SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.4a-12 or Section 240.14a-12
HARNISCHFEGER INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
(1) Title of each class of securities to which
transaction applies:
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(2) Aggregate number of securities to which
transactions applies:
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(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined):
-------------------------------------------------
(4) Proposed maximum aggregate value of
transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
Notice of 1998
Annual Meeting of
Stockholders and
Proxy Statement
<PAGE>
CONTENTS
NOTICE OF ANNUAL MEETING
PROXY STATEMENT
INTRODUCTION 1
PRINCIPAL STOCKHOLDERS AND STOCK
OWNERSHIP OF EXECUTIVE
OFFICERS AND DIRECTORS 2
ELECTION OF DIRECTORS 6
CONTINUING DIRECTORS 8
BOARD MEETINGS, COMMITTEES
AND COMPENSATION 11
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-
IN-CONTROL ARRANGEMENTS;
TRANSACTIONS WITH
MANAGEMENT 13
SUMMARY COMPENSATION TABLE 14
HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION 16
PERFORMANCE GRAPH 19
PENSION PLAN TABLE 20
OPTION EXERCISES AND FISCAL
YEAR-END VALUES 21
LONG-TERM INCENTIVE COMPENSATION 22
OTHER INFORMATION 23
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
HARNISCHFEGER INDUSTRIES, INC.
P.O. Box 554
Milwaukee, WI 53201
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders of Harnischfeger
Industries, Inc. will be held at the Wyndham Hotel, 139 E.
Kilbourn Avenue, Milwaukee, Wisconsin, on Tuesday, April
14, 1998, at 10:00 a.m. for the following purposes:
1. To elect five persons to the Corporation's Board of
Directors; and
2. To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
Stockholders of record at the close of business on February
16, 1998 are entitled to receive notice of and to vote at
the annual meeting and any adjournment or postponement
thereof. A list of stockholders entitled to vote is
available at the Corporation's offices.
We hope that you will attend the 1998 annual meeting.
Whether or not you plan to attend, we urge you to mark,
date and sign the enclosed proxy card and return it
promptly so that your shares will be voted at the meeting
in accordance with your instructions.
By order of the Board of Directors,
JAMES A. CHOKEY
Secretary
February 23, 1998
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE.
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Harnischfeger Industries, Inc. (the "Corporation") for use
at the 1998 annual meeting of stockholders on Tuesday,
April 14, 1998, and at any adjournment or postponement
thereof. The proxy statement, proxy card and annual report
are being mailed to stockholders on or about February 23,
1998.
Proxies
Properly signed and dated proxies received by the
Corporation's Secretary prior to or at the annual meeting
will be voted as instructed thereon or, in the absence of
such instruction, (a) FOR the election to the Board of
Directors of the persons nominated by the Board and (b) in
accordance with the best judgment of the persons named in
the proxy on any other matters which may properly come
before the meeting.
Any proxy may be revoked by the person executing it for any
reason at any time before the polls close at the meeting by
filing with the Corporation's Secretary a written
revocation or duly executed form of proxy bearing a later
date or by voting in person at the meeting. The Corpora-
tion has appointed an officer of Boston EquiServe, transfer
agent for the Corporation, to act as an independent in-
spector at the annual meeting.
If a stockholder is a participant in a Harnischfeger
Industries, Inc. employees' savings plan (a "401K Plan"),
the proxy also serves as voting instructions with respect
to shares allocated to the stockholder's 401K Plan account.
If voting instructions are not received for shares in the
401K Plan at least five days prior to the meeting, those
shares will be voted in the same proportion on a proposal
as the proportion of instructed votes for the 401K Plan.
Record Date, Voting and Shares Outstanding
Stockholders of record of the Corporation's common stock,
$1 par value per share (the "Common Stock"), at the close
of business on February 16, 1998 (the "Record Date") are
entitled to vote on all matters presented at the annual
meeting. As of the Record Date, 48,492,937 shares of Com-
mon Stock were outstanding and entitled to vote at the
annual meeting. Each share is entitled to one vote.
A majority of the shares entitled to vote, represented in
person or by proxy, constitutes a quorum. Under the
Corporation's bylaws, if a quorum is present, the affirma-
tive vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter is
required for the election of directors. The
independent inspector will count the votes and ballots.
Abstentions are considered as shares represented and
entitled to vote; therefore, abstentions are counted for
purposes of the quorum determination but are not counted as
votes cast on a given matter, having the effect of a nega-
tive vote.
Broker or nominee "non-votes" on a matter will not be
considered as shares entitled to vote on that matter and
therefore will not be counted by the inspector in
calculating the number of shares represented and entitled
to vote on that matter. Such non-votes are, however,
counted toward the quorum requirement.
If less than a majority of the outstanding shares of Common
Stock are represented at the meeting, a majority of the
shares so represented may adjourn the meeting from time to
time without further notice.
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCK
OWNERSHIP OF EXECUTIVE OFFICERS
AND DIRECTORS
The following table sets forth the beneficial ownership of
Common Stock as of February 16, 1998 by any person known to
the Corporation to own beneficially more than 5% of its
Common Stock, each of the executive officers named in the
Summary Compensation Table and the Corporation's executive
officers and directors as a group. Beneficial ownership of
these shares consists of sole voting power and sole invest-
ment power except as noted below. All shares beneficially
owned by the named executive officers and directors under
the Executive Incentive Plan, the Supplemental Retirement
and Stock Funding Plan, the Directors Stock Compensation
Plan and the June 8, 1997 Grants are voted by the trustee
of the Corporation's Deferred Compensation Trust as
directed by the Corporation's Management Policy Committee.
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Name and Address Shares Percent
of Beneficial Owner Owned of Class(1)
- --------------------------------------------------------
FMR Corp. 5,032,521(2) 10.21%
82 Devonshire Street
Boston, Massachusetts 02109
Trimark Financial Corporation 5,000,300(3) 10.14%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario
Canada M5X 1E5
Brinson Partners, Inc. 4,609,548(4) 9.35%
209 South LaSalle
Chicago, Illinois 60604-1295
Morgan Stanley, Dean Witter,
Discover & Co. 4,261,530(5) 8.64%
1585 Broadway
New York, New York 10036
Marshall & Ilsley Corporation 2,649,363(6) 5.37%
770 North Water Street
Milwaukee, Wisconsin 53202
Pilgrim Baxter & Associates,
Ltd. 2,628,478(7) 5.33%
825 Duportail Road
Wayne, PA 19087-5525
<PAGE>
Jeffery T. Grade 674,629(8) 1.37%
John N. Hanson 193,813(9) 0.39%
Francis M. Corby, Jr. 354,712(10) 0.72%
Tom Engelsman 26,041(11) 0.05%
James A. Chokey 15,197(12) 0.03%
All executive officers
and directors
as a group (19 persons) 1,407,101(13) 2.85%
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Notes:
(1) Based on 48,492,937 shares of Common Stock
outstanding and 802,042 shares which are subject to
options currently exercisable or which will become
exercisable within 60 days of February 16, 1998.
