SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM 10-Q
---------
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
____ OF THE SECURITIES EXCHANGE ACT OF 1934
X FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
- ---- ----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
____ OF THE SECURITIES EXCHANGE ACT OF 1934
____ FOR THE TRANSITION PERIOD FROM ______ TO _______
COMMISSION FILE NUMBER 1-9299
-----------------------------
HARNISCHFEGER INDUSTRIES, INC.
(Exact Name of registrant as Specified in Its Charter)
Delaware 39-1566457
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
3600 South Lake Drive, St. Francis, Wisconsin 53235-3716
- --------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(414)486-6400
- --------------------------------------------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- ------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at March 11, 1997
- ---------------------- ------------------------------
Common Stock, $1 par value 49,384,288 shares
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
FORM 10-Q
----------
JANUARY 31, 1997
----------------
INDEX
-----
Page No.
--------
PART I. Financial Information:
Consolidated Statement of Income - 1
Three Months Ended
January 31, 1997 and 1996
Consolidated Balance Sheet - 2-3
January 31, 1997 and
October 31, 1996
Consolidated Statement
of Cash Flows - 4
Three Months Ended
January 31, 1997 and 1996
Consolidated Statement of
Shareholders' Equity - 5
Three Months Ended
January 31, 1997 and 1996
Notes to Consolidated
Financial Statements 6-9
Management's Discussion
and Analysis of Results
of Operations and Financial
Condition 10-14
PART II. Other Information 14-15
Signatures 16<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
HARNISCHFEGER INDUSTRIES, INC.
- -------------------------------
CONSOLIDATED STATEMENT OF INCOME
- ---------------------------------
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
--------------------
1997 1996
---------- -------
<S> <C> <C>
Revenues
Net Sales $699,411 $632,684
Other Income 8,760 10,882
--------- ----------
708,171 643,566
Cost of Sales 527,637 491,532
Product Development, Selling
and Administrative Expenses 113,034 98,856
--------- --------
Operating Income 67,500 53,178
Interest Expense - Net (16,497) (13,237)
--------- --------
Income Before Provision
for Income Taxes and Minority
Interest 51,003 39,941
Provision for Income Taxes (17,850) (14,375)
Minority Interest (2,295) (2,375)
--------- ---------
Net Income $ 30,858 $ 23,191
========= =========
Earnings Per Share $ 0.65 $ 0.50
======= ======
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- -------------------------------
CONSOLIDATED BALANCE SHEET
- ---------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 20,837 $ 36,936
Accounts receivable-net 679,664 667,786
Inventories 561,170 547,115
Other current assets 135,456 132,261
Businesses held for sale 26,099 26,152
---------- ----------
1,423,226 1,410,250
Property, Plant and Equipment:
Land and improvements 49,423 48,371
Buildings 303,875 301,010
Machinery and equipment 781,097 776,332
----------- ---------
1,134,395 1,125,713
Accumulated depreciation (505,770) (491,668)
----------- ----------
628,625 634,045
Investments and Other Assets:
Goodwill 514,133 512,693
Intangible assets 36,376 39,173
Other assets 91,675 93,868
---------- ----------
642,184 645,734
---------- ----------
$2,694,035 $2,690,029
=========== ===========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
---------- ------------
<S> <C> <C>
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 50,337 $ 49,633
Trade accounts payable 356,243 346,056
Employee compensation and benefits 132,775 160,488
Advance payments and progress billings 148,120 155,199
Accrued warranties 50,665 50,718
Other current liabilities 302,580 315,033
--------- ----------
1,040,720 1,077,127
Long-term Obligations 658,223 657,765
Other Liabilities:
Liability for postretirement benefits 72,657 78,814
Accrued pension costs 39,707 39,902
Other liabilities 11,715 14,364
Deferred income taxes 56,418 54,920
-------- --------
180,497 188,000
Minority Interest 95,876 93,652
Shareholders' Equity:
Common stock (issued 51,445,620 and
51,406,946 shares, respectively) 51,446 51,407
Capital in excess of par value 623,261 615,089
Retained earnings 174,104 148,175
Cumulative translation adjustments (26,007) (37,584)
Less: Stock Employee Compensation
Trust (1,448,043 and 1,533,993
shares, respectively) at market (64,257) (61,360)
Treasury stock (2,144,613 and
2,274,613 shares, respectively)
at cost (39,828) (42,242)
----------- -----------
718,719 673,485
----------- -----------
$2,694,035 $2,690,029
=========== ===========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- -------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
----------------------
1997 1996
------ -------
<S> <C> <C>
Operating Activities
Net income $30,858 $ 23,191
Add (deduct) - Items not affecting cash:
Depreciation and amortization 25,079 22,922
Minority interest 2,295 2,375
Other - net (3,941) 811
Changes in working capital, exclusive of
acquisition of businesses
(Increase) in accounts receivable - net (7,896) (17,830)
(Increase) in inventories (3,573) (32,516)
(Increase) in other current assets (3,800) (13,711)
Increase (decrease) in trade accounts payable 8,271 (55,177)
(Decrease) in employee compensation
and benefits (25,082) (17,487)
(Decrease) increase in advance payments and
progress billings (7,619) 20,007
(Decrease) increase in other
current liabilities (13,078) 5,812
--------- ---------
Net cash provided by (applied to)
operating activities 1,514 (61,603)
--------- ---------
Investment and Other Transactions
Purchase of Dobson Park Industries plc,
net of cash acquired of $4,631 - (325,369)
Other acquisitions, net of cash acquired (5,325) -
Sale of Joy Environmental Technologies - 11,651
Property, plant and equipment acquired (31,604) (19,680)
Property, plant and equipment retired 21,295 1,190
Other - net (1,394) 945
---------- ----------
Net cash (applied to) investment
and other transactions (17,028) (331,263)
---------- ----------
Financing Activities
Dividends paid (4,781) (4,690)
Exercise of stock options 2,479 1,719
Issuance of long-term obligations 439 153,077
Redemption of long-term obligations (289) (382)
Increase in short-term notes payable 875 81,431
--------- ----------
Net cash (applied to) provided by
financing activities (1,277) 231,155
--------- ----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 692 313
--------- ----------
(Decrease) in Cash and Cash Equivalents (16,099) (161,398)
Cash and Cash Equivalents at Beginning of Period 36,936 239,043
---------- ----------
Cash and Cash Equivalents at End of Period $ 20,837 $ 77,645
========== ==========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Capital in
Common Excess of
Stock Par Value
-------- ----------
<S> <C> <C>
Three Months Ended January 31, 1997
- -----------------------------------
Balance at October 31, 1996 $51,407 $615,089
Net income
Translation adjustments
Exercise of 124,624 stock options 39 753
Dividends paid ($.10 per share)
Dividends on shares held by SECT 148
Adjust SECT shares to market value 4,584
benefit plans 2,484
restricted stock 203
------- ------
Balance at January 31, 1997 $51,446 $623,261
======== =======
Three Months Ended January 31, 1996
- -----------------------------------
Balance at October 31, 1995 $51,118 $603,712
Net income
Translation adjustments
Exercise of 82,074 stock options 82 1,637
Dividends paid ($.10 per share)
Dividends on shares held by SECT 192
Adjust SECT shares to market value 4,560
230,000 shares purchased by
employee benefit plans 2,964
Issuance of restricted stock 8 87
------- --------
Balance at January 31, 1996 $51,208 $613,152
======= ========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ------------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Cumulative
Retained Translation
Earnings Adjustments
----------- -----------
<S> <C> <C>
Three Months Ended
January 31, 1997
- ---------------------------
Balance at October 31, 1996 $148,175 $(37,584)
Net income 30,858
Translation adjustments 11,577
Exercise of 124,624 stock options
Dividends paid ($.10 per share) (4,929)
Dividends on shares held by SECT
Adjust SECT shares to market value
130,000 shares purchased by
employee benefit plans
Amortization of unearned
compensation on
restricted stock
---------- ---------
Balance at January 31, 1997 $174,104 $(26,007)
========== ==========
Three Months Ended January 31, 1996
- -----------------------------------
Balance at October 31, 1995 53,560 $(42,118)
Net income 23,191
Translation adjustments (4,139)
Exercise of 82,074 stock options
Dividends paid ($.10 per share) (4,882)
Dividends on shares held by SECT
Adjust SECT shares to market value
230,000 shares purchased by
employee benefit plans
Issuance of restricted stock
-------- --------
Balance at January 31, 1996 $ 71,869 $(46,257)
========= =========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Treasury
SECT Stock
-------- ---------
<S> <C> <C>
Three Months Ended January 31, 1997
Balance at October 31, 1996 $(61,360) $(42,242)
Net income
Translation adjustments
Exercise of 124,624 stock options 1,687
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value (4,584)
130,000 shares purchased by employee
benefit plans 2,414
Amortization of unearned compensation on
restricted stock
-------- --------
Balance at January 31, 1997 $(64,257) $(39,828)
======== =========
Three Months Ended January 31, 1996
- -----------------------------------
Balance at October 31, 1995 $(60,483) $(46,513)
Net income
Translation adjustments
Exercise of 82,074 stock options
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value (4,560)
230,000 shares purchased by
employee benefit plans 4,271
Issuance of restricted stock
---------- -------
Balance at January 31, 1996 $(65,043) $(42,242)
========== ========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Total
--------
<S> <C>
Three Months Ended January 31, 1997
Balance at October 31, 1996 $673,485
Net income 30,858
Translation adjustments 11,577
Exercise of 124,624 stock options 2,479
Dividends paid ($.10 per share) (4,929)
Dividends on shares held by SECT 148
Adjust SECT shares to market value -
130,000 shares purchased by employee
benefit plans 4,898
Amortization of unearned compensation on
restricted stock 203
--------
Balance at January 31, 1997 $718,719
========
Three Months Ended January 31, 1996
- -----------------------------------
Balance at October 31, 1995 $559,276
Net income 23,191
Translation adjustments (4,139)
Exercise of 82,074 stock options 1,719
Dividends paid ($.10 per share) (4,882)
Dividends on shares held by SECT 192
Adjust SECT shares to market value -
230,000 shares purchased by
employee benefit plans 7,235
Issuance of restricted stock 95
--------
Balance at January 31, 1996 $582,687
========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JANUARY 31, 1997
-----------------
(Amounts in thousands unless indicated)
(a) Basis of Presentation
---------------------
In the opinion of management, all adjustments necessary
for the fair presentation of the results of operations
for the three months ended January 31, 1997 and 1996,
cash flows for the three months ended January 31, 1997
and 1996, and financial position at January 31, 1997
have been made. All adjustments made are of a normal
recurring nature. See note (b) for discussion regarding
acquisitions.
