the Corporation not less than ninety
days before the meeting in order to be submitted at the
meeting.
Cost of Proxy Solicitation
The Corporation will pay the cost of preparing, printing
and mailing proxy materials as well as the cost of solicit-
ing proxies on behalf of the Board. In addition to using
the mails, officers and other employees may solicit proxies
in person and by telephone and telegraph. The Corporation
has also hired Kissell-Blake, Inc., a professional proxy
solicitation firm, and will pay such firm its customary
fee, which is anticipated not to exceed $5,500, plus expenses,
to solicit proxies from banks, brokers and other
nominees having shares registered in their names which are
beneficially owned by others.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Corporation during the last fiscal
year and Forms 5 and amendments thereto furnished to the
Corporation with respect to the last fiscal year, the Cor-
poration is not aware that any director, officer or benefi-
cial owner of more than 10% of the Corporation's Common
Stock failed to file on a timely basis reports required by
Section 16(a) of the Securities Exchange Act of 1934 during
the last fiscal year.
By order of the Board of Directors
K. THOR LUNDGREN
Secretary
February 20, 1997
<PAGE>
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<S> <C> <C> <C> <C> <C> <C>
PRELIMINARY FORM OF PROXY
P HARNISCHFEGER INDUSTRIES, INC.
R ANNUAL MEETING OF STOCKHOLDERS - APRIL 15, 1997
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 15, 1997 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.
1. To elect four directors to 2. To approve an increase in / / / / / /
serve for terms of three years. authorized shares.
FOR AGAINST ABSTAIN
Nominees: Donna M. Alvarado,
Harry L. Davis, 3. To transact such other business as may properly
John N. Hanson come before the Annual Meeting and any adjournment
and Ralph C. Joynes 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:
---------------- -----------
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