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, 1998
_____ ----------------
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
- ---------------------------------------------
(Address of principal executive offices)
53235-3716
- ----------
(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 12, 1998
- -------------------------- ------------------------------
Common Stock, $1 par value 47,799,592 shares
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
FORM 10-Q
----------
JANUARY 31, 1998
-----------------
INDEX
------
Page No.
--------
PART I. Financial Information:
Consolidated Statement of Income - 1
Three Months Ended
January 31, 1998 and 1997
Consolidated Balance Sheet - 2-3
January 31, 1998 and
October 31, 1997
Consolidated Statement of
Cash Flows - 4
Three Months Ended
January 31, 1998 and 1997
Consolidated Statement of
Shareholders' Equity - 5
Three Months Ended
January 31, 1998 and 1997
Notes to Consolidated
Financial Statements 6-11
Management's Discussion and
Analysis of Results of
Operations and Financial
Condition 12-16
PART II. Other Information 16-17
Signatures 19<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------
(Amounts in thousands except per share amounts)
(Unaudited)
Three Months Ended
January 31,
--------------------
1998 1997
----- -----
<S> <C> <C>
Revenues
Net Sales $634,327 $699,411
Other Income 10,158 8,760
-------- --------
644,485 708,171
Cost of Sales 479,253 527,637
Product Development, Selling
and Administrative Expenses 112,181 113,034
--------- --------
Operating Income 53,051 67,500
Interest Expense - Net (18,772) (16,497)
--------- --------
Income Before Provision
for Income Taxes and Minority Interest 34,279 51,003
Provision for Income Taxes (11,650) (17,850)
Minority Interest (900) (2,295)
--------- --------
Net Income $ 21,729 $ 30,858
========= ========
Earnings Per Share
Basic $ 0.46 $ 0.65
====== ======
Diluted $ 0.46 $ 0.64
====== ======
</TABLE>
See accompanying notes to financial statements.<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED BALANCE SHEET
- ------------------------------
(Dollar amounts in thousands)
January 31, October 31,
1998 1997
- ------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 18,065 $ 29,383
Accounts receivable-net 885,623 836,169
Inventories 623,160 594,761
Other current assets 133,303 119,076
Businesses held for sale 9,576 9,323
------------ -----------
1,669,727 1,588,712
Property, Plant and Equipment:
Land and improvements 60,196 60,724
Buildings 290,123 293,501
Machinery and equipment 805,489 821,479
- ----------- ----------
1,155,808 1,175,704
Accumulated depreciation (516,366) (518,604)
- ----------- ----------
639,442 657,100
Investments and Other Assets:
Goodwill 478,310 508,634
Intangible assets 28,649 33,027
Other assets 138,098 137,062
---------- -----------
645,057 678,723
- ---------- -----------
$2,954,226 $2,924,535
========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------
(Dollar amounts in thousands)
January 31, October 31,
1998 1997
- ------------- -------------
<S> <C> <C>
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 136,624 $ 225,853
Trade accounts payable 409,430 460,689
Employee compensation and benefits 114,166 132,268
Advance payments and progress billings 119,647 85,680
Accrued warranties 61,087 47,753
Other current liabilities 188,366 210,054
---------- ----------
1,029,320 1,162,297
Long-term Obligations 895,011 713,466
Other Liabilities:
Liability for postretirement benefits 50,952 56,202
Accrued pension costs 36,047 36,707
Other liabilities 10,994 11,608
Deferred income taxes 84,589 78,671
--------- ---------
182,582 183,188
Minority Interest 101,506 101,364
Shareholders' Equity:
Common stock (issued 51,609,991 and
51,607,172 shares, respectively) 51,610 51,607
Capital in excess of par value 621,205 625,358
Retained earnings 285,227 268,287
Cumulative translation adjustments (57,377) (41,440)
Less: Stock Employee Compensation
Trust (1,433,147 and 1,433,147
shares, respectively) at market (50,160) (56,430)
Treasury Stock (3,714,654 and
3,127,697 shares, respectively)
at cost (104,698) (83,162)
----------- -----------
745,807 764,220
----------- -----------
$2,954,226 $2,924,535
</TABLE>
See accompanying notes to financial statements.<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Three Months Ended
January 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Operating Activities
Net income $ 21,729 $ 30,858
Add (deduct) - Items not affecting cash:
Depreciation and amortization 23,581 25,079 Minority interest 900 2,295
Other - net 2,762 (3,941)
Changes in working capital, exclusive of
acquisition and divestiture of businesses
(Increase) in accounts receivable - net (64,543) (7,896)
(Increase) in inventories (44,655) (3,573)
(Increase) in other current assets (25,178) (3,800)
(Decrease) increase in trade accounts payable (46,526) 8,271
(Decrease) in employee compensation
and benefits (17,676) (25,082)
Increase (decrease) in advance payments and
progress billings 36,148 (7,619)
(Decrease) in other current liabilities (43,004) (13,078)
--------- ----------
Net cash (applied to) provided by
operating activities (156,462) 1,514
--------- ----------
Investment and Other Transactions
Proceeds from sale of J&L Fiber Services 108,000 -
Other acquisitions, net of cash acquired - (5,325)
Property, plant and equipment acquired (30,214) (31,604)
Property, plant and equipment retired 957 21,295
Other - net 1,934 (1,394)
--------- ----------
Net cash provided by (applied to)
investment and other transactions 80,677 (17,028)
--------- ----------
Financing Activities
Dividends paid (4,646) (4,781)
Exercise of stock options 63 2,479
Purchase of treasury stock (23,878) -
Issuance of long-term obligations 181,786 439
Redemption of long-term obligations (352) (289)
(Decrease) increase in short-term notes payable (88,191) 875
--------- ----------
Net cash provided by (applied to)
financing activities 64,782 (1,277)
--------- ----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (315) 692
--------- ----------
(Decrease) in Cash and Cash Equivalents (11,318) (16,099)
Cash and Cash Equivalents at Beginning of Period 29,383 36,936
--------- ----------
Cash and Cash Equivalents at End of Period $ 18,065 $ 20,837
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Capital in
Common Excess of
Stock Par Value
-------- -----------
<S> <C> <C>
Three Months Ended January 31, 1998
- -----------------------------------
Balance at October 31, 1997 $51,607 $625,358
Net income
Translation adjustments
Exercise of 2,819 stock options 3 60
Dividends paid ($.10 per share)
Dividends on shares held by SECT 143
Adjust SECT shares to market value (6,270)
83,043 shares purchased by employee