These financial statements should be read in
conjunction with the financial statements and the notes
thereto included in the Harnischfeger Industries, Inc.
Annual Report on Form 10-K for the year ended October
31, 1996.
The results of operations for any interim period are
not necessarily indicative of the results to be
expected for the full year.
(b) Acquisitions
------------
In early fiscal 1996, the Company completed the
acquisition of Dobson Park Industries plc ("Dobson")
for a purchase price of approximately
$330,000 including acquisition costs, plus the
assumption of net debt of approximately $40,000. The
acquisition was accounted for as a purchase transaction
with the purchase price allocated to specific assets
acquired and liabilities assumed. Resultant goodwill is
being amortized over 40 years.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in
underground mining equipment, industrial electronic
control systems, toys and plastics. Longwall
International ("Longwall"), the main subsidiary of
Dobson, was engaged in the manufacture, sale and
service of underground mining equipment for the
international coal mining industry. Its principal
products included electronically controlled roof
support systems and armored face conveyors. Longwall's
operating results for the first quarter of fiscal 1996
were included in the January 31, 1996 Consolidated
Statement of Income.
The Company is fully integrating Longwall's operations
into its wholly owned subsidiary, Joy Technologies Inc.
("Joy"); thus enabling Joy to offer integrated
underground longwall mining systems to the worldwide
mining industry. As a result of this integration, the
Company has established purchase accounting reserves to
provide for the estimated costs of this effort. The
reserves related primarily to the closure of selected
manufacturing and service facilities, severance and
relocation costs approximate 71,000. As of January 31,
1997, approximately $16,000 of these reserves had been
used.
As part of the Dobson acquisition, the industrial
electronic and toys/plastics businesses are held for
sale and classified as such in the Consolidated Balance
Sheet. The original value of the businesses was set at
$100,000. Several of the businesses were sold,
aggregating net proceeds of $73,901. The remaining
balance represents the net realizable value including
the expected cash flow from the remaining businesses.
These businesses are expected to be sold within the
next year. Profit/losses of these businesses generated
during the period have been excluded from operating
results.
(c) Restructuring Charge
--------------------
In the fourth quarter of fiscal 1996, the Company's
Beloit Corporation subsidiary recorded a restructuring
charge of $43,000. Included in the charge are costs
related to severance for approximately 500 employees
worldwide, the disposition of machinery and equipment,
closure of certain facilities and the sale of
businesses. As of January 31, 1997, approximately
$8,000 had been charged against the reserve and
approximately 245 employees had been terminated in
accordance with the plan. The focus of Beloit
Corporation's restructuring is to better serve its
customers and strengthen its market position in the
worldwide pulp and paper industry. The restructuring
initiative involves organizing engineering and
manufacturing operations into Centers of Excellence and
expanding the aftermarket capabilities of the
subsidiary.
(d) Inventories
-----------
Consolidated inventories consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------ ----------
<S> <C> <C>
Finished goods $ 253,637 $198,160
Work in process and purchased parts 240,443 278,671
Raw materials 131,565 134,448
---------- --------
625,645 611,279
Less excess of current cost over stated
LIFO value (64,475) (64,164)
---------- ---------
$ 561,170 $547,115
========== =========
</TABLE>
Inventories valued using the LIFO method represented
approximately 58% and 56% of consolidated inventories at
January 31, 1997 and October 31, 1996, respectively.
(e) Research and Development Expense
--------------------------------
Research and development costs are expensed as
incurred. Such costs incurred in the development of
new products or significant improvements to existing
products amounted to $10,141 and $7,145 for the three
months ended January 31, 1997 and 1996, respectively.
Certain capital expenditures used in research
activities are capitalized and depreciated over their
expected useful lives.
(f) Interest Expense - Net
----------------------
Net interest expense consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
January 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Interest income $ 798 $ 2,361
Interest expense (17,295) (15,598)
--------- ---------
Interest expense - net $(16,497) $(13,237)
========= =========
</TABLE>
(g) Long-Term Obligations
---------------------
Long-term obligations at January 31, 1997 and October
31, 1996 consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------- -----------
<S> <C> <C>
10 1/4% Senior Notes, due 2003 $188,380 $188,380
8.9% Debentures, due 2022 75,000 75,000
8.7% Debentures, due 2022 75,000 75,000
7 1/4% Debentures, due 2025
(net of discount of $1,257 and 1,261,
respectively) 148,743 148,739
Senior Notes, Series A through D, at
interest rates of between 8.9% and
9.1%, due 1997 to 2006 73,182 73,182
Revolving Credit Facility 40,000 40,000
Industrial Revenue Bonds, at interest
rates of between 5.9% and 8.8%,
due 1997 to 2017 34,425 34,629
Other 27,684 27,207
-------- ---------
662,414 662,137
Less: Amounts payable within one year 4,191 4,372
-------- ---------
$658,223 $657,765
======== =========
</TABLE>
The 7 1/4% debentures were issued on December 19, 1995 at
99.153% in connection with the Company's acquisition of
Dobson. The debentures will mature on December 15, 2025,
are not redeemable prior to maturity and are not subject to
any sinking fund requirements.
In November, 1993, the Company entered into a four-year
Revolving Credit Facility Agreement between the Company
and certain domestic and foreign financial institutions
that allowed for borrowing of up to $150,000 at rates
expressed in relation to LIBOR and other rates. In
November, 1994, the facility was increased to $240,000
and expires in November, 2000. A facility fee is
payable on the Revolving Credit Facility. At January
31, 1997, direct outstanding borrowings under the
facility were $40,000 and commercial paper borrowings,
considered a utilization of the facility, were $3,081.
(h) Contingent Liabilities
----------------------
At January 31, 1997, the Company was contingently
liable to banks, financial institutions, and others for
approximately $310,000 for outstanding letters of
credit securing performance of sales contracts and
other guarantees in the ordinary course of business
excluding the H-K Systems, Inc. back-up bond guarantee
facility. The Company may also guarantee performance of
its equipment at levels specified in sales contracts
without the requirement for letters of credit.
On October 29, 1993, the Company completed the sale of
H-K Systems, Inc. (formerly known as Harnischfeger
Engineers Inc.) to that unit's senior management and
some equity partners. The Company agreed to make
available a back-up bonding guarantee facility for
certain bid, performance and other contract bonds
issued by H-K Systems, Inc. Outstanding contract bonds
under the guarantee arrangement totaled approximately
$47,800 at January 31, 1997. Under the terms of the
facility, no new bonds can be issued.
The Company is a party to litigation matters and claims
which are normal in the course of its operations.
Also, as a normal part of their operations, the
Company's subsidiaries undertake certain contractual
obligations, warranties and guarantees in connection
with the sale of products or services. In the case of
Beloit Corporation, certain litigation matters and
claims are currently pending in connection with its
contractual undertakings. While the outcome of such
litigation matters and claims cannot be predicted with
certainty and favorable or unfavorable judgements or
resolutions may affect income on a quarter-to-quarter
basis, management believes that such matters will not
have a materially adverse effect on the Company's
consolidated financial position or annual results of
operations.
The Company is also involved in a number of proceedings
and potential proceedings relating to environmental
matters. Although it is difficult to estimate the
potential exposure to the Company related to these
environmental matters, the Company believes that these
matters will not have a materially adverse effect on
its consolidated financial position or annual results
of operations.
(i) Issuance of $150,000, 6 7/8% Debentures
---------------------------------------
On February 25, 1997, $150,000 of 6 7/8% debentures
were issued at 99.925%. Proceeds were used for
repayment of short-term indebtedness and to increase
cash. The debentures will mature on February 15, 2027,
are not redeemable by the Company prior to maturity and
are not subject to any sinking fund requirements. Each
holder of the debentures has the right to require the
Company to repay the holders, in whole or in part, on
February 15, 2007, at a repayment price equal to 100%
of the aggregate principal amount therof plus accrued
and unpaid interest. Interest on the debentures is
payable semi-annually on February 15 and August 15 of
each year commencing on August 15, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
----------------------------------------------
(Amounts in thousands unless indicated)
The discussion in Management's Discussion and Analysis
contains forward-looking statements. When used in this
document, terms such as "anticipate", "believe", "estimate",
"expect", "indicate", "may be", "objective", "plan",
"predict", and "will be" are intended to identify such
statements. Forward-looking statements are subject to
certain risks, uncertainties and assumptions which could
cause actual results to differ materially from those
projected, including those described in Item 5. Other
Information - "Cautionary Factors" in Part II of this report.
Net income for the three months ended January 31, 1997
amounted to $30,858, or $0.65 per share as compared to net
income of $23,191, or $0.50 per share, for the three months
ended January 31, 1996.
Per share calculations for the first three months of 1997 and
1996 were based on 47,720 and 46,795 average shares
outstanding, respectively.
Significant factors contributing to the $7,667 increase in
net income for the first three months of 1997 as compared to
1996 included: (1) a $14,322 increase in operating income in
1997 over 1996 as described in the Segment Information
-------------------
section which follows, offset by (2) a $3,260 increase in
interest expense in 1997 and (3) a $3,475 increase in income
taxes in 1997 primarily due to higher pre-tax income.
Segment Information
- -------------------
Operating results of the Company's business segments for the
first quarter of 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Net Sales Operating Income
1997 1996 1997 1996
----- ----- ------ -----
<S> <C> <C> <C> <C>
First Quarter
- -------------
Mining Equipment $350,454 $314,976 $45,078 $35,382
Pulp and Paper Machinery 268,975 252,353 20,874 18,562
Material Handling 79,982 65,355 7,196 4,332
------- -------- ------ -------
Total Business Segments $699,411 $632,684 73,148 58,276
======== ========= ======= ========
Corporate Administration (5,648) (5,098)
------- -------
Operating Income $67,500 $53,178
======= =======
</TABLE>
(a)Backlog has been reduced by $170,000 due to change of
scope and indefinite deferments on certain contracts booked
in prior years.