(2) Based on information contained in a Schedule 13G,
amendment no. 6, filed with the Securities Exchange
Commission on February 6, 1998 by FMR Corp., a parent
holding company. FMR Corp. reported sole voting
power as to 301,858 shares, shared voting power as to
11,726 shares, sole investment power as to 5,019,949
shares and shared investment power as to 11,726
shares. Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of
the Investment Advisors Act of 1940, reported being
the beneficial owner of 4,661,300 or 9.44% of the
Corporation's Common Stock as a result of acting as
investment adviser to several investment companies
registered under Section 8 of the Investment Company
Act of 1940.
(3) Based on information contained in a Schedule 13G
filed with the Securities Exchange Commission on
October 3, 1997 by Trimark Financial Corporation.
(4) Based on information contained in a Schedule 13G,
amendment no. 1, filed with the Securities Exchange
Commission on February 11, 1998 by Brinson Partners,
Inc. ("Brinson"). Brinson, an investment adviser
registered under Section 203 of the Investment
Advisors Act of 1940, reported shared voting power
and shared dispositive power as to these shares. The
report was also filed on behalf of Brinson Holdings,
Inc., SBC Holding (USA), Inc. and Swiss Bank
Corporation.
(5) Based on information contained in a Schedule 13G
filed with the Securities Exchange Commission on
February 11, 1998 by Morgan Stanley, Dean Witter,
Discover & Co. and its wholly-owned subsidiary,
Miller, Anderson & Sherrerd, LLP, investment advisers
registered under Section 203 of the Investment
Advisors Act of 1940. Morgan Stanley, Dean Witter,
Discover & Co. reported shared voting power as to
3,745,331 shares and shared dispositive
<PAGE>
Notes (continued)
power as to 4,261,530 shares. Miller, Anderson &
Sherrerd, LLP reported shared voting power as to
3,515,200 shares and shared dispositive power as to
4,004,500 shares.
(6) Based on information contained in a Schedule 13G
filed with the Securities Exchange Commission on
February 13, 1998 by Marshall & Ilsley ("M&I"). M&I
reported shared voting power and share dispositive
power as to these shares.
(7) Based on information contained in a Schedule 13G
filed with the Securities Exchange Commission on
February 12, 1998 by Pilgrim Baxter & Associates,
Ltd. ("Pilgrim"). Pilgrim reported shared voting
power as to these shares.
(8) Includes 66,000 shares Mr. Grade has a right to
acquire upon exercise of stock options (including
25,500 which become exercisable within 60 days of
February 16, 1998), 920 shares beneficially owned
under the Profit Sharing Plan, 245,818 shares
beneficially owned under the Executive Incentive
Plan, 177,450 shares beneficially owned under the
Supplemental Retirement and Stock Funding Plan and
179,420 shares beneficially owned under the June 8,
1997 Grant. Also includes 2,271 shares assigned to
Mr. Grade's Executive Incentive Plan account as a
result of the "banked bonus" feature of that Plan.
Award of such shares is dependent upon achievement of
certain performance targets in future years.
(9) Includes 41,191 shares Mr. Hanson has a right to
acquire upon exercise of stock options (including
14,250 which become exercisable within 60 days of
February 16, 1998), 22,815 shares beneficially owned
under the Executive Incentive Plan and 3,745 shares
beneficially owned under the Supplemental Retirement
and Stock Funding Plan. Also includes 722 shares
assigned to Mr. Hanson's Executive Incentive Plan
account as a result of the "banked bonus" feature of
that Plan. Award of such shares is dependent upon
achievement of certain performance targets in future
years.
(10) Includes 66,250 shares Mr. Corby has a right to
acquire upon exercise of stock options (including
15,500 which become exercisable within 60 days of
February 16, 1998), 920 shares beneficially owned
under the Profit Sharing Plan, 44 shares beneficially
owned under the 401K Plan, 128,775 shares
beneficially owned under the Executive Incentive
Plan, 52,287 shares beneficially owned under the -
Supplemental Retirement and Stock Funding Plan and
96,209 shares beneficially owned under the June 8,
1997 Grant. Includes 5,100 shares owned by Mr.
Corby's three sons. Also includes 1,227 shares
assigned to Mr. Corby's Executive Incentive Plan
account as a result of the "banked bonus" feature of
that Plan. Award of such shares is dependent upon
achievement of certain performance targets in future
years.
(11) Includes 8,000 shares Mr. Engelsman has a right to
acquire upon exercise of stock options and 18,041
shares beneficially owned under the Executive
Incentive Plan. On February 12, 1998, the
Corporation announced that Mr. Engelsman had left the
employ of the Corporation.
<PAGE>
Notes (continued)
(12) Includes 2,500 shares Mr. Chokey has a right to
acquire upon exercise of stock options (including 875
which become exercisable within 60 days of February
16, 1998) and 3,505 shares beneficially owned under
the Executive Incentive Plan and 9,192 shares
beneficially owned under the Supplemental Retirement
and Stock Funding Plan.
(13) Includes the following shares held by executive
officers who are not named in the table: 58,469
shares which four executive officers have a right to
acquire upon exercise of stock options (including
16,222 which become exercisable within 60 days of
February 16, 1998), 2,411 shares beneficially owned
by three executive officers under the Profit Sharing
Plan, 107 shares beneficially owned by one executive
officer under the 401K Plan, 42,279 shares
beneficially owned by three executive officers under
the Executive Incentive Plan and 400 shares held by
the wife of an executive officer as custodian for
their minor children. Also includes 674 shares
assigned to three executive officers' Executive
Incentive Plan accounts as a result of the "banked"
bonus feature of the Plan. Award of such shares is
dependent upon achievement of certain performance
targets in future years. Also includes 14,808 shares
for Mr. Donald Taylor, 14,208 of which are
beneficially owned under the Directors' Stock
Compensation Plan. Mr. Taylor is retiring as a
director as of the date of the 1998 annual meeting.
See the Notes under the headings "Election of Directors"
and "Continuing Directors" on pages 7 and 10 for additional
information on beneficial ownership of Common Stock by
directors.