benefit plans 1,739
670,000 shares acquired as treasury stock
Amortization of unearned compensation on
restricted stock 175
-------- ----------
Balance at January 31, 1998 $51,610 $621,205
======== ==========
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
130,000 shares purchased by
employee benefit plans 2,484
Amortization of unearned compensation on
restricted stock 203
-------- ----------
Balance at January 31, 1997 $51,446 $623,261
======== ==========
</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, 1998
- -----------------------------------
Balance at October 31, 1997 $268,287 $(41,440)
Net income 21,729
Translation adjustments (15,937)
Exercise of 2,819 stock options
Dividends paid ($.10 per share) (4,789)
Dividends on shares held by SECT
Adjust SECT shares to market value
83,043 shares purchased by employee
benefit plans
670,000 shares acquired as treasury stock
Amortization of unearned compensation on
restricted stock
-------- ---------
Balance at January 31, 1998 $285,227 $(57,377)
======== =========
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)
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Treasury
SECT Stock
----------- ----------
<S> <C> <C>
Three Months Ended January 31, 1998
Balance at October 31, 1997 $(56,430) $(83,162)
Net income
Translation adjustments
Exercise of 2,819 stock options
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value 6,270
83,043 shares purchased by employee
benefit plans 2,342
670,000 shares acquired as treasury stock (23,878)
Amortization of unearned compensation on
restricted stock ---------- -----------
Balance at January 31, 1998 $(50,160) $(104,698)
========== ===========
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)
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Total
----------
<S> <C>
Three Months Ended January 31, 1998
- -----------------------------------
Balance at October 31, 1997 $764,220
Net income 21,729
Translation adjustments (15,937)
Exercise of 2,819 stock options 63
Dividends paid ($.10 per share) (4,789)
Dividends on shares held by SECT 143
Adjust SECT shares to market value -
83,043 shares purchased by employee
benefit plans 4,081
670,000 shares acquired as treasury stock (23,878)
Amortization of unearned compensation on
restricted stock 175
--------
Balance at January 31, 1998 $745,807
========
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
========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
(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, 1998 and 1997,
cash flows for the three months ended January 31, 1998
and 1997, and financial position at January 31, 1998
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, 1997.
The results of operations for any interim period are not
necessarily indicative of the results to be expected for
the full year.
(b) Acquisitions
------------
The Company completed the acquisition of Dobson Park
Industries plc ("Dobson") in 1996 for a purchase price
of approximately $330,000 including acquisition costs,
plus the assumption of net debt of approximately
$40,000.
The Company is fully integrating Longwall's (the main
subsidiary of Dobson) 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
approximated $71,000. As of January 31, 1998,
approximately $47,300 of these reserves had been used.
It is anticipated that the remaining reserves will be
substantially utilized in fiscal 1998.
(c) Restructuring Charge
--------------------
In the fourth quarter of fiscal 1996, the Company's
Beloit Corporation subsidiary recorded a restructuring
charge. The focus of the restructuring is to better
serve its customers and strengthen its market position
in the worldwide pulp and paper industry. The
restructuring is consistent with the Company's policy to
generate positive Economic Value Added ("EVA"). The
restructuring initiative involves organizing engineering
and manufacturing operations into Centers of Excellence
and expanding the aftermarket capabilities of the
subsidiary. The total estimated cost of the
restructuring activities reduced fiscal 1996 pre-tax
income by $43,000 ($21,830 after tax and minority
interest, or $0.46 per share). 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, 1998, $30,200 had been
charged against the reserve and 466 employees had been
terminated in accordance with the plan. The remaining
reserves are expected to be substantially utilized
during fiscal 1998.
(d) Inventories
-----------
<TABLE>
<CAPTION>
Consolidated inventories consisted of the following:
January 31, October 31,
1998 1997
------------ -----------
<S> <C> <C>
Finished goods $270,771 $274,391
Work in process and purchased parts 280,830 247,568
Raw materials 131,768 132,980
-------- --------
683,369 654,939
Less excess of current cost over stated
LIFO value (60,209) (60,178)
--------- --------
$623,160 $594,761
========= ========
</TABLE>
Inventories valued using the LIFO method represented
approximately 56% and 54% of consolidated inventories at
January 31, 1998 and October 31, 1997, 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 $10,417 and $10,141 for the three months
ended January 31, 1998 and 1997, respectively. Certain
capital expenditures used in research activities are
capitalized and depreciated over their expected useful
lives.
(f) Interest Expense - Net
----------------------
<TABLE>
<CAPTION>
Net interest expense consisted of the following:
Three Months Ended
January 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Interest income $ 1,524 $ 798
Interest expense (20,296) (17,295)
--------- ---------
Interest expense - net $(18,772) $(16,497)
========= =========
</TABLE>
(g) Long-Term Obligations
---------------------
<TABLE>
<CAPTION>
Long-term obligations at January 31, 1998 and October
31, 1997 consisted of the following:
January 31, October 31,
1998 1997
------------ -----------
<S> <C> <C>
10 1/4% Senior Notes, due 2003 $ 7,730 $ 7,730
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 $1,244 and 1,247,
respectively) 148,756 148,753
6 7/8% Debentures, due 2027 (net of
discount of $109 and $111,
respectively) 149,891 149,889
Senior Notes, Series A through D, at
interest rates of between 8.9% and
9.1%, due 1998 to 2006 71,364 71,364
Revolving Credit Facility 275,000 150,000
Industrial Revenue Bonds, at interest
rates of between 5.9% and 8.8%,
due 1998 to 2017 33,200 33,400
Other 70,644 14,057
-------- --------
906,585 725,193
Less: Amounts payable within one year 11,574 11,727
--------- --------
$895,011 $713,466
========= =========
</TABLE>
On February 17, 1998, the Company filed a shelf
registration with the Securities and Exchange Commission
for $200,000 of debt securities. To date, no securities
have been issued under this registration.