Segment Information
- -------------------
Operating results of the Company's business segments for the
first quarter of 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Orders Booked Backlog at
1997 1996 1/97 10/96
------ --------- ------- --------
<S> <C> <C> <C> <C>
First Quarter
- -------------
Mining Equipment $378,417 $291,052 $481,443 $453,480
Pulp and Paper Machinery 403,042 261,373 810,204(a) 846,137
Material Handling 59,333 81,483 111,901 132,550
-------- ------- -------- ---------
Total Business Segments $840,792 $633,908 $1,403,548 $1,432,167
======== ======== ========= ==========
</TABLE>
(a)Backlog has been reduced by $170,000 due to change of
scope and indefinite deferments on certain contracts booked
in prior years.
Segment Information - Continuing Operations
- -------------------------------------------
Net sales of the Mining Equipment segment amounted to
$350,454 and $314,976 for the first three months of 1997 and
1996, respectively, representing an 11% increase in 1997 as
compared to 1996. The sales increase is primarily due to
increases in original equipment activity for the underground
mining operations. Operating profit increased to $45,078 in
the first quarter of 1997 as compared to $35,382 in 1996.
The increase in operating profit is primarily due to stronger
sales and margins as well as improved manufacturing variances
in both surface and underground mining. Bookings for the
first three months of 1997 amounted to $378,417 as compared
to $291,052 for the same period in 1996, representing a 30%
increase.
The Pulp and Paper Machinery segment contributed sales and
operating profit of $268,975 and $20,874, respectively, for
the first three months of 1997, as compared to net sales of
$252,353 and operating profit of $18,562 for the
corresponding period in 1996. Sales increased 7% in 1997
over 1996 primarily due to an increase in sales of original
equipment and aftermarket activity. Operating profit
reflected stronger gross margins due to stronger sales and
reduced manufacturing variances. Bookings for the first
three months of 1997 amounted to $403,042 as compared to
$261,373 for the same period in 1996.
The Material Handling segment contributed sales and operating
profit of $79,982 and $7,196, respectively, for the first
three months of 1997, as compared to sales of $65,355 and
operating profit of $4,332 for the comparable period in 1996.
Sales increased due to an increase in original equipment and
aftermarket sales. Operating profit increased as a result of
stronger sales and improved margins. Bookings for the first
three months of 1997 and 1996 amounted to $59,333 and
$81,483, respectively.
Income Taxes
- ------------
The Company's estimated annual effective tax rate for the
first three months of 1997 was 35% compared to a 35% federal
statutory tax rate.
Liquidity and Cash Flows
- ------------------------
The Company's capital structure at January 31, 1997 and
October 31, 1996 was as follows:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
<S> <C> <C>
Short-term notes payable $ 46,146 $ 45,261
Long-term obligations,
including current portion 662,414 662,137
-------- --------
708,560 707,398
Minority interest 95,876 93,652
Shareholders' equity 718,719 673,485
-------- ---------
Total capitalization $1,523,155 $1,474,535
=========== ===========
Debt to capitalization ratio 46.5% 48.0%
====== ======
</TABLE>
Cash Flow from Operating Activities
- -----------------------------------
Cash flow provided by operating activities was $1,514 for the
three months ended January 31, 1997 compared to cash flow
used by operating activities of $61,603 for the comparable
period in 1996. The increase in cash flows between periods is
primarily the result of an increase in trade accounts
payable.
Cash Flow from Investment Activities
- ------------------------------------
Cash flow applied to investment activities was $17,028 for
the three months ended January 31, 1997 compared to cash flow
applied to investment activities of $331,263 for the
comparable period in 1996. The change is primarily due to
the retirement of property, plant and equipment in 1997 in
conjunction with the Longwall integration plan and the
$330,000 acquisition of Dobson in early fiscal 1996.
Cash Flow for Financing Activities
- ----------------------------------
Cash flow applied to financing activities was $1,277 for the
first quarter of fiscal 1997 compared to cash flow provided
by financing activities of $231,155 for the comparable period
in 1996. The change was due primarily to the 1996 issuance
of 7 1/4%, $150,000 debentures and the 1996 increase in
short-term notes payable in connection with the acquisition
of Dobson Park plc.
The Company maintains the ability to expand its borrowing in
several ways, including the following:
(1) A five-year Revolving Credit Facility Agreement between
the Company and certain domestic and foreign financial
institutions that allows for borrowing of up to $240,000
at rates expressed in relation to LIBOR and other rates.
At January 31, 1997, direct outstanding borrowings
related to the facility were $40,000 and commercial
paper borrowings, considered a utilization of the
facility, were $3,081.
(2) Short-term bank credit lines of foreign subsidiaries of
approximately $127,400 of which approximately $31,100
was outstanding at January 31, 1997.
On February 25, 1997, $150,000 of 6 7/8% debentures were
issued at 99.925% and the proceeds used to reduce short-term
debt outstanding and increase cash. The debentures were
issued pursuant to a shelf registration filed with the
Securities and Exchange Commission in 1996, for the sale of
up to $200,000 of debt securities. To date, no other
securities covered by the registration have been offered for
sale.
The Company believes its available cash, cash flow provided
by operating activities and committed credit lines provide
adequate liquidity on both a short- and long-term basis.
The Company has no significant capital commitments as of
January 31, 1997; any future capital commitments are expected
to be funded through cash flow from operations and, if
necessary, available lines of credit; however, see discussion
below regarding acquisitions.
The Company intends to continue to expand its businesses,
both internally and through acquisitions. It is expected that
new acquisitions would be financed primarily by
internally-generated funds or by additional borrowings.
Acquisitions
- ------------
In early fiscal 1996, the Company completed the acquisition
of Dobson for a purchase price of approximately $330,000
including acquisition costs, plus the assumption of net debt
of approximately $40,000. The acquisition was accounted for
as a purchase transaction with the purchase price allocated
to specific assets acquired and liabilities assumed.
Resultant goodwill is being amortized over 40 years.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in underground
mining equipment, industrial electronic control systems, toys
and plastics. Longwall, the main subsidiary of Dobson, was
engaged in the manufacture, sale and service of underground
mining equipment for the international coal mining industry.
Its products included electronically controlled roof support
systems and armored face conveyors. Longwall's operating
results were included in the Consolidated Statement of Income
in the first quarter of fiscal 1996.
The Company is fully integrating Longwall's operations into
Joy, thus enabling Joy to offer integrated underground
longwall mining systems to the worldwide mining industry. As
a result of this integration, the Company has established
purchase accounting reserves to provide for the estimated
costs of this effort. The reserves related primarily to the
closure of selected manufacturing and service facilities,
severance and relocation costs approximate $71,000. As of
January 31, 1997, approximately $16,000 of these reserves had
been used.
As part of the Dobson acquisition, the industrial electronic
and toys/plastics businesses are held for sale and classified
as such in the Consolidated Balance Sheet. The original
value of the businesses was set at $100,000. Several of the
businesses were sold, aggregating net proceeds of $73,901.
The remaining balance represents the net realizable value
including the expected cash flow from the remaining
businesses. These businesses are expected to be sold within
the next year. Profit/losses of these businesses generated
during the period have been excluded from operating income.
PART II. OTHER INFORMATION
----------------------------
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 Other Information "Cautionary Factors"
-------------------------------------
This report and other documents or oral statements
which have been and will be prepared or made in the
future contain or may contain forward-looking
statements by or on behalf of the Company. Such
statements are based upon management's expectations
at the time they are made. In addition to the
assumptions and other factors referred to
specifically in connection with such statements, the
following factors, among others, could cause actual
results to differ materially from those
contemplated.
The Company's principal businesses involve
designing, manufacturing, marketing and servicing
large, complex machines for the mining, papermaking
and capital goods industries. Long periods of time
are necessary to plan, design and build these
machines. With respect to new machines and
equipment, there are risks of customer acceptances
and start-up or performance problems. Large amounts
of capital are required to be devoted by the
Company's customers to purchase these machines and
to finance the mines, paper mills, steel mills and
other facilities that use these machines. The
Company's success in obtaining and managing a
relatively small number of sales opportunities,
including warranties and guarantees associated
therewith, can affect the Company's financial
performance. In addition, many projects are located
in undeveloped or developing economies where
business conditions are less predictable. In recent
years, more than 50% of the Company's total sales
occurred outside the United States.
Other factors that could cause actual results to
differ materially from those contemplated include:
- Factors affecting purchases of new equipment,
rebuilds, parts and services such as:
production capacity, stockpiles and production
and consumption rates of coal, copper, iron,
gold, fiber, paper/paperboard, recycled paper,
steel and other commodities; the cash flows of
customers; the cost and availability of
financing to customers and the ability of
customers to obtain regulatory approval for
investments in mining, papermaking, steel
making, automotive manufacturing and other
heavy industrial projects; the ages,
efficiencies and utilization rates of existing
equipment; the development of new technologies;
the availability of used or alternative
equipment; consolidations among customers; work
stoppages at customers or providers of
transportation; and the timing, severity and
duration of customer buying cycles,
particularly in the paper and mining
businesses.
- Factors affecting the Company's ability to
capture available sales opportunities,
including: customers' perceptions of the
quality and value of the Company's products as
compared to competitors' products; the
existence of patents protecting or restricting
the Company's ability to offer features
requested by customers; whether the Company has
successful reference installations to show
customers, especially for papermaking and
mining equipment; customers' perceptions of the
health and stability of the Company as compared
to its competitors; the availability of
manufacturing capacity at the Company's
factories; and whether the Company can offer
the complete package of products and services
sought by its customers.
- Factors affecting the Company's ability to
successfully manage sales it obtains, such as:
the accuracy of the Company's cost and time
estimates for major projects; the Company's
success in completing projects on time and
within budget; the Company's success in
recruiting and retaining managers and key
employees; wage stability and cooperative labor
relations; plant capacity and utilization; and
whether acquisitions are assimilated and
divestitures completed without notable
surprises or unexpected difficulties.
- Factors affecting the Company's general
business, such as: unexpectantly large patent,
tax, product, environmental, employee health or
benefit or contractual liabilities;
nonrecurring restructuring charges; changes in
accounting or tax rules or regulations; and
reassessments of asset valuations such as
inventories.
- Factors affecting general business levels, such
as: political turmoil and economic growth in
major markets such as the United States,
Canada, Europe, the Far East, South Africa,
Australia and Chile; environmental and trade
regulations; and the stability and ease of
exchange of currencies.
Item 6 (a) Exhibits:
3 Bylaws of Harnischfeger Industries, Inc., as
amended on February 10, 1997.