<PAGE>
ELECTION OF DIRECTORS
The following table shows certain information (including
principal occupation, business experience and beneficial
ownership of the Corporation's Common Stock as of February
16, 1998) concerning each of the individuals nominated by
the Board of Directors for election at the 1998 annual
meeting. All of the nominees are presently directors whose
terms expire in 1998 and who are nominated to serve terms
ending at the annual meeting in 2001. If for any
unforeseen reason any of these nominees should not be
available for election, the proxies will be voted for such
person or persons as may be nominated by the Board.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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Director Proposed Shares
Since Term Owned(1)
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Larry D. Brady President of FMC
Corporation, a world 1995 2001 3,362(2)
leader in production of
chemicals and machinery for
industry, government and
agriculture, since 1993.
Director of FMC Corporation
since 1989. Director,
National Merit Scholarship
Foundation, National
Association of Manufacturers
and Tenneco Inc. Age 55.
Francis M.
Corby, Jr. Executive Vice President, 1996 2001 354,712(3)
Finance and Administration
since 1995. Senior Vice
President, Finance and Chief
Financial Officer from 1986
to 1995. Age 54.
John D. Correnti President, Chief Executive 1994 2001 3,924(4)
Officer and director of
Nucor Corporation,a major
steel producer, since 1996.
President, Chief Operating
Officer and Director of Nucor
from 1991 to 1995. Director,
CEM Corporation and Navistar
International Corporation. Age 50.
Robert B. Hoffman Vice Chairman and Chief 1994 2001 3,165(5)
Financial Officer of Monsanto
Company, a diversified
company in agriculture,
pharmaceuticals and food
products, since 1997. Senior
Vice President and Chief
Financial Officer from 1994 to
1997; Vice President-Inter-
national of FMC Corporation
from 1990 to 1994.
<PAGE>
Director, Kemper Group of
Municipal Funds and Boatman's
Trust Company. Age 61.
Jean-Pierre
Labruyere Chairman and Chief 1994 2001 5,230(4)
Executive since 1972 of
Labruyere, Eberle, a
financial holding company
based in France with global
interests in many business
areas including food
distribution and involved
in laser printing and
electronic archiving
business and wines
production. Director,
Promodes S.A., Algeco S.A.
and Martin Maurel Bank
Banque de France Adviser.
Age 60.
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Notes
(1) Beneficial ownership of these shares consists of sole voting power and sole
investment power except as noted below. None of the nominees beneficially
owned 1% or more of the Corporation's Common Stock.
(2) Includes 500 shares held jointly with his wife and 2,862 shares beneficially
owned under the Directors Stock Compensation Plan.
(3) See note 10 on page 4.
(4) Shares beneficially owned under the Directors Stock Compensation Plan.
(5) Includes 2,165 shares beneficially owned under the Directors Stock
Compensation Plan.
</TABLE>
<PAGE>
CONTINUING DIRECTORS
The following table shows certain information concerning
the directors whose terms will continue after the 1998
annual meeting including principal occupation, experience
and beneficial ownership of the Corporation's Common Stock
as of February 16, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Director Current Shares
Since Term Owned(1)
- ---------------------------------------------------------------------------------
Robert M. Gerrity Chairman and Chief 1994 1999 3,678(2)
Executive Officer of Antrim
Group Inc., a technology
corporation, since December,
1996. Director and former
President and Chief Executive
Officer of Ford New Holland,
now New Holland n.v., a
London-based agricultural
and industrial equipment
manufacturer. Director,
Libralter Engineered
Systems, Rubbermaid, Inc.
and Standard Motor Products,
Inc. Age 60.
Jeffery T. Grade Chairman and Chief 1983 1999 674,629(3)
Executive Officer since 1993.
President and Chief
Executive Officer from 1992
to 1993. President and
Chief Operating Officer
from 1986 to 1992.
Director, Case Corporation,
Coeur D'Alene Mines
Corporation and LG&E
Energy Corp. Age 54.
L. Donald LaTorre President of L & G 1997 1999 1,848(4)
Management Consultants
Corporation, since April,
1997. Retired Director
of Engelhard Corporation,
a world-leading provider
of environmental
technologies, specialty
chemical products, engineered
materials and related
services, since 1997.
President and Chief
Operating Officer from 1995
to 1997. Senior Vice
President and Chief
Operating Officer from 1990
to 1995. Trustee Bloomfield
College; Chairman and
Director Mercer University
School of Engineering Board.
Age 60.
Leonard Redon Director, Rochester Area 1997 1999 998(5)
Operations, and Vice
President of Eastman Kodak
Company, a company engaged
worldwide in developing,
manufacturing and marketing
consumer and commercial
imaging products, since
December
<PAGE>
1997. President and Chief
Executive Officer of Qualex,
Inc., the world's largest
wholesale photoprocessor,
from April to December, 1997.
Vice President of Eastman Kodak
Company and President,
Customer Equipment Services
Division of Eastman Kodak
from 1995 to 1997. General
Manager and Vice President of
Government and Education
Markets from 1994 to 1995.
General Manager and Vice
President of Markets
Development, U.S. and
Canada, from 1991 to 1994.
Director, Qualex, Inc. and
Technology Service Solutions.
Age 46.
Donna M. Alvarado Principal of Aguila 1992 2000 4,355(6)
International, an
international business
development consulting firm,
since 1994. President
and Chief Executive Officer
of Quest International, a
non-profit educational
organization, from 1989 to
1994. Director, Park
National Bank. Age 49.
Harry L. Davis Professor of Creative 1987 2000 11,315(5)
Management at the
University of Chicago since
1994. Professor of
Marketing from 1963 to 1994.
Deputy Dean of the Graduate
School of Business at the
University of Chicago from
1983 to 1993. Director,
Golden Rule Insurance
Company. Age 60.
John N. Hanson President and Chief 1996 2001 193,813(7)
Operating Officer since
1996. Executive Vice
President and Chief
Operating Officer from 1995
to 1996. President and Chief
Executive Officer of Joy
Technologies Inc. from 1994
to 1995. President, Chief
Operating Officer and
Director of Joy
Technologies Inc. from 1990
to 1995. Director, Arrow
Electronics. Age 56.
Ralph C. Joynes Retired Vice Chairman, 1988 2000 11,721(8)
President and Chief
Operating Officer of USG
Corporation, international
manufacturer of building
materials and construction
systems. Age 69.
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<PAGE>
Notes
(1) Beneficial ownership of these shares consists of sole voting power and sole
investment power except as noted below. None of the continuing directors
beneficially owned 1% or more of the Corporation's Common Stock except Mr.
Grade who beneficially owned 1.37%.
(2) Includes 2,678 shares beneficially owned under the Directors Stock
Compensation Plan.
(3) See note 8 on page 4.
(4) Includes 848 shares beneficially owned under the Directors Stock Compensation
Plan.