In 1996, the Company filed a shelf registration with the
Securities and Exchange Commission for the sale of up to
$200,000 of debt securities. 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 thereof plus accrued and unpaid
interest. Interest on the debentures is payable
semi-annually on February 15 and August 15 of each year.
The Company maintains a committed five-year Revolving
Credit Facility Agreement with certain domestic and
foreign financial institutions that allows for
borrowings of up to $500,000 at rates expressed in
relation to LIBOR and other rates which expires in
October, 2002. A facility fee is payable on the
Revolving Credit Facility. At January 31, 1998, direct
outstanding borrowings under the facility were $275,000
and commercial paper borrowings, considered a
utilization of the facility, were $75,266.
(h) Contingent Liabilities
----------------------
At January 31, 1998, the Company was contingently liable
to banks, financial institutions, and others for
approximately $440,000 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. 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 $14,700
at January 31, 1998. Under the terms of the facility,
no new bonds can be issued during 1998.
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. Although the outcome of theses
matters cannot be predicted with certainty and favorable
or unfavorable resolution 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. In the case
of Beloit Corporation, certain litigation matters and
claims are currently pending in connection with its
contractual undertakings. Beloit may on occasion enter
into arrangements to participate in the ownership of or
operate pulp or papermaking facilities in order to
satisfy contractual undertakings or resolve disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15,000 failed
to perform satisfactorily. In June, 1997, a Lewiston,
Idaho jury awarded Potlatch $95,000 in damages in the
case. Beloit has appealed this award to the Idaho
Supreme Court. While the eventual outcome of the
Potlatch case cannot be predicted, reserves in the
January 31, 1998 Consolidated Balance Sheet are less
than the full amount of the jury award.
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) Earnings Per Share
------------------
In the first quarter of fiscal 1998, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No.
128, "Earnings Per Share". Following is the
reconciliation of the numerators and denominators used
to calculate the basic and diluted earnings per share
from continuing operations:
<TABLE>
<CAPTION>
For The Three Months Ended
January 31,
-----------------------------
1998 1997
----- -------
<S> <C> <C>
Basic Earnings Per Share
------------------------
Income available for common shareholders $21,729 $30,858
Average common shares outstanding 46,742 47,720
Basic earnings per share $0.46 $0.65
===== =====
Diluted Earnings Per Share
--------------------------
Income available for common shareholders $21,729 30,858
Average common shares outstanding
Common stock 46,742 47,720
Assumed exercise of stock options 199 538
------- -------
46,941 48,258
Diluted earnings per share $0.46 $0.64
====== =====
</TABLE>
(j) Common Stock
------------
In September, 1997, the Company announced that the board
of directors had authorized the purchase of up to ten
million shares of the Company's common stock. As of
March 12, 1998, the Company had repurchased 1,676,400
through open-market transactions at a cost of
approximately $65,300.
(k) Other
-----
On February 23, 1998, in its first quarter results press
release, the Company included an update of Beloit's
B2000 strategy indicating that manufacturing throughput
is increasing dramatically while the global pulp and
paper markets continue to rationalize. The Company
expects to take restructuring and non-recurring charges
in the range of $125,000 to $150,000 in the second
quarter, specifically related to Beloit. These charges
will include significant reductions in global plant
investment and employment as well as additional reserves
for non-restructuring-related expenses. Preliminary
estimates are that the restructuring actions will
produce savings of $30,000 to $40,000 annually.
On January 28, 1998, the Company announced the sale of
80 percent of the Company's P&H Material Handling unit
for approximately $340,000 in cash at closing in a
transaction with Chartwell Investments, Inc. In
addition, the Company will receive preferred stock and
royalty payments from the new company for 10 years. The
1998 after-tax cash proceeds from the transaction are
expected to total approximately $300,000. Gains from
the sale are expected to more than offset the
restructuring and non-recurring charges anticipated at
Beloit.
The transaction is expected to close in the second
quarter, subject to completion of Chartwell's financing
arrangements. Chartwell is a private investment firm
based in New York City that controls businesses in
distribution and services with over $1 billion in sales.
The Company expects to use the proceeds of the sale to
pay down debt and to buy back stock as part of the
Company's previously announced intent to repurchase up
to 10 million shares.<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
--------------------------------------------
(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, 1998
amounted to $21,729, or $0.46 per basic share as compared to
net income of $30,858, or $0.65 per basic share, for the three
months ended January 31, 1997.
Basic earnings per share calculations for the first three
months of 1998 and 1997 were based on 46,742 and 47,720
average shares outstanding, respectively, and diluted earnings
per share for the first three months of 1998 and 1997 were
based on 46,941 and 48,258 average shares outstanding,
respectively.
Significant factors contributing to the $9,129 decrease in net
income for the first three months of 1998 as compared to 1997
included: (1) a $14,449 decrease in operating income in 1998
compared with 1997 as described in the Segment Information
-------------------
section which follows, and (2) a $2,275 increase in interest
expense in 1998, offset by (3) a $6,200 decrease in income
taxes in 1998 primarily due to lower pre-tax income.