10(a)Harnischfeger Industries, Inc. Stock
Incentive Plan as amended and restated as
of February 10, 1997.
(b)Harnischfeger Industries, Inc. Executive
Incentive Plan as amended and restated
as of February 10, 1997.
(c)Harnischfeger Industries, Inc. Supplemental
Retirement and Stock Funding Plan as amended
and restated as of February 10, 1997.
(d)Directors Stock Compensation Plan as amended
and restated as of February 10, 1997.
11 Statement re: Calculation of Earnings Per Share
(b) Reports on Form 8-K
1. Current Report on Form 8-K relating to the
Harnischfeger Industries, Inc. News
Release dated February 19, 1997 reporting
the financial results for the quarter ended
January 31, 1997.
<PAGE>
FORM 10-Q
- ---------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
(Registrant)
/s/ Francis M. Corby, Jr.
----------------------------
Francis M. Corby, Jr.
Executive Vice President for
Finance and Administration
Date March 12, 1997 and Chief Financial Officer
- -------------------
/s/ James C. Benjamin
------------------------------
James C. Benjamin
Vice President and Controller
Date March 12, 1997 and Chief Accounting Officer
- -------------------<PAGE>
Exhibit 11
- ----------
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CALCULATION OF EARNINGS PER SHARE
- ---------------------------------
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
------------------
1997 1996
---- -----
<S> <C> <C>
Average Shares Outstanding 47,720 46,795
====== ======
Net Income $30,858 $23,191
======= =======
Net Income per share $ 0.65 $ 0.50
====== ======
</TABLE>
Exhibit 10(a)
THE HARNISCHFEGER INDUSTRIES, INC. STOCK INCENTIVE PLAN
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 Non-Employee Director as defined
in Rule 16b-3(b)(3), as promulgated by the Commission under
the Exchange Act, or any 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.
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, which, following abstention or recusal of
all members who are not Disinterested Persons, is 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
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.
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 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. Unless
otherwise determined by the Committee, if an optionee's
employment terminates by reason of Retirement, 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 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, 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.
(i) Other Termination. Unless otherwise determined
by the Committee, if an optionee incurs a Termination of
Employment for any reason other than death, Disability or
Retirement, 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.
(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
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.
(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.
(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.
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 3600 S. Lake Dr., St. Francis, Wisconsin
53235". 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 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
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-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. 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 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 theretofore
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. 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. 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:
(i) 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;
(ii) 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
(iii) 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 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.<PAGE>
Section 14. 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).
Exhibit 10(b)
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
EXECUTIVE INCENTIVE PLAN
-------------------------
(as amended and restated February 10, 1997)
1. Purpose. Harnischfeger Industries, Inc.
-------
Executive Incentive Plan (the "Plan") was established by
Harnischfeger Industries, Inc. (the "Company") effective as
of October 30, 1990 to provide as an incentive the
possibility of payment of additional compensation to or on
behalf of the key officers of the Company and its
subsidiaries who contribute materially to the success and
profitability of the Company and who become participants in
the Plan.
2. Administration. The Plan will be
--------------
administered by a committee of two or more directors
constituted to comply with the
Non-Employee Director requirements of Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934 as amended
and Securities Exchange Commission interpretations thereunder
(the "Committee"), which Committee from time to time may
delegate the performance of certain of its ministerial duties
under the Plan, such as the keeping of records and
participants' accounts, to such person or persons as it may
select. The Plan shall be administered on the basis of a
plan year (the "Plan Year") which coincides with the fiscal
year of the Company, which currently is the 12-month period
beginning on November 1 and ending on the next following
October 31. The Company shall pay the cost of Plan
administration. The Committee shall have the power, right
and duty to interpret the provisions of the Plan and may from
time to time adopt rules with respect to the administration
of the Plan and the determination and distribution of
benefits under the Plan, and may amend any and all rules
previously established. Any decision made by the Committee
in good faith in connection with its administration of or
responsibilities under the Plan, including the interpretation
of any provision of the Plan, the application of any rule
established under the Plan, any determination as to the
officers eligible to participate in the Plan for any Plan
Year, the amount allocated to each for any Plan Year and the
manner, conditions and terms of payment of such amount, shall
be conclusive on all persons.
3. Participation: Prior to October 1 of
--------------
each Plan Year, the Committee shall select those executives
who will be participants in the Plan for the following Plan
Year. The inclusion or selection of any executive as a
participant in the Plan (a "Participant") for any Plan Year
shall not require the inclusion or selection of such person
as a Participant for any subsequent Plan Year, or, if such
person is subsequently so included or selected, shall not
require the same benefit provided the Participant under the
Plan for an earlier Plan Year be provided such Participant
for the subsequent Plan Year.
4. Performance Goals. On or after
-----------------
September 15 of each Plan Year, the Chief Executive Officer
of the Company shall recommend to the Committee performance
goals for the Company and each of its divisions and
subsidiaries for the following Plan Year. Prior to October
15 of each Plan Year, the Committee shall either approve the
Chief Executive Officer's recommended performance goals for
the following Plan Year, or in the Committee's sole
discretion, shall establish the performance goals for that
Plan Year at such levels as it considers appropriate. The
Committee shall also establish, by October 15 of each Plan
Year, threshold performance levels for the year for the
Company and each of its divisions and subsidiaries, over and
under performance levels and percentages for the year for the
Company and each of its divisions and subsidiaries, and other
features of the incentive compensation program for the
following Plan Year. If the business unit fails to meet the
established threshold performance level for a Plan Year, no
amount will be awarded to Participants in that business
unit's Plan for that year.
5. Target Incentive Percentage. As of the
---------------------------
date that the Committee determines the executives who shall
be eligible to participate in the Plan for a Plan Year, the
Committee also shall establish with respect to each
Participant a "target incentive percentage", which percentage
shall be based upon the appropriate performance goals
referred to in Section 4 as well as the Participant's
responsibility level as determined by the Committee. For
each Plan Year that the threshold performance level has been
achieved, the target incentive percentage for each
Participant (adjusted for any under or over performance or
other features of the incentive compensation program as
provided in Section 4) shall be multiplied by his base salary
earned in the fiscal year. The resulting amount with respect
to each Participant for a Plan Year is his "Incentive Award"
for that year.
6. Source, Time and Manner of Payment.
----------------------------------
Each Participant's Incentive Award for a Plan Year shall be
paid from the general assets of the Company, in accordance
with the following:
(a)All of a Participant's Incentive Award for a
Plan Year shall be payable, without interest, on or before
the January 10 next following the end of that Plan Year
except for such portion of said Incentive Award that such
Participant shall have previously elected to have deferred in
accordance with Section 6 (b).
(b)Each Participant may elect to defer the
payment of up to 100% of the Incentive Award payable to such
Participant pursuant to Section 6 (a), in accordance with the
provisions of Section 7 hereof.
7. Election of Stock in Lieu of Pay. Each
--------------------------------
Participant shall have the right to elect to have up to 100%
of the Incentive Award payable to such Participant in
accordance with Section 6 hereof converted into shares of the
Company's common stock ("Stock") and delivered into the
Harnischfeger Industries Deferred Compensation Trust ("Rabbi
Trust") for the benefit of such Participant subject to the
terms hereinafter set forth:
(a)A Participant in the Plan for any Plan Year
may by written notice filed with the Company before the
beginning of such Plan Year elect to convert into Stock up to
100% of his Incentive Award for that Plan Year. Such
election shall be irrevocable.
(b)Shares of Stock equal to the number (rounded
to the nearest integer) derived by dividing seventy five
percent (75%) of the average closing price of the Stock on
the New York Stock Exchange Composite Tape for the month of
October of the Plan Year into the amount of Incentive Award
that each Participant has elected to convert into Stock shall
be registered by the Company in the name of the Rabbi Trust
and delivered to the Rabbi Trust for allocation to such
Participant's account, provided, however, that (i) the
Company may direct the trustee of the Rabbi Trust (the
"Trustee") to use for this purpose shares of Stock previously
delivered by the Company to the Rabbi Trust if such shares
have not been allocated to the account of any Participant and
(ii) the total number of shares that may be delivered by the
Company to the Rabbi Trust for the accounts of all
Participants during any Plan Year shall not exceed two
percent of the total number of shares outstanding at the
beginning of such Plan Year adjusted for any stock split,
stock dividend, combination of shares, or similar change in
Stock, and provided further that if there are not sufficient
available shares during any Plan Year to fully convert all
Incentive Awards which the Participants have elected to
convert, all available shares for that Plan Year shall be
allocated to electing Participants on a pro rata basis and
the balance of each Participant's Incentive Award shall be
paid to the Participant in cash. The aforesaid calculation
and funding of each Participant's account shall take place as
soon as practical after the January 1 immediately following
the end of each such Plan Year beginning with the Plan Year
ending October 31, 1990. The Stock allocated to a
Participant's account pursuant hereto may at the Company's
option be acquired through open market purchases or may be
either treasury shares or newly issued shares provided that
any treasury or newly issued shares are duly registered
pursuant to applicable federal and state securities laws and
stock exchange regulations. Although the Company intends to
exert its best efforts so that the shares allocated or
distributed to Participants hereunder will be registered
under, or exempt from the registration requirements of, the
Securities Act of 1933 (the "Securities Act") and any
applicable state securities laws, if the allocation or
distribution would otherwise result in the violation by the
Company of any provision of the Securities Act or of any
state securities law, the Company may require that such
allocation or distribution be deferred until the Company has
taken appropriate action to avoid any such violation.
(c)An account shall be maintained in the name of
each Participant which will reflect the shares of Stock into
which his Incentive Award has been converted, and shall be
credited to reflect all dividends, stock splits and other
distributions with respect to such shares. All cash
distributions with respect to Stock shall be invested by the
Trustee in shares of Stock through open market or other
appropriate purchases as soon as practicable after receipt of
same; provided, however, that the number of shares allocated
to each Participant's account in respect of each cash
distribution will be the same as if the cash distribution
were used to purchase shares of Stock at 75% of the average
price paid by the Trustee for Stock purchased when it
reinvests such cash dividends in Stock as provided in
Paragraph 4.1 of the Rabbi Trust. The Company shall from
time to time as needed make available to the Trustee
sufficient shares of Stock for allocation to Participants'
accounts in connection with such discounted purchase of Stock
with cash dividends. Each such Stock account shall be
charged with any distribution made to a Participant when
made.