(5) Shares beneficially owned under the Directors Stock Compensation Plan.
(6) Includes 3,855 shares beneficially owned under the Directors Stock
Compensation Plan.
(7) See note 9 on page 4.
(8) Includes 10,721 shares beneficially owned under the Directors Stock
Compensation Plan.
</TABLE>
<PAGE>
BOARD MEETINGS, COMMITTEES,
AND COMPENSATION
The Board of Directors held six meetings during fiscal
1997. All incumbent directors attended at least 75% of the
total number of meetings of the Board and committees of
which they were members except Mr. Labruyere who attended
73% of the meetings of the Board and committees of which he
was a member.
BOARD COMMITTEES
The Board has Audit, Human Resources, Finance
and Strategic Planning, Pension and Executive Committees.
Audit Committee
Current members of the Audit Committee are Robert B.
Hoffman (Chair), John D. Correnti, Ralph C. Joynes, Jean-Pierre
Labruyere and Leonard E. Redon. The functions of
the Audit Committee are to: (i) recommend for appointment
independent auditors for the Corporation, (ii) review and
approve the scope of the annual audit and proposed budget
for audit fees, (iii) review the results of the annual
audit with the independent auditors, (iv) review the
auditors' management letters with the independent auditors
and engage in appropriate follow-up with the corporate
staff, (v) determine that appropriate action is taken if
any irregularities are uncovered, (vi) review with the
independent auditors the Corporation's internal controls,
(vii) review the activities of the internal auditors and
(viii) report to the Board on the activities and findings
of the Audit Committee and make recommendations to the
Board based on such findings. The Audit Committee met
three times during fiscal 1997.
Human Resources Committee
Current members of the Human Resources Committee are Harry
L. Davis (Chair), Donna M. Alvarado, Larry D. Brady, John
D. Correnti and Robert M. Gerrity. The functions of the Hu-
man Resources Committee are to: (i) periodically review and
approve the compensation structure for the Corporation's
key executives, including salary rates, participation in
any incentive bonus plan, fringe benefits, non-cash
perquisites and all other forms of compensation, (ii) ad-
minister the Corporation's stock option and stock-based
compensation plans, (iii) periodically review the executive
manpower of the Corporation and make recommendations to the
Board as appropriate and (iv) receive, consider and present
to the Board for its consideration nominations to fill
vacancies in the Board of Directors.
Stockholders who wish to recommend persons to become
directors of the Corporation should direct their
recommendations to the Human Resources Committee in care of
the Corporation. The Human Resources Committee met four
times during fiscal 1997.
Finance and Strategic Planning Committee
Current members of the Finance and Strategic Planning
Committee are Larry D. Brady (Chair), Harry L. Davis,
Robert M. Gerrity, Robert B. Hoffman and L. Donald LaTorre.
The functions of the Finance and Strategic Planning Com-
mittee are to: (i) periodically review with management of
the Corporation the financial structure of the Corporation
and the appropriateness of such structure given the short-term
and long-term goals of the Corporation, (ii) review
specific financial proposals of management which require
Board approval and make recommendations to the Board as
appropriate, (iii) review with management the strategic
plans of management for the Corporation and (iv) review
specific recommendations of management relating to
acquisitions, divestitures and other strategic activities
requiring approval of the Board and make recommendations to
the Board as appropriate. The Finance and Strategic Plan-
ning Committee met twice during fiscal 1997.
Pension Committee
Current members of the Pension Committee are Donna M.
Alvarado (Chair), Ralph C. Joynes,
<PAGE>
Jean-Pierre Labruyere, L. Donald LaTorre and Leonard E.
Redon. The functions of the Pension Committee are to: (i)
periodically review the investment policy of the Corpora-
tion's Pension and Investment Committee, (ii) periodically
review the actions and performance of the Pension and In-
vestment Committee and any other administrative committees
for retirement plans and trusts for which the Corporation
sponsors or may hereafter sponsor (a "Plan" or "Trust"),
including the implementation by such committees of the
investment policy, (iii) make recommendations to the Board
regarding the membership of the Pension and Investment Com-
mittee, (iv) review the need for the establishment of any
new Plan or Trust, the termination of any existing Plan or
Trust and the adoption of any amendment to any single Plan
that would result in an increase in current Plan
liabilities in excess of $5,000,000 and (v) report to the
Board on the activities and findings of the Pension Com-
mittee and make recommendations to the Board based on those
findings. The Pension Committee met twice during fiscal
1997.
Executive Committee
Current members of the Executive Committee are Jeffery
T. Grade (Chair), Donna M. Alvarado, John D. Correnti,
Harry L. Davis, Robert B. Hoffman and Ralph C. Joynes.
The function of the Executive Committee is to act upon a
matter when it determines that prompt action is in the best
interest of the Corporation and it is not possible to call
a meeting of the full Board. The Executive Committee did
not meet during fiscal 1997.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the
Corporation receive an annual retainer fee of $22,600, a
fee of $1,250 for each Board meeting attended and a fee of
$1,000 for each Board committee meeting attended. Com-
mittee chairs receive $1,250 for each committee meeting
attended. Directors who are officers of the Corporation
earn no additional remuneration for their services as
directors.
In 1991, the Corporation established a Directors Stock Com-
pensation Plan under which non-employee directors are
allowed to elect to defer up to 100% of their fees by con-
verting their fees into Common Stock to be held in trust
until termination of their status as directors.
In February, 1997, the Board established an incentive
compensation plan for outside directors based on the same
Economic Value Added ("EVA") performance targets used
for the Corporation's Executive Incentive Plan. Under the
Plan, non-employee directors are eligible to earn annual
incentive compensation awards in addition to annual
retainer and meeting fees. Incentive compensation is
determined by multiplying $25,000 by a figure which
represents the EVA performance of the Corporation in a
given year expressed as a percentage of the EVA performance
target for that year. Incentive compensation awards
are converted into shares of Common Stock under the
Directors Stock Compensation Plan and held in trust until
the director's status as a director terminates.
In October 1997, the Board established a long-term
compensation plan for outside directors designed to reward
directors in the same way that senior executives of the
Corporation will be rewarded if the Corporation's Common
Stock achieves certain high performance targets over a five
year period. Under the plan, awards of up to 6,000 shares
of Common Stock may be made to each non-employee director
upon achievement of pre-established stock price improvement
factors. The base stock price was set at $40.87 per share.
A portion of the shares will be awarded if the stock price
increases by 30% over the base price within three years and
all the shares will be awarded if the stock price increases
50% within three years or 70% within five years. If target
prices are not met, none of the shares will be awarded.
Any shares that are awarded will be held in trust until the
director's status as a director terminates.