Segment Information
- -------------------
<TABLE>
<CAPTION>
Operating results of the Company's business segments for the
first quarter of 1998 and 1997 are summarized as follows:
Net Sales Operating Income
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Mining Equipment $321,122$350,454$38,527 $45,078
Pulp and Paper Machinery 236,722 268,975 14,507 20,874
P&H Material Handling 76,483 79,982 5,634 7,196
-------- ------------------------
Total Business Segments $634,327$699,411 58,668 73,148
======== ========
Corporate Administration (5,617) (5,648)
-------- -------
Operating Income $53,051 $67,500
================
</TABLE>
(A) Backlog has been reduced by $2,703 due to sale of J&L
Fiber Services in November, 1997.
Segment Information
- -------------------
<TABLE>
<CAPTION>
Operating results of the Company's business segments for the
first quarter of 1998 and 1997 are summarized as follows:
Orders Booked Backlog at
1998 1997 1/98 10/97
<S> <C> <C> <C> <C>
Mining Equipment $303,340 $378,417 $ 340,558 $ 358,340
Pulp and Paper Machinery 303,376 403,042 840,569(A) 776,618
P&H Material Handling 78,499 59,333 99,759 97,743
-------- -------- ---------- ---------
Total Business Segments $685,215 $840,792 $1,280,886 $1,232,701
======== ======== ========== =========
</TABLE>
(A) Backlog has been reduced by $2,703 due to sale of J&L
Fiber Services in November, 1997.
Segment Information - Continuing Operations
- -------------------------------------------
Net sales of the Mining Equipment segment amounted to $321,122
and $350,454 for the first three months of 1998 and 1997,
respectively, representing an 8% decrease in 1998 as compared
to 1997. Operating profit decreased to $38,527 in the first
quarter of 1998 as compared to $45,078 in 1997. The decrease
in sales and operating profit is primarily due to lower
original equipment sales in underground mining. Bookings for
the first three months of 1998 amounted to $303,340 as
compared to $378,417 for the same period in 1997. The
decrease is due primarily to an original equipment Russian
order in the first quarter of 1997.
The Pulp and Paper Machinery segment contributed sales and
operating profit of $236,722 and $14,507, respectively, for
the first three months of 1998, as compared to net sales of
$268,975 and operating profit of $20,874 for the corresponding
period in 1997. Sales decreased 12% in 1998 over 1997
primarily due to a decrease in sales of original equipment
caused by the weak global pulp and paper markets and by the
stretch-out of production on two large fine paper machines for
the Pacific Rim. Aftermarket sales were impacted by the
previously announced sale of J&L Fiber Services ("J&L") in
November, 1997. Operating results were adversely impacted by
the lower sales levels and benefited from a $15,000 settlement
of certain patent litigation and the gain on the sale of J&L,
both of which were largely offset by previously capitalized
expenses related to the litigation, additions to warranty
reserves and certain non-recurring charges and adjustments
related to customer contracts. Bookings for the first three
months of 1998 amounted to $303,376 as compared to $403,042
for the same period in 1997, as 1997 included a $150,000
original equipment order for a customer in the Pacific Rim.
The Material Handling segment contributed sales and operating
profit of $76,483 and $5,634, respectively, for the first
three months of 1998, as compared to sales of $79,982 and
operating profit of $7,196 for the comparable period in 1997.
Bookings for the first three months of 1998 and 1997 amounted
to $78,499 and $59,333, respectively.
Income Taxes
- ------------
The Company's estimated annual effective tax rate for 1998 was
34% compared to a 35% federal statutory tax rate. The
principal reason for the difference between the effective rate
and the statutory rate is the usage of tax credits.
Liquidity and Cash Flows
- ------------------------
<TABLE>
<CAPTION>
The Company's capital structure at January 31, 1998 and October 31, 1997 was as follows:
January 31, October 31,
1998 1997
- ----------- ------------
<S> <C> <C>
Short-term notes payable $ 125,050 $ 214,126
Long-term obligations,
including current portion 906,585 725,193
---------- ----------
1,031,635 939,319
Minority interest 101,506 101,364
Shareholders' equity 745,807 764,220
- ---------- ----------
Total capitalization $1,878,948 $1,804,903
========== ==========
Debt to capitalization ratio 54.9% 52.0%
===== =====
</TABLE>
Cash Flow from Operating Activities
- -----------------------------------
Cash flow used by operating activities was $156,462 for the
three months ended January 31, 1998 compared to cash flow
provided by operating activities of $1,514 for the comparable
period in 1997. The decrease in cash flows between periods
resulted from an increase in accounts receivable and
inventories and decreases in trade accounts payable.
Cash Flow from Investment Activities
- ------------------------------------
Cash flow provided by investment activities was $80,677 for
the three months ended January 31, 1998 compared to cash flow
applied to investment activities of $17,028 for the comparable
period in 1997. The change is primarily due to proceeds from
the sale of J&L in fiscal 1998.
Cash Flow for Financing Activities
- ----------------------------------
Cash flow provided by financing activities was $64,782 for the
first quarter of fiscal 1998 compared to cash flow applied to
financing activities of $1,277 for the comparable period in
1997. The change was due to long-term debt issuance of
$181,786 offset by a decrease in short-term notes payable of
$88,191 and the purchase of treasury stock of $23,878 in
fiscal 1998.
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 borrowings of up to $500,000
at rates expressed in relation to LIBOR and other rates.
At January 31, 1998, direct outstanding borrowings
related to the facility were $275,000 and commercial
paper borrowings, considered a utilization of the
facility, were $75,266.
(2) The Company maintains various uncommitted domestic credit
facilities of approximately $80,000 to further supplement
short-term working capital requirements. At January 31,
1998, borrowings under these facilities were $8,000.
Additionally, short-term bank credit lines of foreign
subsidiaries were approximately $193,800 of which
approximately $41,800 was outstanding at January 31,
1998.
(3) In 1996, the Company filed a shelf registration with the
Securities and Exchange Commission for the sale of up to
$200,000 of debt securities. 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. To date, no other securities covered
by the registration have been offered for sale.