(d)The Stock in a Participant's account shall be
distributed to him (or to his beneficiary in the event of his
death) promptly (but not sooner than sixty (60) days)
following his termination of employment with the Company or
its subsidiaries; provided, however, that a Participant may
upon written notice to the Committee given at least one year
prior to his termination of employment, elect an annual
distribution of such Stock over a period of time of up to ten
(10) years (e.g. if a ten year election, one tenth of the
balance at the time of the first distribution, one ninth at
the time of the second distribution, etc.) and provided
further that a Participant may upon written notice to the
Committee given at least one year prior to his termination of
employment elect to delay until the next calendar year
following his termination of employment either the
distribution of or, if the Participant has elected annual
distributions over a period of time, the initial distribution
from his account. During the first fifty (50) days following
a Participant's termination of employment, the Participant
(or the Participant's beneficiary in the event of the
Participant's death) shall have the right to elect to have
the Participant's account distributed in cash, Stock or a
combination of cash and Stock. Upon receipt of a written
request from a Participant that a part or all of the
distribution be made in cash, the Company shall direct the
Trustee to credit such Participant's account with an amount
(the "Cash Portion") equal to the product of the number of
shares of Stock then credited to Participant's account
necessary to comply with the request (the "Diversified
Shares") and the closing price of the Stock on the New York
Stock Exchange Composite Tape as of the date the request is
received by the Company. Thereafter, the Trustee shall keep
such Participant's account as if the Cash Portion were
invested in cash, cash equivalents, mutual funds or
marketable securities as directed by the Commitee from time
to time and as if the Diversified Shares had been sold.
(e)Notwithstanding the foregoing, in the event
of a "Change in Control" of the Company (as defined in the
Rabbi Trust), the Company shall purchase for cash all shares
of Stock then in all Participants' accounts at a per-share
price equal to the the Change in Control Price, and the
Trustee is directed to sell such shares upon such terms.
Immediately after the Company purchases any shares pursuant
to this Section 7(f), the Committee shall cause the Trustee
to effect a distribution of all cash proceeds to the
Participants in accordance with their accounts. As used
herein, "Change in Control Price" means the higher of (i) the
highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national securities exchange
on which such shares are listed or on NASDAQ, as applicable,
during the 60-day period prior to and including the date of
a Change in Control and (ii) if the Change in Control is the
result of a tender or exchange offer or a Business
Combination (as defined in the Rabbi Trust), the highest
price per share of Stock paid in such tender or exchange
offer or Business Combination. 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 by the Incumbent Board (as
defined in the Rabbi Trust).
(f)In the event that the Committee determines
that the laws of a country in which a Participant resides
make it impracticable to allocate Stock to the account of
such Participant, the election of Stock in lieu of pay
pursuant to this Section 7 shall not be available to such
Participant. However, at the discretion of the Committee,
the Participant may be placed in a plan to be designated the
Stock Equivalent Unit Plan which will provide deferred
compensation in the same manner and amounts as would have
been provided under this Plan except such amounts will not be
funded through the Rabbi Trust. Notwithstanding the
foregoing, in the event of a Change in Control, the Company
shall fund accounts in the Stock Equivalent Unit Plan with
cash in a manner similar to that described in Section 7(f)
above.
(h)Participants shall not be eligible to elect
to receive Stock in lieu of pay pursuant to this Section 7
for a period of twelve (12) months following the receipt of
a hardship distribution from any cash or deferred
compensation plan of the Company maintained pursuant to
Section 401(k) of the Internal Revenue Code.
8. Designation of Beneficiaries. Each
----------------------------
Participant from time to time may name any person or persons
(who may be named concurrently, contingently or successively)
to whom his benefits under the Plan are to be paid if he dies
before he receives his Incentive Award or the proceeds of his
Rabbi Trust account. Each such beneficiary designation will
revoke all prior designations by the Participant, shall not
require the consent of any previously named beneficiary,
shall be in a form prescribed by the Committee, and will be
effective only when filed with the Committee during the
Participant's lifetime. If a Participant fails to designate
a beneficiary before his death, the beneficiary shall be the
Participant's estate.
9. General. No Participant or other person
-------
shall have any right, title or interest in any amount awarded
under this Plan prior to the payment thereof to such person
or in any property of the Company. Neither the establishment
nor continuance of this Plan shall affect or enlarge the
employment rights of any Participant or constitute a contract
of employment with any Participant. Neither the Company nor
any Committee member shall be personally liable for any act
done or omitted to be done in good faith in the
administration of the Plan. Except as provided in Section 7
hereof, nothing herein shall require the Company to segregate
or set aside any funds or other property for the purpose of
paying any amounts, the payment of which has been deferred
under the Plan.
10. Facility of Payment. When a person
-------------------
entitled to benefits under the Plan is under legal
disability, or, in the Committee's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the
Committee may direct the payment of benefits to such person's
legal representative, or to a relative or friend of such
person for such person's benefit, or the Committee may direct
the application of such benefits for the benefit of such
person. Any payments made in accordance with the preceding
sentence shall be a full and complete discharge of any
liability for such payment under the Plan.
11. Withholding for Taxes. Notwithstanding
---------------------
any other provision of the Plan, the Committee may on behalf
of the Participant withhold or direct the Trustee to withhold
from any payment to be made under the Plan, whether in the
form of cash or shares of Stock, such amount or amounts as
may be required for purposes of complying with appropriate
federal, state or foreign tax withholding provisions.
Subject to the discretion of the Committee, no distribution
will be made to the Participant until all tax withholding
obligations have been satisfied.
12. Benefit Statements. The Company shall
------------------
provide statements of account to Participants on a periodic
basis but not less than annually in such form and at such
time as it deems appropriate.
13. Amendment and Termination. Because
-------------------------
unforeseen circumstances may make it undesirable to continue
the Plan in any form, or to continue it without change, the
Board of Directors of the Company must necessarily reserve
and hereby has reserved the right to amend the Plan from time
to time and to terminate the Plan at any time, except that no
such amendment or any termination of the Plan shall change
the terms and conditions of payment of any Incentive Award
theretofore awarded to a Participant without the consent of
the Participant concerned, nor shall any termination of the
Plan eliminate any obligations of the Company which
theretofore shall have arisen under the Plan.
16. Controlling Law. The laws of Wisconsin
---------------
shall be controlling in all matters relating to the Plan.
17. Gender and Number. Where the context
-----------------
admits, words in the masculine gender shall include the
feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
-------------------------------------------
Exhibit 10(c)
HARNISCHFEGER INDUSTRIES, INC.
-------------------------------
SUPPLEMENTAL RETIREMENT AND STOCK FUNDING PLAN
----------------------------------------------
(as amended and restated February 10, 1997)
SECTION 1: Introduction
- ---------- ------------
1.1 The Plan and its Effective Date.
-------------------------------
Harnischfeger Industries, Inc. Supplemental Retirement and
Stock Funding Plan (the "Supplemental Plan") is the amendment
and restatement effective as of October 1, 1990 of the plan
that was originally established by Harnischfeger Industries,
Inc., a Delaware corporation (the "Company"), effective March
1, 1987 as the Harnischfeger Industries, Inc. Supplemental
Retirement Plan.
1.2 Purpose. The Company maintains a
-------
Harnischfeger Salaried Employees' Retirement Plan (the
"Retirement Plan"), which is intended to meet the
requirements of a "qualified plan" under the Internal Revenue
Code of 1986, as amended (the "Code"). While the Code and
the Employee Retirement Income Security Act of 1974, as
amended (the "Act"), place limitations on the benefits which
may be paid from a qualified plan, the Code and the Act
permit the payment under a non-qualified supplemental
retirement plan of the benefits which may not be paid under
the qualified plan because of such limitations. The purposes
of this Supplemental Plan are (i) to provide benefits which
may not be provided under the Retirement Plan because of
limitations imposed by the Code or the Act, including those
relating to nondiscrimination and maximum benefit
limitations, elections to defer compensation made by the
participants, and the granting of past service credits and
(ii) to provide the opportunity for qualified executives to
have their supplemental benefits converted into shares of the
Company's common stock upon the terms hereinafter set forth.
SECTION 2: Participation and Benefits
- --------- --------------------------
2.1 Eligibility for Benefits Related to
-----------------------------------
Retirement Plan. Subject to the conditions and
- ---------------
limitations hereof, if a participant in the Retirement Plan
(i) has been granted credit for prior service or elected to
defer compensation which may not be taken into account under
the Retirement Plan because of applicable nondiscrimination
or other rules, or (ii) has accrued a vested pension benefit
under the Retirement Plan (or would have accrued a vested
benefit if his prior service were taken into account), and
such benefit has been limited as a result of the maximum
benefit limitations imposed by Sections 401(a)(17) and 415 of
the Code, he shall be a participant ("Participant") in this
Supplemental Plan and shall be entitled to receive under this
Supplemental Plan the portion of his benefits under the
Retirement Plan, determined without regard to the limitations
on the inclusions of prior service or deferred compensation
or the maximum benefit limitations therein, which exceeds the
benefits payable to him under the Retirement Plan after
applying such limitations. If a Participant was employed by
another "Harnischfeger Company", as defined in the Retirement
Plan, and such other company also maintains a supplemental
plan covering the Participant, the benefits hereunder and
under such other plan shall be limited so as to not be
duplicative and the Participant's benefits hereunder and
under such other plan shall be paid by the Company and such
other Harnischfeger Company in such proportions as the
Company shall determine. The term "Company" as hereinafter
used shall be deemed to include a reference to each such
other Harnischfeger Company.
2.2 Payment of Benefits. Except to the
-------------------
extent a Participant becomes entitled to receive Company
common stock as provided in Section 3, his benefits under
this Supplemental Plan shall be paid to him, or in the event
of his death to his beneficiary, at the same time and in the
same manner as his pension benefits under the Retirement
Plan.
2.3 Funding. Benefits payable under this
-------
Supplemental Plan to a Participant or his beneficiary shall
be paid directly by the Company or at its discretion through
Harnischfeger Industries Deferred Compensation Trust ("Rabbi
Trust"), a grantor trust established by the Company. Prior
to a "Change in Control" of the Company (as hereinafter
defined), the Company shall not be required (but may do so in
its discretion) to fund through the Rabbi Trust or otherwise
any benefits under this Supplemental Plan, except that shares
of Company stock shall be issued and transferred to the Rabbi
Trust as herein provided.