<PAGE>
EMPLOYMENT CONTRACTS AND
TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Corporation
and any of its executive officers.
The Executive Incentive Plan, the Supplemental Retirement
and Stock Funding Plan, the June 8, 1997 Grants and the
Long-Term Compensation Plan for Key Executives provide for
the distribution of accrued benefits following termination
of a participant's employment with the Corporation.
These plans also provide that, in the event of a "Change in
Control" as defined in the Corporation's Deferred
Compensation Trust, the Corporation will purchase for cash
all shares of Common Stock then allocated to all
participants' accounts at the highest per-share price actu-
ally paid in connection with such Change in Control and
cash proceeds will be distributed to the participants. The
1996 Stock Incentive Plan provides that, upon a Change in
Control, all outstanding option grants become exercisable.
All existing options under the 1988 Incentive Stock Plan
become exercisable upon a Change in Control.
TRANSACTIONS WITH MANAGEMENT
From time to time, the Corporation uses The Relocation
Center to assist executives who are required by the
Corporation to change their places of residence. The
Corporation pays The Relocation Center to purchase the
homes for their appraised values and reimburses The
Relocation Center for costs incurred in marketing the
homes. Proceeds from the sale of homes by The Relocation
Center are then paid to the Corporation. In Fiscal 1997
the Corporation paid The Relocation Center to purchase Mr.
Chokey's home for $530,000, its appraised value.
Prior to the acquisition of Joy Technologies Inc.
("JTI") by the Corporation, JTI lent Mr. Hanson
$240,000 in connection with a program in which JTI lent
executives money to encourage them to purchase and own JTI
stock. The Corporation succeeded to the loan as a result
of the JTI acquisition. The loan matured on July 1, 1997
and has been extended by the Corporation for a one year
period. Mr. Hanson pays interest on the balance at the
annual rate of 6.22%. The Corporation holds 10,000 shares
of Common Stock as collateral for repayment of the loan.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to,
earned by or paid to the Corporation's Chief Executive
Officer and each of the four most highly compensated execu-
tive officers other than the Chief <PAGE>
Executive Officer who were serving as executive officers at
the end of fiscal 1997 for services rendered to the Corpo-
ration and its subsidiaries during fiscal 1997, 1996 and
1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term
Annual Compensation Compensation
Awards Payouts
Secu-
Other Restricted rities All
Name Annual Stock Under- Other
and Compen- Award(s) lying LTIP Compen-
Principal Position Year Salary Bonus sation ($) Options Payouts sation
($) ($) ($) (2) /SARS ($) ($)
(1) (1) (#) (3) (1)(4)
- -----------------------------------------------------------------------------------------------
Jeffery T. Grade 1997 660,000 - 406,393 - - 246,011 686,052
Chairman and 1996 600,000 - 390,183 - 42,000 253,998 750,102
Chief Executive 1995 554,928 - 359,989 86,625 35,000 79,377 764,168
Officer
John N. Hanson (5) 1997 432,600 260,973 122,699 - - 47,755 233,894
President and Chief 1996 381,691 253,750 104,295 - 31,000 22,683 244,232
Operating Officer 1995 301,153 148,500 38,060 - 26,000 - 720,721
Francis M. Corby,Jr. 1997 350,004 - 239,391 - - 131,544 367,996
Executive Vice 1996 324,000 - 242,694 - 26,000 129,288 409,794
President for 1995 295,025 - 214,281 43,312 21,000 37,462 409,374
Finance and
Administration
Tom Engelsman(5) 1997 340,260 - 88,348 - - 3,980 262,423
Senior Vice
President and
President
Beloit Corporation
James A. Chokey(5) 1997 213,336 109,441 36,480 - - - 114,613
Executive Vice
President, Secretary
and General Counsel
</TABLE>
Notes
(1) Participants in the Executive Incentive Plan may
elect to defer up to 100% of their cash bonuses by
converting such bonuses into Common Stock at a 25%
discount from the average closing price of the Common
Stock for the last month of the fiscal year. All
such stock is held in the Corporation's Deferred
Compensation Trust and may not be withdrawn by a
participant
<PAGE>
Notes (continued)
as long as the participant remains an employee of the
Corporation. All of the named executive officers
elected to convert 100% of their cash bonuses into
Common Stock under this plan in each of the last
three fiscal years except Mr. Hanson who became an
executive officer during fiscal 1995 and who elected
to convert 50% of his 1996 and 1997 cash bonuses into
Common Stock under the plan and Mr. Chokey who became
an executive officer in 1997 and elected to convert
50% of his 1997 cash bonus into Common Stock under
the Plan. The Executive Incentive Plan also provides
that dividends on shares held in participants'
accounts are reinvested in Common Stock at a 25%
discount from market prices. The dollar values of
the differences between (i) the bonus amount
converted and the market value of the shares
purchased and (ii) the dollar amounts attributable to
the discount upon the reinvestment of dividends are
included in the "Other Annual Compensation" column.
The dollar value of the bonus amounts that have been
converted into stock and deferred are reported in the
"LTIP Payouts" and "All Other Compensation" columns.
(2) No restricted Common Stock is outstanding. Amounts
in 1995 represent the market value on the date of
grant of Restricted Common Stock granted in 1995
which also vested during fiscal 1995.
(3) Represents the portion of the bonus earned in 1997
that resulted from bonuses that were "banked" in
prior years under the EVA Bonus Program described on
page 22. Each of the executives elected to defer
these amounts under the Executive Incentive Plan
except Mr. Hanson and Mr. Chokey who elected to defer
50% of these amounts.
(4) Includes the following amounts which represent
bonuses earned in 1997 (net of amounts reported under
LTIP Payouts) and deferred and converted into Common
Stock by the named executives under the Executive
Incentive Plan as described in Note 1 above: Jeffery
T. Grade $677,160; John N. Hanson $221,924; Francis
M. Corby, Jr. $359,104; Tom Engelsman $257,237; and
James A. Chokey $109,441. Also includes $3,420 for
Mr. Grade, Mr. Hanson and Mr. Corby and $3,150 for
Mr. Engelsman and Mr. Chokey which represents cash
payments under the Profit Sharing Plan and the
following amounts paid by the Corporation during
fiscal 1997 for group term life insurance premiums
for the benefit of the executives: Jeffery T. Grade
$5,472; John N. Hanson $8,550; Francis M. Corby, Jr.
$5,472; Tom Engelsman $2,036 and James A. Chokey
$2,022. Includes $630,000 for Mr. Hanson in 1995
which the Corporation became obligated to pay in
connection with the acquisition of Joy Technologies
Inc.