(4) On February 17, 1998, the Company filed a shelf
registration with the Securities and Exchange Commission
for $200,000 of debt securities. To date, no securities
have been issued under this registration.
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, 1998; 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
- ------------
The Company completed the acquisition of Dobson Park
Industries plc ("Dobson") in 1996 for a purchase price of
approximately $330,000 including acquisition costs, plus the
assumption of net debt of approximately $40,000.
The Company is fully integrating Longwall's (the main
subsidiary of Dobson) 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
approximated $71,000. As of January 31, 1998, approximately
$47,300 of these reserves had been used. It is anticipated
that the remaining reserves will be substantially utilized in
fiscal 1998.
Common Stock
- ------------
In September, 1997, the company announced that the board of
directors had authorized the purchase of up to ten million
shares of the Company's common stock. As of March 12, 1998,
the Company had repurchased 1,676,400 shares through
open-market transactions at a cost of approximately $65,300.
Other
- -----
On February 23, 1998, in its first quarter results press
release, the Company included an update of Beloit's B2000
strategy indicating that manufacturing throughput is
increasing dramatically while the global pulp and paper
markets continue to rationalize. The Company expects to take
restructuring and non-recurring charges in the range of
$125,000 to $150,000 in the second quarter, specifically
related to Beloit. These charges will include significant
reductions in global plant investment and employment as well
as additional reserves for non-restructuring-related expenses.
Preliminary estimates are that the restructuring actions will
produce savings of $30,000 to $40,000 annually.
On January 28, 1998, the Company announced the sale of 80
percent of the Company's P&H Material Handling unit for
approximately $340,000 in cash at closing in a transaction
with Chartwell Investments, Inc. In addition, the Company
will receive preferred stock and royalty payments from the new
company for 10 years. The 1998 after-tax cash proceeds from
the transaction are expected to total approximately $300,000.
Gains from the sale are expected to more than offset the
restructuring and non-recurring charges anticipated at Beloit.
The transaction is expected to close in the second quarter,
subject to completion of Chartwell's financing arrangements.
Chartwell is a private investment firm based in New York City
that controls businesses in distribution and services with
over $1 billion in sales. The Company expects to use the
proceeds of the sale to pay down debt and to buy back stock as
part of the Company's previously announced intent to
repurchase up to 10 million shares.
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 the companies' success
in securing payment for such sales and meeting the
requirements of warranties and guarantees associated
with such sales, 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 customers' 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 quality 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; 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; 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 Company's ability to assist
with competitive financing programs and the
availability of manufacturing capacity at the
Company's factories.
- 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 adequacy of
the Company's systems to manage major projects
and its 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: unforeseen 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 turmoil in
major markets such as the United States, Canada,
Europe, Asia and the Pacific Rim, South Africa,
Australia and Chile; environmental and trade
regulations; and the stability and ease of
exchange of currencies.
Item 6 (a) Exhibits:
10(a)Harnischfeger Industries, Inc. Executive
Incentive Plan, as amended and restated as of
February 9, 1998.
(b)Harnischfeger Industries, Inc. Long-Term
Compensation Plan for Key Executives, as amended
and restated as of February 9, 1998.
(c)Harnischfeger Industries, Inc. Supplemental
Retirement and Stock Funding Plan, as amended
and restated as of February 9, 1998.
(d)Harnischfeger Industries, Inc. Directors
Stock Compensation Plan, as amended and
restated, as of February 9, 1998.
(e)Harnischfeger Industries, Inc. Long-Term
Compensation Plan for Directors as of
February 9, 1998.
11 Statement re: Calculation of Earnings Per
Share
27 Financial Data Schedule
(b)Reports on Form 8-K
NONE
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, 1998 and Chief Financial Officer
- -------------------
/s/ James C. Benjamin
-----------------------
James C. Benjamin
Vice President and Controller
Date March 12, 1998 and Chief Accounting Officer
- -------------------
Exhibit 11
- -----------
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CALCULATION OF EARNINGS PER SHARE
- ---------------------------------
(Amounts in thousands except per share amounts)
Three Months Ended
January 31,
-------------------------------
1998 1997
-------- -------
<S> <C> <C>
Average Shares Outstanding
Basic 46,742 47,720
====== =======
Diluted 46,941 48,258
====== =======
Net Income $21,729 $30,858
======= =======
Net Income per share
Basic $0.46 $0.65
===== =====
Diluted 0.46 0.64
===== =====
</TABLE>
Exhibit 10(a)
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
EXECUTIVE INCENTIVE PLAN
------------------------
(as amended and restated February 9, 1998)
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 reflected as shares of the
Company's common stock ("Stock") in a bookkeeping account
maintained in the Participant's name (the "Account") 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 have up to 100% of his
Incentive Award for that Plan Year reflected in his Account as
an equivalent number of shares of Stock. Such election shall
be irrevocable.
(b) Each electing Participant's Account shall
be credited to reflect 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
December immediately following end of the Plan Year into the
amount of Incentive Award that such Participant has elected to
have reflected in his Account as Stock. The Company shall
deliver to the Harnischfeger Industries Deferred Compensation
Trust (the "Rabbi Trust") shares of Stock equal in number to
the shares credited to the Accounts of all Participants who
make an election under this Section 7. Shares transferred to
the Rabbi Trust shall be registered by the Company in the name
of the Rabbi Trust. 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
to the extent the assets of the Rabbi Trust exceed the
Company's aggregate obligation under all Plans associated with
the Rabbi Trust. The aforesaid calculation and stock transfer
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
transferred to the Rabbi Trust 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 transferred to the
Rabbi Trust 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) Each Participant's Account shall be
credited to reflect all dividends, stock splits and other
distributions with respect to shares reflected in his Account.
All cash distributions with respect to Stock shall be
reflected in the Participant's Account as an equivalent number
of shares of Company stock; provided, however, that the number
of shares credited 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 in connection with such discounted purchase of
Stock with cash dividends. Each Participant's Account shall
be charged with any distribution made to a Participant when
made.