SECTION 3: Conversion of Benefits into
- ---------- ---------------------------
Common Stock
- ------------
3.1 Eligible Stock Participant. As used
--------------------------
herein, the term "Eligible Stock Participant" means each
Participant who is an active senior executive of the Company
as of October 1, 1990 (and each Participant designated from
time to time hereafter by the Committee, as defined in
Section 4.1 hereof) whose accrued benefits as of October 1,
1990 under this Supplemental Plan equals or exceeds a monthly
normal retirement annuity of $1,000 per month.
3.2 Initial Stock Funding. Each Eligible
---------------------
Stock Participant shall have the right to elect to have all
benefits payable under this Supplemental Plan converted, on
the terms hereinafter set forth, into shares of the Company's
common stock and delivered into the Rabbi Trust for the
benefit of such Participant. The present value of each such
electing Participant's prospective supplemental pension
benefits shall be calculated as of October 1, 1990 using the
most recent assumptions adopted by the Company for purposes
of calculating the actuarial present value of the Company's
pension obligations, provided, however,
--------
that the discount rate used herein shall be one half percent
less than the discount rate used in such assumptions. Shares
of stock equal to the number (rounded to the nearest integer)
derived by dividing the average closing price for the
Company's common stock reflected on the New York Stock
Exchange Composite Tape for the month of September, 1990 into
the aforesaid present value shall be registered by the
Company in the name of the trustee of the Rabbi Trust (the
"Trustee") and delivered to the Rabbi Trust for allocation to
such Participant's account. The aforesaid calculation and
funding of each Participant's account shall take place as
soon as is practicable after October 1, 1990. The shares
allocated to an Eligible Stock Participant's account pursuant
to Sections 3.2 or 3.3 may be either treasury shares or newly
issued shares provided any treasury or newly issued shares
are duly registered pursuant to applicable federal and state
securities, and stock exchange, regulations. Although the
Company intends to exert its best efforts so that the shares
allocated or distributed to Participants hereunder will be
registered under, or exempt from the registration
requirements of, the Securities Act of 1933 (the "Securities
Act") and any applicable state securities laws, if the
allocation or distribution would otherwise result in the
violation by the Company of any provision of the Securities
Act or of any state securities law, the Company may require
that such allocation or distribution be deferred until the
Company has taken appropriate action to avoid any such
violation.
3.3 Subsequent Stock Funding. As soon as
------------------------
practicable after November 1st of each year (beginning with
November of 1991), the present value of each Eligible Stock
Participant's prospective supplemental pension benefits
payable hereunder shall be calculated as of such November 1st
using the then current assumptions adopted by the Company for
purposes of calculating the actuarial present value of the
Company's pension obligations, provided that the discount
rate used for purposes of such calculation shall be one half
percent less than the rate used in such assumptions. Shares
of the Company's common stock equal to the number (rounded to
the nearest integer) derived by dividing the average closing
price of the Company's common stock on the New York Stock
Exchange Composite Tape for the immediately preceding month
of October into the difference between the aforesaid present
value and the amount of the present value calculated for the
immediately preceding year pursuant to the terms of this
Supplemental Plan (if no previous calculation has been made,
a zero value shall be used for the previous calculation)
shall be registered by the Company in the name of the Trustee
and delivered to the Rabbi Trust (if adequate shares or other
consideration have not theretofore been delivered by the
Company to the Rabbi Trust) for allocation to such
Participant's account, provided, however, that the total
number of shares that may be delivered by the Company to the
Rabbi Trust for the accounts of all Eligible Stock
Participants during any fiscal year shall not exceed one
percent of the total number of shares outstanding at the
beginning of such fiscal year adjusted for any stock split,
stock dividend, combination of shares or similar change in
Stock, provided further that if there are not sufficient
available shares during any fiscal year to fully fund the
accounts of the Eligible Stock Participants, all available
shares for that fiscal year shall be allocated to Eligible
Stock Participant accounts on a pro rata basis and the
balance of each Participant's account shall be paid to the
Participant in cash. The stock allocated to an Eligible
Stock Participant's account pursuant hereto may at the
Company's option be acquired through open market purchases or
may be either treasury shares or newly issued shares provided
that any treasury or newly issued shares are duly registered
pursuant to applicable federal and state securities laws and
stock exchange regulations. Although the Company intends to
exert its best efforts so that the shares allocated or
distributed to Participants hereunder will be registered
under, or exempt from the registration requirements of, the
Securities Act and any applicable state securities laws, if
the allocation or distribution would otherwise result in the
violation by the Company of any provision of the Securities
Act or of any state securities law, the Company may require
that such allocation or distribution be deferred until the
Company has taken appropriate action to avoid any such
violation.
3.4 Non-Electing Eligible Stock
---------------------------
Participants. If any Eligible Stock Participant
- ------------
shall elect not to have his supplemental benefits earned
prior to October 1, 1990 converted into the Company's common
stock as provided in Section 3.2, such supplemental benefits
shall be calculated and paid as if this Supplemental Plan had
terminated on October 1, 1990. Any supplemental pension
benefits accruing to such Participant after October 1, 1990
shall be converted into shares of the Company's common stock
pursuant to the provisions of Section 3.3 and shall be
calculated as if such Participant first became an employee of
the Company on October 1, 1990.
3.5 Participants' Accounts. An account
----------------------
shall be maintained in the name of each Eligible Stock
Participant which will reflect the shares of the Company's
common stock into which his benefits have been converted.
Each Eligible Stock Participant's account shall be credited
to reflect all dividends, stock splits and other
distributions with respect to such shares, and all non-stock
distributions with respect to Company shares shall be
invested by the Trustee in shares of the Company's common
stock through open market or other appropriate purchases as
soon as practicable after receipt of same or, if the Rabbi
Trust has unallocated shares, using such shares valued at the
last closing price for the Company's common stock on the New
York Stock Exchange Composite Tape immediately preceding such
allocation. Each such stock account shall be charged with
any distribution made to a Participant when made. In
addition, appropriate plan records shall be maintained to
reflect a Participant's benefits under Section 2 which have
not been converted into the Company's common stock, including
benefits accrued up to date of termination.
3.6 Payment of Benefits.
-------------------
3.6.1 Stock Benefits. As used in this
--------------
section, the term "Stock Benefits" shall mean all shares of
the Company's common stock, all distributions thereon not
used by the Trustee to purchase additional shares of the
Company's common stock, any other amounts allocable to an
Eligible Stock Participant's account as of the date of such
determination, and the amount of any benefits accrued
hereunder that have not been converted into shares of the
Company's common stock.
3.6.2 Payments. Benefits forming a
--------
portion of the Stock Benefits that have not been funded at
the distribution date shall be paid directly by the Company.
3.6.2.1 If an Eligible Stock Participant
voluntarily terminates his employment with the Company prior
to attaining age 55 or is terminated with "Cause" (as
hereinafter defined) at any age, all Stock Benefits shall be
forfeited to the Company and such Participant shall receive
benefits under Section 2 to the same extent as if none of his
benefits had ever been funded with Company stock under
Section 3 of this Supplemental Plan (subject to any prior
payments made pursuant to the provisions of Section 3.4).
3.6.2.2 Subject the Committee's sole
discretion to waive the provisions of this Section, if an
Eligible Stock Participant's employment is voluntarily
terminated after the attainment of age 55 and prior to
attainment of age 62, his Stock Benefits shall be reduced in
accordance with the early retirement reduction factors under
the Retirement Plan based upon his attained age at his
termination of employment and paid to him in a lump sum; that
portion of his Stock Benefits not paid to him due to such
reduction shall be forfeited to the Company.
3.6.2.3 If an Eligible Stock Participant's
employment is (a) voluntarily terminated following attainment
of age 62 (55 in the event the Committee elects to waive the
provisions of Section 3.6.2.2 hereof) or (b) is involuntarily
terminated at any age without Cause, including termination
due to death or disability, all of his Stock Benefits shall
be distributed to him (or to his beneficiary in the event of
his death) promptly (but not sooner than sixty (60) days)
following his termination of employment with the Company or
its subsidiaries; provided, however, that a Participant may
upon written notice to the Committee given at least one year
(ninety (90) days for any such notice given prior to January
1, 1995) prior to his termination, elect an annual
distribution of such Stock over a period of time of up to ten
(10) years (e.g. if a ten year election, one tenth of the
balance at the time of the first distribution, one ninth of
the balance at the time of the second distribution, etc.) and
provided further that a Participant may upon written notice
to the Committee given at least one year (ninety (90) days
for any such notice given prior to January 1, 1995) prior to
his termination of employment elect to delay until the next
calendar year following his termination of employment either
the distribution of or, if the Participant has elected annual
distributions over a period of time, the initial distribution
from his account. During the first fifty (50) days following
a Participant's termination of employment, the Participant
(or the Participant's beneficiary in the event of the
Participant's death) shall have the right to elect to have
the Participant's account distributed in cash, stock or a
combination of cash and stock. Upon receipt of a written
request that a part or all of the distribution be made in
cash, the Company shall direct the Trustee to credit such
Participant's account with an amount (the "Cash Portion")
equal to the product of the number of shares of Stock then
credited to Participant's account necessary to comply with
the request (the "Diversified Shares") and the closing price
of the Stock on the New York Stock Exchange Composite Tape as
of the date the request is received by the Company.
Thereafter, the Trustee shall keep such Participant's account
as if the Cash Portion were invested in cash, cash
equivalents, mutual funds or marketable securities as
directed by the Commitee from time to time and as if the
Diversified Shares had been sold.
3.6.3 Change In Control.
-----------------
Notwithstanding the foregoing, in the event of a "Change in
Control" of the Company (as defined in the Rabbi Trust), the
Company shall purchase for cash all shares of Company common
stock then forming a portion of the Stock Benefits at a per-share price
equal to the the Change in Control Price, and the
Trustee shall be directed to sell such shares upon such
terms. Immediately after the Company purchases any shares
pursuant to this Section 3.6.3, the Committee shall cause the
Trustee to effect a distribution of all Stock Benefits,
including such cash proceeds, to the Eligible Stock
Participants. As used herein, "Change in Control Price"
means the higher of (i) the highest reported sales price,
regular way, of a share of Stock in any transaction reported
on the New York Stock Exchange Composite Tape or other
national securities exchange on which such shares are listed
or on NASDAQ, as applicable, during the 60-day period prior
to and including the date of a Change in Control and (ii) if
the Change in Control is the result of a tender or exchange
offer or a Business Combination (as defined in the Rabbi
Trust), the highest price per share of Stock paid in such
tender or exchange offer or Business Combination. 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 by the
Incumbent Board (as defined in the Rabbi Trust).