(5) Information for Mr. Hanson covers the period since
November 29, 1994, the date the Corporation acquired
Joy Technologies Inc. Information for Mr. Engelsman
and Mr. Chokey covers fiscal 1997, the year each
became an executive officer of the Corporation. On
February 12, 1998, the Corporation announced that Mr.
Engelsman had left the employ of the Corporation.
<PAGE>
HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE
COMPENSATION
The Human Resources Committee met four times during fiscal
1997. Throughout the year the Committee Chairperson also
maintained a dialogue concerning compensation and
organizational development issues with senior management of
the Corporation.
The Committee considered both corporate performance and
individual contributions in its deliberations on executive
compensation and relied on the personal knowledge and
experience of its members as well as compensation survey
data from a large number of comparable durable goods
manufacturing companies.
The Committee continues to be guided by the following
fundamental considerations:
1. The need to attract and retain competent management.
2. The desire to set pay levels which are competitive
with levels being paid in similar businesses.
3. The intent to reward management for a mix of
long-term and short-term accomplishments.
4. The need to link executive pay levels to
quantifiable benchmarks.
5. The belief that base salaries should be
conservative (50th percentile of comparable
companies) but that incentive opportunities should
allow for above average total compensation (75th
percentile of comparable companies) if warranted by
the performance of the Corporation.
Cash Compensation
Consistent with the considerations listed above, the
Committee uses compensation survey data from comparable
companies when determining the salary and incentive
compensation components of cash compensation. Since 1994,
the Corporation's key employee incentive compensation
(bonus) plans have been based on the concept of Economic
Value Added ("EVA"). Under EVA, focus is shifted from
budget performance to the after-tax returns produced on
capital investment in the business, and managers are
rewarded for adding and creating economic value in their
respective businesses. The hurdle becomes the
Corporation's weighted average after-tax cost of capital
and rewards are linked to the difference management is able
to produce between that cost and corporate earnings. The
EVA target is raised each year by an "improvement factor"
so that increasingly higher EVA benchmarks must be attained
in order to earn the same level of incentive pay.
More than 350 executives participated in EVA based
incentive plans in 1997 with targeted bonus opportunities
ranging from 10% to 90% of base pay.
In those business units where the EVA incentive plan
produces bonuses in excess of 125% of the target two thirds
of the excess amount is "banked" for credit toward
incentive compensation in future years and may be forfeited
if future performance targets are not achieved.
Companies which have adopted EVA have seen a positive
relationship between improved EVA and increased common
stock prices. While no promise of improved performance
should be inferred, the Committee believes that EVA is one
of the contributing factors toward improved stock
performance of the Corporation.
Profit Sharing
Beginning in fiscal 1995, the Corporation's Profit Sharing
Plan was more closely linked with EVA concepts. All
domestic salaried and
<PAGE>
non-bargaining unit hourly employees participate in this
plan which pays a 3% cash bonus for attainment of a
business unit's EVA target. Across the Corporation, the
average payment for 1997 was approximately 3.4% of a
participating employee's base pay. For purposes of the
plan, the maximum base pay which can be used for
calculations is $100,000.
Stock-Based Compensation
The Committee administers a number of stock-based plans
which are designed to encourage management to own the
Corporation's Common Stock. The Committee strongly
believes that ownership by management of significant
amounts of the Corporation's Common Stock is an important
linkage to shareholder value.
New Long-Term Compensation Plan
In August 1997, following the recommendation of the
Committee, the Board approved a new long-term incentive
compensation plan designed to dramatically restructure
incentives toward achieving high performance in the
Corporation's Common Stock. The new plan retains the key
elements of aligning the interests of senior executives
with those of stockholders, focusing management efforts on
the creation of value in the long term, and increasing
executive stock ownership. The plan focuses on achieving
high performance and concentrates executives as a team on
reaching the plan's goals.
Under the new plan, eleven officers of the Corporation
forego stock option grants during the five year life of the
plan. Awards of up to an aggregate of 1,200,000 shares may
be made based upon achievement of pre-established stock
price improvement factors. The base stock price was set at
$40.87 per share. A portion of the shares will be awarded
if the stock price increases by 30% over the base price
within three years and all the shares will be awarded if
the stock price increases 50% within three years or 70%
within five years. If target prices are not met, none of
the shares will be awarded. As a result of adopting this
plan, no stock options were granted in fiscal 1997 to the
senior executives participating in the plan.
Stock Options
The Committee in its discretion may award stock options to
key contributors to the Corporation's success. Such grants
give recipients the right to purchase the Corporation's
Common Stock at an exercise price equal to the average of
the high and low price of the stock on the New York Stock
Exchange on the date of the grant. All option grants give
the holder a ten year right to purchase. Vesting occurs
over a 42 month period. Because of the adoption of the new
long-term compensation plan, no stock options were granted
to the Corporation's senior executives in fiscal 1997.
Restricted Common Stock
On June 8, 1997, restricted stock granted to two senior
executive officers during the previous year in connection
with the cancellation of employment agreements was
surrendered in exchange for comparable payment rights based
on stock held in the Corporation's deferred compensation
trust. As a result, the Corporation currently has no
restricted stock outstanding.
Stock in Lieu of Bonus
The Committee believes it is important for management to
become significant stockholders in the Corporation.
Accordingly, under the Executive Incentive Plan as adopted
by the Committee and approved by stockholders in 1992,
selected participants in the Corporation's designated bonus
program may elect to receive all or a part of their
incentive compensation in stock in lieu of cash payments.
This plan, strongly supported by the Committee, encourages
approximately 70 members of senior management to convert up
to 100% of their cash bonuses into shares of Common Stock
of the Corporation. As both an inducement and due to
restrictions placed on the sale of the stock, the plan
allows executives to convert their bonuses into stock at a
25% discount from the current market price. This stock
must be placed in a grantor trust maintained by the
Corporation and
<PAGE>
may not be accessed until the executive retires or
terminates employment. Dividends remain in the account and
are used to buy additional shares, also at a 25% discount.
Since inception, participants in this plan have deferred
incentive compensation equivalent to over one million
shares, further aligning their interests with those of
stockholders.
Chief Executive Officer Compensation
The performance and contributions of the Chairman and Chief
Executive Officer Jeffery T. Grade were reviewed at length
by the Committee at its October, 1996 and 1997 meetings.
Recognizing the continued and significant progress the
Corporation has made as a result of his leadership, Mr.
Grade's base pay was increased at the October, 1996 meeting
from $600,000 to $660,000. At the October, 1997 meeting,
Mr. Grade's base pay was increased from $660,000 per year
to $700,000, an increase of 6.1%. Based on outside survey
data, Mr. Grade's new base salary is slightly above the
50th percentile for comparable companies, the 50th
percentile being the Committee's stated compensation
benchmark. The Committee believes that Mr. Grade's salary
is in line with that paid to Chief Executive Officers of
comparable companies and is appropriate for the size of the
Corporation and his scope of responsibilities.