(d) Shares of Stock equal in number to the
shares credited to a Participant's Account shall be
distributed to him (or to his beneficiary in the event of his
death) promptly (but not sooner than fifteen (15) 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
Account 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 ten (10) 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 benefit 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 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 such 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, such Participant's Account shall be kept 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.
(e) Notwithstanding the foregoing, promptly
(but not later than fifteen (15) days) following a "Change in
Control" of the Company (as defined in the Rabbi Trust), an
amount of cash equal to (i) the number of shares of Stock
credited to each Participant's Account (ii) multiplied by the
Change in Control Price as defined below shall be paid by the
Company to each Participant in lieu of any payment described
in Section 7(d). If the Company chooses not to make such
payment directly to a Participant or Participants, the Company
shall within such fifteen (15) day period purchase for cash,
at the Change in Control Price, from the Rabbi Trust a
sufficient number of shares of Stock to provide the full cash
payment and the Trustee is directed to sell such shares upon
such terms. 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 sixty (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 for the Participant to participate in the
Plan, the election of having his Incentive Award reflected as
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 another plan
(the "Other Plan") which will provide deferred compensation in
the same manner and amounts as would have been provided under
this Plan except that the Other Plan will not be in any way
associated with the Rabbi Trust. Notwithstanding the
foregoing, in the event of a Change in Control, the
Participant's benefit under the Other Plan shall be
distributed in cash to the Participant in a manner similar to
that described in Section 7(e) above.
(g) 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(b)
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
LONG-TERM COMPENSATION PLAN FOR KEY EXECUTIVES
-----------------------------------------------
(as amended and restated February 9, 1998)
1. Purpose. The Harnischfeger Industries,
-------
Inc. Long-Term Compensation Plan for Key Executives
(the "Plan"), established effective as of September
8, 1997 by Harnischfeger Industries, Inc. (the
"Company"), is intended to provide certain key
officers of the Company a one-time grant of long-
term compensation incentives directly linked to
achieving high performance for Company
shareholders.
2. Administration. The Plan will be
--------------
administered by the Human Resources Committee of
the Board of Directors of the Company or such other
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 as the Board of Directors may designate
from time to time (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. Awards under the Plan shall be
granted on the basis of five consecutive years
(each a "Plan Year" and, individually, Plan Years
1, 2, 3, 4 and 5, respectively) consisting of the
five 12-month periods beginning on September 8,
1997 and ending on September 7, 2002. 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 procedures with respect to the
administration of the Plan. Any decision made by
the Committee in good faith in connection with its
administration of or responsibilities under the
Plan shall be conclusive on all persons.
3. Participation. Each executive of the
-------------
Company listed on Schedule I shall be a participant
in the Plan (a "Participant").
4. Shares. The total number of shares of
------
the Company's common stock ("Stock") (other than
Dividend Shares (as defined below) and Stock
awarded through the reinvestment of cash
distributions as provided in paragraph 6(b) hereof)
on which the value of a Participant's award under
the Plan is based (the "Total Share Award") is
listed on Schedule I. As share awards are earned
by a Participant pursuant to Section 6, a
bookkeeping account maintained on behalf of the
Participant (the "Account") shall be credited to
reflect the earned awards.
5. Stock Price Targets. The Stock prices
-------------------
at which awards are made under the Plan (the "Stock
Price Targets") and corresponding proportions of
Total Share Awards to be granted under the Plan
(the "Proportions of Total Share Award") for each
Plan Year are listed on Schedule II.
6. Awards. If at any time during a Plan
------
Year the average closing price of the Stock on the
New York Stock Exchange Composite Tape for twenty
(20) consecutive trading days equals or exceeds a
Stock Price Target for such Plan Year, each
Participant who is then employed by the Company
shall earn (for purposes of crediting the
Participant's Account (i) an amount measured by a
number of shares of Stock (a "Stock Award") which
together with all previous Stock Awards equals the
Total Share Award for such Participant multiplied
by the Proportion of Total Share Award
corresponding to such Stock Price Target and (ii)
an additional amount (the "Dividend Shares") equal
to the number of shares of Stock (rounded to the
nearest whole number of shares) that would have
been credited to the Participant's Account as the
result of the reinvestment of cash distributions in
the manner and at the prices specified in paragraph
6(b) below had such Stock Award been made on
September 8, 1997. Any Participant whose
employment with the Company terminates for any
reason prior to September 8, 2002 shall not be
eligible for additional Stock Awards under the Plan
following the date of such termination of
employment. On the date a Participant earns a
Stock Award, the Company shall deliver into the
Harnischfeger Industries Deferred Compensation
Trust ("Rabbi Trust") a number of shares of Stock
equal to the Stock Award and Dividend Shares
corresponding to such Stock Award to be held under
the terms of the Rabbi Trust subject to the terms
hereinafter set forth:
(a) Shares of Stock required to be
delivered to the Rabbi Trust by the Company
shall be registered by the Company in the
name of the Rabbi Trust, provided, however,
------------------
that 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 to the extent shares held in the
Rabbi Trust exceed the Company's aggregate
obligations under all plans covered by the Rabbi
Trust. The Stock transferred to the Rabbi Trust
hereunder may at the Company's option be acquired
through open market purchases or may be treasury
shares provided that any such shares are duly
registered or exempted from registration pursuant
to applicable federal and state securities laws.
Although the Company intends to exert its best
efforts so that the shares transferred to the Rabbi
Trust or distributed to Participants or their
beneficiaries 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 transfer or
distribution be deferred until the Company has
taken appropriate action to avoid any such
violation.
(b) Each Participant's Account shall be
credited to reflect all dividends, stock
splits and other distributions with respect
to such shares. The number of shares
credited to each Participant's Account in
respect of each cash distribution with
respect to Stock transferred to the Rabbi
Trust hereunder 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 in connection
with such discounted purchase of Stock with
cash dividends. Each Participant's Account
shall be debited to reflect any
distributions made to a Participant when
made.