3.6.4 Cause. For purposes of this
-----
Supplemental Plan, "Cause" shall mean termination upon (a)
Participant's willful and continued failure to perform
substantially the reasonably assigned duties with the Company
consistent with those duties specified pursuant to his
contract of employment prior to a Change in Control of the
Company (other than any such failure resulting from
incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to Participant by
the Chairman of the Board or Chief Executive Officer of the
Company which specifically identifies the manner in which
such person believes that Participant has not substantially
performed such assigned duties, or (b) Participant's willful
engagement in illegal conduct which is materially and
demonstrably injurious to the Company. For purposes of this
Section, 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 Company. 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 Company
shall be conclusively presumed to be done, or omitted to be
done, in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Participant shall not be
deemed to have been terminated for Cause unless and until
there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of
the entire membership of the Board at a meeting
of the Board called and held for the purpose (after
reasonable notice to Participant and an opportunity for
Participant, together with his counsel, to be heard before
the Board), finding that in the good faith opinion of the
Board Participant was guilty of the conduct set forth above
in (a) or (b) of this Section and specifying the particulars
thereof in detail.
3.7 Diversification. After an Eligible
---------------
Stock Participant reaches age 55, he shall have the right,
subject to the provisions of this Section 3.7, to elect to
have up to 50% of the value of his Stock Benefits determined
as if such portion were thereafter invested in such
investments, and in such manner, as the Company's Pension and
Investment Committee shall from time to time authorize.
SECTION 4: General Provisions
- --------- ------------------
4.1 Committee. This Supplemental Plan shall
---------
be administered by a committee of two or more directors
constituted to comply with the Non-Employee Director
requirements of Rule 16b-3 promulgated pursuant to the
Securities Exchange Act of 1934 as amended and Securities
Exchange Commission interpretations thereunder (the
"Committee"), disregarding any changes in the members of the
Committee following a Change in Control of the Company. The
Company shall pay the cost of administration of the
Supplemental Plan. The Committee shall have the power, right
and duty to interpret the provisions of the Supplemental Plan
and may from time to time adopt rules with respect to the
administration of the Supplemental Plan and the determination
and distribution of benefits under the Supplemental Plan, and
may amend any and all rules previously established. Any
decision made by the Committee in good faith in connection
with its administration of or responsibilities under the
Supplemental Plan, including the interpretation of any
provision of the Supplemental Plan, the application of any
rule established under the Supplemental Plan, any
determination as to the officers eligible to participate in
the Supplemental Plan, the amount allocated to each and the
manner, conditions and terms of payment of such amount, shall
be conclusive on all persons.
4.2 Beneficiary. A Participant's "beneficiary"
------------
under this Supplemental Plan means any person who becomes
entitled to benefits under the Retirement Plan because of the
Participant's death; provided that, if a Participant dies
while his benefits under this Supplemental Plan are payable
to him in installments, his beneficiary under this
Supplemental Plan shall be either (i) the person or persons
designated by him by signing and filing with the Committee a
form furnished by the Committee, or (ii) if the Participant
failed to designate a beneficiary in (i) above, or if the
beneficiary designated in (i) above dies before the date of
the Participant's death, the Participant's estate.
4.3 Discretion. Notwithstanding any
----------
provisions in this Supplemental Plan to the contrary, the
Committee shall have the discretion to allow any benefits to
be paid that would otherwise be forfeited.
4.4 Employment Rights. Establishment of the
-----------------
Supplemental Plan shall not be construed to give any
Participant the right to be retained in the Company's service
or to any benefits not specifically provided by the
Supplemental Plan.
4.5 Interests Not Transferable. Except as
--------------------------
to withholding of any tax under the laws of the United States
or any state, the interests of the Participants and their
beneficiaries under the Supplemental Plan are not subject to
the claims of their creditors and may not be voluntarily or
involuntarily transferred, assigned, alienated or encumbered,
provided, however, that the Committee shall have discretion
to waive this restriction, in whole or in part. No
Participant shall have any right to any benefit payments
hereunder prior to his termination of employment with the
Company other than pursuant to Section 3.6.3.
4.6 Payment with Respect to Incapacitated
-------------------------------------
Participants or Beneficiaries. If any person
- -----------------------------
entitled to benefits under the Supplemental Plan is under a
legal disability or in the Committee's opinion is
incapacitated in any way so as to be unable to manage his
financial affairs, the Committee may direct the payment of
all or a portion of such benefits to such person's legal
representative or to a relative or friend of such person for
such person's benefit, or the Committee may direct the
application of such benefits for the benefit of such person
in any manner which the Committee may elect that is
consistent with the Supplemental Plan. Any payments made in
accordance with the foregoing provisions of this section
shall be a full and complete discharge of any liability for
such payments.
4.7 Limitation of Liability. To the extent
-----------------------
permitted by law, no person (including the Company, its Board
of Directors, the Committee, any present or former member of
the Company's Board of Directors or the Committee, and any
present or former officer of the Company) shall be personally
liable for any act done or omitted to be done in good faith
in the administration of the Supplemental Plan.
4.8 Controlling Law. The laws of Wisconsin
---------------
shall be controlling in all matters relating to the
Supplemental Plan.
4.9 Gender and Number. Where the context
-----------------
admits, words in the masculine gender shall include the
feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
4.10 Successor to the Company. The term
------------------------
"Company" as used in the Supplemental Plan shall include any
successor to the Company by reason of merger, consolidation,
the purchase of all or substantially all of the Company's
assets or otherwise.
4.11 Withholding for Taxes. Notwithstanding
---------------------
any other provision of this Supplemental Plan, the Committee
may on behalf of the Participant withhold or direct the
Trustee to withhold from any payment to be made under this
Supplemental Plan, whether in the form of cash or shares of
stock, such amount or amounts as may be required for purposes
of complying with appropriate federal, state or foreign tax
withholding provisions. Subject to the discretion of the
Committee, no distribution will be made to the Participant
until all tax withholding obligations have been satisfied.
SECTION 5: Amendment and Termination
- --------- -------------------------
5.1 Amendment and Termination. The Board
-------------------------
of Directors of the Company reserves the right to amend the
Supplemental Plan from time to time or to terminate the
Supplemental Plan at any time, provided that no amendment of
the Supplemental Plan nor the termination of the Supplemental
Plan may cause the reduction, forfeiture or cessation of any
benefits that were accrued as of the date of such amendment
or termination and which would otherwise be payable under
this Supplemental Plan, but for such amendment or
termination.
Exhibit 10(d)
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
DIRECTORS STOCK COMPENSATION PLAN
---------------------------------
(as amended and restated February 10, 1997)
1. Purpose. The Harnischfeger Industries,
-------
Inc. Directors Stock Compensation Plan (the "Plan") has been
established effective as of March 2, 1992 by Harnischfeger
Industries, Inc., a Delaware corporation (the "Company"), to
provide benefits to certain members of the Board of Directors
of the Company (the "Board") and has been amended effective
as of February 10, 1997 to provide stock compensation to
outside directors as a result of the termination of the
Service Compensation Plan for Directors. The Plan is
intended to assist and enable the Company to attract and
retain directors of the highest capabilities and to
facilitate the director's ability to acquire an ownership
interest in the common stock of the Company.
2. Administration. The Plan shall be
--------------
administered by a committee of two or more directors
constituted to comply with the Non-Employee Director
requirements of Rule 16b-3 promulgated pursuant to the
Securities Exchange Act of 1934 as amended and Securities
Exchange Commission interpretations thereunder (the
"Committee"), which Committee from time to time may delegate
the performance of certain of its ministerial duties under
the Plan, such as the keeping of records and participants'
accounts, to such person or persons as it may select. The
Plan shall be administered on the basis of a plan year (the
"Plan Year") which coincides with the fiscal year of the
Company, which currently is the 12-month period beginning on
November 1 and ending on the next following October 31. The
Company shall pay the cost of Plan administration. The
Committee shall have the power, right and duty to interpret
the provisions of the Plan and may from time to time adopt
rules with respect to the administration of the Plan and the
determination and distribution of benefits under the Plan,
and may amend any and all rules previously established. Any
decision made by the Committee in good faith in connection
with its administration of or responsibilities under the
Plan, including the interpretation of any provision of the
Plan, the application of any rule established under the Plan,
the amount allocated to each for any Plan Year and the
manner, conditions and terms of payment of such amount, shall
be conclusive on all persons.
3. Participation. Each member of the Board
--------------
who is not also an employee of the Company (herein
"Director") shall participate in the Plan.
4. Prior Benefits Under Directors Service
--------------------------------------
Plan. Each Director who was a Director on
- ----
November 1, 1996 shall have the present value of his accrued
benefits under the Service Compensation Plan for Directors as
of October 31, 1996 as set forth in Schedule "A" attached
hereto ("Accrued Benefits") converted into shares of the
Company's common stock ("Stock") and deferred pursuant to the
provisions of Section 7 hereof. All Accrued Benefits will be
fully vested for all Directors.
5. Performance Goals. The Committee shall
-----------------
set performance goals for the Company for each Plan Year.
These performance goals will be the same as performance goals
set for the Company under the Harnischfeger Industries, Inc.
Executive Incentive Plan.
6. Target Incentive Award; Incentive
---------------------------------
Compensation. The "Target Incentive Award" shall
- ------------
be $25,000 or another amount set by the Committee prior to
the beginning of the applicable Plan Year. Subject to the
immediately following two sentences, the amount determined by
multiplying the actual performance of the Company for a Plan
Year (expressed as a percentage of the performance goal) by
the Target Incentive Award for such Plan Year shall be the
"Incentive Compensation" for each Director for that Plan
Year. A Director who becomes a Director after November 1 of
any Plan Year shall have his Incentive Compensation for that
Plan Year reduced by a fraction that reflects the portion of
the Plan Year he was not a Director. A Director who ceases
being a Director prior to October 31 of any Plan Year shall
not receive Incentive Compensation for that Plan Year.