Under the terms of the Corporation's Executive Incentive
Plan, Mr. Grade earned incentive compensation of $923,171
for fiscal 1997, including $175,069 credited to Mr. Grade's
1997 incentive compensation as a result of amounts "banked"
in 1995 and $70,942 credited in 1997 as a result of amounts
"banked" in 1996. No amount was "banked" in 1997 under
the EVA method of calculating incentive compensation. The
amount of the 1997 bonus was determined by the
Corporation's corporate performance which exceeded the 1997
EVA target by 14%, entitling Mr. Grade and certain other
senior executives to an incentive equal to 114% of their
individual bonus targets, which, in Mr. Grade's case, was
90% of base pay.
The total cash compensation earned by Mr. Grade in 1997 was
$1,583,171 (including the amounts banked in 1995 and 1996
and payable in 1997 and the 1997 Profit Sharing payment).
Mr. Grade was not granted stock options during 1997.
Section 162(m)
Section 162(m) of the Internal Revenue Code limits to $1
million the deductibility of the compensation paid in a
taxable year by a publicly held corporation to the Chief
Executive Officer and any other executive officer whose
compensation is required to be reported in the Summary
Compensation Table. However, qualified performance-based
compensation is not subject to the deduction limit if
certain conditions are met. It continues to be the
Committee's intent to take the necessary steps to satisfy
these conditions in order to preserve the deductibility of
executive compensation to the fullest extent possible
consistent with its other compensation objectives and
overall compensation philosophy.
In Summary
The Committee believes that the compensation paid to senior
executives is in line with performance and is comparable to
that being paid in similar corporations.
Respectfully,
Harry L. Davis (Chair)
Donna M. Alvarado
Larry D. Brady
John D. Correnti
Robert M. Gerrity
Donald Taylor<PAGE>
<PAGE>
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder
return on the Corporation's Common Stock over the last five
fiscal years as compared to the returns of the Standard &
Poor's 500 Stock Index and the Dow Jones Heavy Machinery
Index. The Heavy Machinery subgroup consists of AGCO
Corporation, Case Corporation, Caterpillar Inc., Deere &
Co., and Harnischfeger Industries, Inc. AGCO Corporation
and Case Corporation were added to the Heavy Machinery
subgroup on July 1, 1996 while Clark Equipment, Indresco,
Inc., Manitowoc Co. and Nacco Industries were removed from
the subgroup. Case Corporation began trading on June 24,
1996. The graph assumes $100 was invested on October 31,
1992 in (a) the Corporation's Common Stock, (b) the
Standard & Poor's 500 Stock Index and (c) the Heavy Machin-
ery Index and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10/31/92 10/31/93 10/31/94 10/31/95 10/31/96 10/31/97
-------- -------- -------- -------- -------- --------
S&P 500 100 115 119 151 187 247
Machinery Group 100 184 216 235 302 411
Harnischfeger 100 131 151 192 247 245
Machinery Group = CAT, DE, HPH, AG, CSE
</TABLE>
<PAGE>
PENSION PLAN TABLE
The following table sets forth the estimated annual
benefits payable upon retirement at normal retirement age
for the years of service indicated under the Corporation's
defined benefit pension plan (and excess benefit arrange-
ments defined below) at the indicated remuneration levels.
Remuneration covered by the plan includes the following
amounts reported in the Summary Compensation Table: salary
and bonus (including the cash value of bonuses forgone for
stock under the Executive Incentive Plan). "Banked"
bonuses are not included.
The years of service credited for each of the executive
officers named in the Summary Compensation Table are:
Jeffery T. Grade, 29 years; John N. Hanson, 8 years; Fran-
cis M. Corby, Jr., 17 years; Tom Engelsman, 2 years; and
James A. Chokey, 15 years.
Benefits are based both upon years of service and the
highest consecutive five year average annual salary and
incentive compensation during the last ten calendar years
of service. Estimated benefits under the retirement plan
are subject to the provisions of the Internal Revenue Code
which limit the annual benefits which may be paid from a
tax qualified retirement plan. Amounts in excess of such
limitations will either be paid from the general funds of
the Corporation or funded with Common Stock under the terms
of the Supplemental Retirement and Stock Funding Plan. The
estimated benefits in the table above do not reflect off-
sets under the plan of 1.25% per year of service (up to a
maximum of 50%) of the Social Security benefit.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Years of Service
-----------------------------------------------------------------
Remuneration 10 15 20 25 30 35
-----------------------------------------------------------------
$ 400,000 $ 60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
500,000 75,000 112,500 150,000 187,500 225,000 262,500
600,000 90,000 135,000 180,000 225,000 270,000 315,000
700,000 105,000 157,500 210,000 262,500 315,000 367,500
800,000 120,000 180,000 240,000 300,000 360,000 420,000
900,000 135,000 202,500 270,000 337,500 405,000 472,500
1,000,000 150,000 225,000 300,000 375,000 450,000 525,000
1,100,000 165,000 247,500 330,000 412,500 495,000 577,500
</TABLE>
<PAGE>
OPTION EXERCISES AND
FISCAL YEAR-END VALUES
The following table sets forth information with respect to
the five executive officers named in the Summary
Compensation Table concerning the number of shares acquired
on exercise of options, the value realized and the number
and value of options outstanding at the end of the last
fiscal year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options/
Options/SARS at SARs at Fiscal Year-
Shares Fiscal Year End (#) End($)(3)
Acquired
on Value
Exercise Realized
Name (#) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
Jeffery T. Grade - - 40,500 55,250 $361,760 $269,748
John N. Hanson - - 26,941(4) 36,250 262,421 140,384
Francis M. Corby,
Jr. 14,000 248,436 50,750 33,750 701,986 162,746
Tom Engelsman - - 8,000 14,000 45,110 54,080
James A. Chokey - - 1,625 4,875 1,308 3,924
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) are outstanding.
(2) Based on the market value of the stock on the date of
exercise less the exercise price and withholding tax
paid by the recipient.
(3) Based on the closing price of the Corporation's
Common Stock on the New York Stock Exchange at the
end of the fiscal year of $39.375
(4) Includes 6,191 options under the Joy Technologies
Inc. Stock Option Plan (the "Joy Option Plan"). As a
consequence of the merger of the Corporation and Joy
Technologies Inc. in November, 1994, all options that
had been granted under the Joy Option Plan to any Joy
Technologies Inc. employees were converted into
options to purchase the Corporation's Common Stock.