(c) Stock equal to the number of shares
credited to a Participant's Account shall be
distributed to him (or to his beneficiary in
the event of his death) promptly (but not
sooner than fifteen (15) 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 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 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 ten (10) 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 receive payment hereunder
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
adjust such Participant'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.
(d) Notwithstanding the foregoing,
promptly (but not later than fifteen (15)
days) following a "Change in Control" of the
Company (as defined in the Rabbi Trust), an
amount of cash equal to (i) the number of
shares of Stock credited to each
Participant's Account (ii) multiplied by the
Change in Control Price as defined below
shall be paid by the Company to each
Participant in lieu of any payment described
in Section 6(c). If the Company chooses not
to make such payment directly to a
Participant or Participants, the Company
shall within such fifteen (15) day period
purchase for cash, at the Change in Control
Price, from the Rabbi Trust a sufficient
number of shares of Stock to provide the
full cash payment and the Trustee is
directed to sell such shares upon such
terms. 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 sixty
(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).
7. 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 full benefits hereunder. 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.
8. General. No Participant or other person
-------
shall have any right, title or interest in any
property of the Company as a result of an award
under the Plan. No rights or interests of
Participants under this Plan shall be assignable
either voluntarily or involuntarily nor shall the
establishment nor continuance of this Plan affect
or enlarge the employment rights of any Participant
or constitute a contract of employment with any
Participant. No 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 6 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.
9. 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.
10. 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.
11. Benefit Statements. The Company shall
------------------
provide statements of their Accounts to
Participants on a periodic basis but not less than
annually in such form and at such time as it deems
appropriate.
12. Amendment and Termination. The Company
-------------------------
may not amend or terminate the Plan without the
express written consent of each Participant who is
affected by such amendment or termination.
13. Controlling Law. The laws of Wisconsin
---------------
shall be controlling in all matters relating to the
Plan.
14. 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.
15. Gross-Up Payments. Subject to
-----------------
Participants complying with the requirements of
this Section 15, in the event it shall be
determined that any payment or distribution under
the Plan to or for the benefit of a Participant,
determined without regard to any additional
payments required by this first paragraph of this
Section 15 (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are incurred by a
Participant with respect to such excise tax (such
excise tax, together with any such interest and
penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Participant shall be
entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by the Participant of all taxes (including
any interest or penalties imposed with respect to
such taxes), including, without limitation, any
income taxes (and any interest or penalties imposed
with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Participant retains an
amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
Subject to the provisions of the third
paragraph of this Section 15, all determinations
required to be made under this Section 15,
including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at
such determination, shall be made by Price
Waterhouse LLP or any successor thereto (the
"Accounting Firm") which shall provide detailed
supporting calculations both to the Company and
Participants within thirty (30) business days of
the receipt of notice from a Participant that there
has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payments, as determined
pursuant to this Section 15, shall be paid by the
Company to Participants within five days of the
receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be
binding upon the Company and Participants. As a
result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to the
third paragraph of this Section 15 and the
Participant thereafter is required to make a
payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit
of the Participant.
Participants shall notify the Company in
writing of any claim by the Internal Revenue
Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable
but no later than thirty (30) business days after
the Participant is informed in writing of such
claim and shall apprise the Company of the nature
of such claim and the date on which such claim is
requested to be paid. The Participant shall not
pay such claim prior to the expiration of the
thirty (30)-day period following the date on which
it gives such notice to the Company (or such
shorter period ending on the date that any payment
of taxes with respect to such claim is due). If
the Company notifies the Participant in writing
prior to the expiration of such period that it
desires to contest such claim, the Participant
shall: (i) give the Company any information
reasonably requested by the Company relating to
such claim; (ii) take such action in connection
with contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company; (iii)
cooperate with the Company in good faith in order
effectively to contest such claim; and (iv) permit
the Company to participate in any proceedings
relating to such claim; provided, however, that the
Company shall bear and
- -----------------------
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall indemnify
and hold the Participant harmless, on an after-tax
basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto)
imposed as a result of such representation and
payment of costs and expenses. Without limitation
on the foregoing provisions of this third paragraph
of Section 15, the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings,
hearings and conferences with the taxing authority
in respect of such claim and may, at its sole
option, either direct the Participant to pay the
tax claimed and sue for a refund or contest the
claim in any permissible manner, and the
Participant shall prosecute such contest to a
determination before any administrative tribunal,
in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall
determine; provided, however, that if the Company
-----------------------
directs the Participant to pay such claim and sue
for a refund, the Company shall advance the amount
of such payment to the Participant, on an interest-
free basis and shall indemnify and hold the
Participant harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with
respect to such advance or with respect to any
imputed income with respect to such advance; and
further provided that any extension
---------------------
of the statute of limitations relating to payment
of taxes for the taxable year of the Participant
with respect to which such contested amount is
claimed to be due is limited solely to such
contested amount. Furthermore, the Company's
control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be
payable hereunder and the Participant shall be
entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue
Service or any other taxing authority.
If, after the receipt by the Participant
of an amount advanced by the Company pursuant to
the third paragraph of this Section 15, the
Participant becomes entitled to receive any refund
with respect to such claim, the Participant shall
(subject to the Company's complying with the
requirements of the third paragraph of this Section
15) promptly pay to the Company the amount of such
refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after
the receipt by the Participant of an amount
advanced by the Company pursuant to the third
paragraph of this Section 15, a determination is
made that the Participant shall not be entitled to
any refund with respect to such claim and the
Company does not notify the Participant in writing
of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after
such determination, then such advance shall be
forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment
required to be paid.