7. Stock Conversion. The Accrued Benefits
----------------
specified in Schedule "A" and Incentive Compensation
determined in accordance with Section 6 shall be converted
into shares of Stock and delivered into the Harnischfeger
Industries, Inc. Deferred Compensation Trust ("Rabbi Trust")
for the benefit of such Director, subject to the terms and
conditions hereinafter set forth. Shares of Stock equal to
the number (rounded to the nearest integer) derived (a) by
dividing the average closing price of the Stock on the New
York Stock Exchange Composite Tape for the month of October,
1996, into the Accrued Benefits and (b) by dividing the
average closing price of the Stock on the New York Stock
Exchange Composite Tape for the month of October of the Plan
Year into the amount of Incentive Compensation shall be
registered by the Company in the name of the Rabbi Trust and
delivered to the Rabbi Trust for allocation to such
Director's account, provided, however, that (i) the Company
may direct the trustee of the Rabbi Trust (the "Trustee") to
use for this purpose shares of Stock previously delivered by
the Company to the Rabbi Trust if such shares have not been
allocated to the account of any Director. The aforesaid
calculation and funding of each Participant's account shall
take place as soon as practical after February 10, 1997 in
the case of Accrued Benefits and the January 1 immediately
following the end of each Plan Year in the case of Incentive
Compensation.
8. Stock in Lieu of Fees. Each Director
---------------------
shall have the right to have up to 100% of such Director's
annual retainer and meeting fees (including fees for
committee meetings) (collectively, the "Compensation")
payable during each Plan Year converted into shares of Stock
and delivered into the Rabbi Trust for the benefit of such
Director subject to the following terms:
(a)Written notice shall be given by a Director to the Company
prior to May 1 of each Plan Year stating that such
Director elects to convert into Stock up to 100% of
such Director's Compensation payable during the next
Plan Year. Directors who become Directors on or
after May 1 of any Plan Year may by written notice
to the Company elect to covert their Compensation
into Stock under the Plan effective six months after
the date such notice is delivered to the Company.
(b)As soon as practicable after each date determined by the
Company for payment of compensation to Directors,
the number of shares of Stock (rounded to the
nearest whole share) derived by dividing the closing
price of the Stock on the New York Stock Exchange
Composite Tape on such payment date into the amount
of Compensation each Director has elected to convert
into Stock shall be delivered into the Rabbi Trust
for the benefit of such Director.
(c) The annual retainer fee for Directors shall
be $22,600.00, the fee for each Board meeting
attended shall be $1,250.00 and the fee for each
meeting of a committee or subcommittee of the Board
attended shall be $1,000.00 for regular members and
$1,250.00 for committee and subcommittee chairs,
provided that, subject to Section 18 hereof, the
amount of such fees may be changed at the discretion
of the Company from time to time.
9. Source of Stock. The Stock allocated to
---------------
each Director's account pursuant hereto may at the Company's
option be acquired through open market purchase, or may be
either treasury shares or newly issued shares; provided that
any treasury or newly issued shares are duly registered
pursuant to applicable federal and state securities laws and
stock exchange regulations. The Company may, in lieu of
delivering shares to the Trustee, direct the Trustee to use
for the purposes of this Plan shares of Stock previously
delivered by the Company to the Rabbi Trust if such shares
have not been allocated to the account of any Plan
participant. Although the Company intends to exert its best
efforts so that the shares allocated or distributed to
Directors hereunder will be registered under, or exempt from
the registration requirements of, the Securities Act of 1933
(the "Securities Act") and any applicable state securities
laws, if the allocation or distribution would otherwise
result in the violation by the Company of any provision of
the Securities Act or of any state securities law, the
Company may require that such allocation or distribution be
deferred until the Company has taken appropriate action to
avoid any such violation.
10. Participants' Accounts. An account
----------------------
shall be maintained in the name of each Director
participating in the Plan which will reflect the shares of
Stock into which his Accrued Benefits, Incentive Compensation
and Compensation have been converted, and shall be credited
to reflect all dividends, stock splits and other
distributions with respect to such shares. All cash
distributions with respect to Stock shall be invested by the
Trustee in shares of Stock through open market or other
appropriate purchases as soon as practicable after receipt of
same. Each such Stock account shall be charged with any
distribution made to a Director when made.
11. Distribution of Stock. The Stock in a
---------------------
Director's account shall be distributed to him (or to his
beneficiary in the event of his death) promptly (but not
sooner than sixty (60) days) following the termination of his
status as a Director of the Company; provided, however, that
a Director may upon written notice to the Company given one
year prior to his termination, request that the Company
approve an annual distribution of such Stock over a period of
time not to exceed ten (10) years (e.g. if a ten year
election, one tenth of the balance at the time of the first
distribution, one ninth of the balance at the time of the
second distribution, etc.) and provided further that a
Director may upon written notice to the Company given at
least one year prior to termination of his status as a
Director elect to delay until the next calendar year
following termination of his status as a Director either the
distribution of or, if the Director has elected annual
distributions over a period of time, the initial distribution
from his account. During the first fifty (50) days following
a Director's termination, the Director (or the Director's
beneficiary in the event of the Director's death) shall have
the right to elect to have the Director's account distributed
in cash, stock or a combination of cash and stock. Upon
receipt of a request that a part or all of the distribution
be made in cash, the Company shall direct the Trustee to
credit such Director's account with an amount (the "Cash
Portion") equal to the product of the number of shares of
Stock then credited to Director's account necessary to comply
with the request (the "Diversified Shares") and the closing
price of the Stock on the New York Stock Exchange Composite
Tape as of the date the request is received by the Company.
Thereafter, the Trustee shall keep such Director's account as
if the Cash Portion were invested in cash, cash equivalents,
mutual funds or marketable securities as directed by the
Committee from time to time and as if the Diversified Shares
had been sold.
12. Change in Control. Notwithstanding the
-----------------
foregoing, in the event of a "Change in Control" of the
Company (as defined in the Rabbi Trust), the Company shall
purchase for cash all shares of Stock then in all Directors'
accounts at a per-share price equal to the Change in Control
Price, and the Trustee is directed to sell such shares.
Immediately after the Company purchases any shares pursuant
to this Section 12, the Committee shall cause the Trustee to
effect a distribution of all cash proceeds to the Directors
in accordance with their accounts. As used herein, "Change in
Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Stock in any
transaction reported on the New York Stock Exchange Composite
Tape or other national securities exchange on which such
shares are listed or on NASDAQ, as applicable, during the 60-day period
prior to and including the date of a Change in
Control and (ii) if the Change in Control is the result of a
tender or exchange offer or a Business Combination (as
defined in the Rabbi Trust), the highest price per share of
Stock paid in such tender or exchange offer or Business
Combination. 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 by the Incumbent Board (as defined in the Rabbi
Trust).
13. Designation of Beneficiaries. Each
----------------------------
Director from time to time may name any person or persons
(who may be named concurrently, contingently or successively)
to whom his benefits under the Plan are to be paid if he dies
before he receives the proceeds of his Plan account. Each
such beneficiary designation will revoke all prior
designations by the Director, shall not require the consent
of any previously named beneficiary, shall be in a form
prescribed by the Company, and will be effective only when
filed with the Company during the Director's lifetime. If a
Director fails to designate a beneficiary before his death,
as provided above, or if the beneficiary designated by a
Director dies before the date of the Director's death or
before complete payment of the Director's Plan account, the
Company, in its discretion, may pay such benefits to either
(i) one or more of the Director's relatives by blood,
adoption or marriage and in such proportions as the Company
determines, or (ii) the legal representative or
representatives of the estate of the last to die of the
Director and his designated beneficiary.
14. General. No Director or other person
-------
shall have any right, title or interest in any amount awarded
under this Plan prior to the payment thereof to such person.
No rights or interests of Directors under this Plan shall be
assignable either voluntarily or involuntarily. Neither the
Company nor any officer of the Company shall be personally
liable for any act done or omitted to be done in good faith
in the administration of the Plan.
15. Facility of Payment. When a person
-------------------
entitled to benefits under the Plan is under legal
disability, or, in the Company's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the
Company may direct the payment of benefits to such person's
legal representative, or to a relative or friend of such
person for such person's benefit, or the Company may direct
the application of such benefits for the benefit of such
person. Any payments made in accordance with the preceding
sentence shall be a full and complete discharge of any
liability for such payment under the Plan.
16. Withholding for Taxes. Notwithstanding
---------------------
any other provision of the Plan, the Company may on behalf of
the Directors withhold or direct the Trustee to withhold from
any payment to be made under the Plan, whether in the form of
cash or stock, such amount or amounts as may be required for
purposes of complying with applicable federal, state or
foreign tax withholding provisions. Subject to the
discretion of the Company, no distribution will be made to
the Director until all tax withholding obligations have been
satisfied.
17. Benefit Statements. The Company shall
------------------
provide statements of account to participating Directors on
a periodic basis but not less than annually in such form and
at such time as it deems appropriate.
18. Amendment and Termination. The Board of
-------------------------
Directors of the Company hereby reserves the right to amend
this Plan from time to time and to terminate this Plan at any
time, except that no such amendment or any termination of
this Plan shall change the terms and conditions of payment of
any Accrued Benefits, Incentive Compensation or Compensation
previously payable to a Director without the consent of the
Director concerned, nor shall any termination of the Plan
eliminate any obligations of the Company which theretofore
shall have arisen under the Plan.
19. Controlling Law. The laws of Wisconsin
---------------
shall be controlling in all matters relating to the Plan.
20. Gender and Number. Where the context
-----------------
admits, words in the masculine gender shall include the
feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
-----------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 20,837
<SECURITIES> 0
<RECEIVABLES> 688,058
<ALLOWANCES> 8,394
<INVENTORY> 561,170
<CURRENT-ASSETS> 1,423,226
<PP&E> 1,134,395
<DEPRECIATION> 505,770
<TOTAL-ASSETS> 2,694,035
<CURRENT-LIABILITIES> 1,040,720
<BONDS> 658,223
0
0
<COMMON> 51,446
<OTHER-SE> 667,273
<TOTAL-LIABILITY-AND-EQUITY> 2,694,035
<SALES> 699,411
<TOTAL-REVENUES> 8,760
<CGS> 527,637
<TOTAL-COSTS> 640,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,497
<INCOME-PRETAX> 51,003
<INCOME-TAX> 17,830
<INCOME-CONTINUING> 30,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,858
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