<PAGE>
LONG-TERM INCENTIVE
COMPENSATION
The Corporation provides long-term incentive compensation
opportunities to its executives through the Long-Term
Compensation Plan for Key Executives and the "Banked Bonus"
feature of the Executive Incentive Plan.
Long-Term Compensation Plan for Key Executives
In August 1997, the Board of Directors adopted a long-term
compensation plan for eleven of its key executives under
which up to an aggregate of 1,200,000 shares of Common
Stock may be awarded to the executives if certain price
stock price targets are met. Under the new plan, the
eleven officers forgo stock option grants during the five-year
life of the plan. Awards will be made upon
achievement of pre-established stock price improvement
factors. The base stock price was set at $40.87 per share.
A portion of the shares will be awarded if the stock price
increases by 30% over the base price within three years and
all the shares will be awarded if the stock price increases
50% within three years or 70% within five years. If target
prices are not met, none of the shares will be awarded.
Any shares that are awarded are held in trust until the
officer's employment with the Corporation terminates.
"Banked Bonus"
As described in the Human Resources Committee Report on
Executive Compensation, incentive compensation for senior
executives is based on the concept of Economic Value Added
("EVA"). The EVA method of calculating incentive
compensation has a "Bonus Bank" feature which is designed
to ensure that EVA improvements are sustained over a period
of years. The bonus paid to an executive for any fiscal
year is equal to the earned bonus for the year, up to a
maximum of 125% of the target bonus, plus 33% of the bonus
earned, if any, in excess of 125% of the target bonus.
Two-thirds of any bonus earned in excess of 125% of the
target bonus is credited to the Bonus Bank for possible
future payment to the executive or forfeiture under the
terms of the EVA program. A Bonus Bank account is at risk
in the sense that in any year the earned bonus is negative,
the negative bonus amount is subtracted from the Bonus Bank
balance. The executive is not expected to otherwise repay
negative balances in the Bonus Bank.
For those executives who have elected to defer their cash
bonuses by converting such bonuses into Common Stock under
the terms of the Executive Incentive Plan, the "banked"
portion of any bonus is converted into Common Stock on the
same terms as the "unbanked" portion of the bonus. Because
earned bonuses did not exceed 125% of the EVA target for
fiscal 1997, no amounts were added to the Bonus Bank in
1997.<PAGE>
<PAGE>
OTHER INFORMATION
Auditors
The Board of Directors has selected Price Waterhouse as
independent accountants for the fiscal year ending October
31, 1998. Price Waterhouse has served the Corporation as
auditors since 1925. A representative of Price Waterhouse
will be present at the 1998 annual meeting, will have the
opportunity to make a statement and will be available to
answer questions that may be asked by stockholders.
Additional Matters
The Board of Directors is not aware of any other matters
that will be presented for action at the 1998 annual
meeting. Should any additional matters properly come be-
fore the meeting, the persons named in the enclosed proxy
will vote on those matters in accordance with their best
judgment.
Submission of Stockholder Proposals
All stockholder proposals to be presented at the 1999
annual meeting must be received by the Corporation not
later than October 25, 1998 in order to be considered for
inclusion in the Corporation's proxy statement and proxy
for that meeting under SEC Rule 14a-8. In addition, the
Corporation's bylaws require that stockholder proposals
must be received by the Corporation not less than ninety
days before the meeting in order to be submitted at the
meeting.
Cost of Proxy Solicitation
The Corporation will pay the cost of preparing, printing
and mailing proxy materials as well as the cost of solicit-
ing proxies on behalf of the Board. In addition to using
the mails, officers and other employees may solicit proxies
in person and by telephone and telegraph. The Corporation
has also retained Kissell-Blake, Inc., a professional proxy
solicitation firm, and will pay such firm its customary
fee, which is anticipated not to exceed $5,500, plus
expenses, to solicit proxies from banks, brokers and other
nominees having shares registered in their names which are
beneficially owned by others.
Section 16(a) Beneficial Ownership
Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Corporation during the last fiscal
year and Forms 5 and amendments thereto furnished to the
Corporation with respect to the last fiscal year, the Cor-
poration is not aware that any director, officer or benefi-
cial owner of more than 10% of the Corporation's Common
Stock failed to file on a timely basis reports required by
Section 16(a) of the Securities Exchange Act of 1934 during
the last fiscal year.
By order of the Board of Directors
JAMES A. CHOKEY
Secretary
February 23, 1998
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
P HARNISCHFEGER INDUSTRIES, INC.
R ANNUAL MEETING OF STOCKHOLDERS - APRIL 14, 1998
0 This Proxy Solicited on Behalf of the Board of Directors
X
Y The undersigned hereby appoints Jeffery T. Grade and James A. Chokey, and each of
them, proxies, with power of substitution, to vote the shares of stock of Harnischfeger
Industries, Inc. which the undersigned is entitled to vote, as specified on the reverse
side of this card, and, if applicable, hereby directs the trustee of employee benefit
plan(s) shown on the reverse side hereof to vote the shares of stock of Harnischfeger
Industries, Inc. allocated to the account(s) of the undersigned or otherwise which the
undersigned is entitled to vote pursuant to such employee benefit plan(s), as specified on
the reverse side of this card, at the Annual Meeting of Stockholders to be held on April
14, 1998 at 10:00 a.m., CST, at the Wyndham Hotel, 139 E. Kilbourn Avenue, Milwaukee,
Wisconsin, and at any adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES WILL BE
VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE VOTED FOR ALL NOMINEES FOR
DIRECTORS IN PROPOSAL 1 AND IT AUTHORIZES THE ABOVE DESIGNATED PROXIES AND TRUSTEE, AS
APPLICABLE, TO VOTE IN ACCORDANCE WITH THEIR JUDGEMENT ON SUCH OTHER BUSINESS AS MAY COME
BEFORE THE MEETING.
(IMPORTANT-TO BE SIGNED AND DATED ON REVERSE SIDE) /SEE REVERSE
SIDE/
<PAGE>
/ X / Please mark
votes as in
this example
The Board of Directors recommends a vote FOR Proposal 1.
1. To elect five directors to 2. To transact such other business as may properly
serve for terms of three years. come before the Annual Meeting and any adjournment
or postponement thereof.
Nominees:Larry D. Brady, Francis
M. Corby, Jr., John D.
Correnti, Robert B. Hoffman
and Jean-Pierre Labruyere
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
--------------------------------------
For all nominees except as noted on the
line above.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
Please sign exactly as your name appears. If acting as
attorney, executor, trustee or in representative
capacity, sign name and title.
Signature(s): Date: Signature(s): Date:
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