Exhibit 10(c)
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
SUPPLEMENTAL RETIREMENT AND STOCK FUNDING PLAN
----------------------------------------------
(as amended and restated February 9, 1998)
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 ("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 place assets in the Rabbi Trust that may be
used to provide any benefits under this Supplemental Plan,
except that shares of Stock shall be issued and transferred to
the Rabbi Trust as provided in Section 3.2 and 3.3.
Notwithstanding the above, the Company intends for this
Supplemental Plan to constitute an unfunded, unsecured promise
to pay future benefits.
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 reflected, on
the terms hereinafter set forth, as shares of Stock in a
bookkeeping account maintained in the Participant's name (the
"Account"). 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. An amount equal to
the number of shares of Stock (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 credited to the
Participant's Account. The Company shall deliver into the
Rabbi Trust a number of shares of Stock equal to the amount
reflected in all electing Eligible Stock Participants'
Accounts hereunder, and the Company shall register such shares
in the name of the trustee of the Rabbi Trust (the "Trustee").
The aforesaid calculation and Stock transfer shall take place
as soon as is practicable after October 1, 1990. The shares
transferred to the Rabbi Trust pursuant to Section 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 transferred to the Rabbi
Trust 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 transfer 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. Each
Eligible Stock Participant's Account shall be credited with an
amount equal to the number of shares of the Company's common
stock (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
following month of December 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). A number of shares of Stock equal to the amount
reflected in all Eligible Stock Participant's Accounts 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). Stock transferred by the Company
to the Rabbi Trust 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 transferred to the Rabbi
Trust 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 transfer 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 reflected as common stock as provided in
Section 3.2, such supplemental benefits shall be calculated
and paid under the provisions of the Supplemental Plan in
effect prior to October 1, 1990 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. Each Eligible
----------------------
Stock Participant's Account shall be credited to reflect all
dividends, stock splits and other distributions with respect
to shares of Stock reflected in his Account, and all non-stock
distributions with respect to Stock shall be reflected as
shares of the Stock (for purposes of crediting the
Participant's Account), using the last closing price for the
Stock on the New York Stock Exchange Composite Tape
immediately preceding such non-stock distribution. Each
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 reflected as shares of 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
Stock, and any other amounts reflected in an Eligible Stock
Participant's Account as of the date of such determination,
including the amount of any benefits accrued hereunder that
are not reflected as shares of Stock.
3.6.2 Payments. Stock Benefits shall, at
--------
the Company's discretion, be paid from the Rabbi Trust or paid
directly by the Company from other assets.
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 and such Participant shall receive benefits under
Section 2 to the same extent as if none of his benefits had
ever been reflected as 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.
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 fifteen (15) 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 Benefits over a period of time of
up to ten (10) years (e.g. if a ten year election, one tenth
of the Account balance at the time of the first distribution,
one ninth of the Account 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 of his benefit. During the
first ten (10) 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
reflected in the 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 Committee from time to time and as if the Diversified
Shares had been sold.
3.6.3 Change In Control.
-----------------
Notwithstanding the foregoing, promptly (but not later than
fifteen (15) days) following a "Change in Control" of the
Company (as defined in the Rabbi Trust), an amount of cash
equal to (i) the number of shares of Stock credited to each
Participant's Account multiplied by the Change in Control
Price as defined below (ii) plus the value of any portion of
such Participant's Account not reflected in shares of Stock
shall be paid by the Company to each Participant in lieu of
any payment described in Section 3.6.2. If the Company
chooses not to make such payment directly to a Participant or
Participants, the Company shall within such fifteen (15) day
period purchase for cash, at the Change of Control Price, from
the Rabbi Trust sufficient number of shares to provide the
cash payments and the Trustee is directed to sell such shares
upon such terms. 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 9, 1998)
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 based 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") reflected as shares of the
Company's common stock ("Stock") in a bookkeeping account
maintained in the Director's name (the "Account") and the
payment of which will be 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 Crediting. The Accrued Benefits
---------------
specified in Schedule "A" and Incentive Compensation
determined in accordance with Section 6 shall be reflected as
shares of Stock in the Participant's Account. The number of
shares to be reflected shall be determined by (a) 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 December immediately following end of
the Plan Year into the amount of Incentive Compensation. The
Company shall transfer shares equal to the aggregate amount
reflected in all Director's Accounts hereunder to the
Harnischfeger Industries, Inc. Deferred Compensation Trust
("Rabbi Trust"), subject to the terms and conditions
hereinafter set forth. The transferred shares 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 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 to the extent assets held by the Rabbi Trust
exceed the Company's aggregate obligations under all plans
associated with the Rabbi Trust. The aforesaid calculation of
Account credits and the transfer of Stock to the Rabbi Trust
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 reflected as shares of Stock 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 have his Compensation reflected as
Stock, and, therefore, elects to defer receipt of 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 have their
Compensation reflected as 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 have
reflected as Stock shall be credited to the
Directors' Account. The Company shall transfer
shares of Stock equal to the aggregate amount
credited to all Director's Accounts to the Rabbi
Trust.
(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 transferred
---------------
to the Rabbi Trust 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 to the extent the value of
assets held in the Rabbi Trust exceed the Company's aggregate
liability under all plans associated with the Rabbi Trust.
Although the Company intends to exert its best efforts so that
the shares transferred to the Rabbi Trust 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 transfer or distribution be deferred until
the Company has taken appropriate action to avoid any such
violation.
10. Participants' Accounts. Each Director's
----------------------
Account shall reflect the number of shares of Stock which
represent his Accrued Benefits and Incentive Compensation and
the Compensation he has elected to have reflected as Stock,
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 reflected in a
Participant's Account shall be converted to shares of Stock
for crediting purposes. Each such 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 fifteen (15) 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
of his benefits hereunder. During the first ten (10) 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 reflected in the 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, promptly (but not later than fifteen (15) days)
following a "Change in Control" of the Company (as defined in
the Rabbi Trust), an amount of cash equal to (i) the number of
shares of Stock credited to each Director's Account (ii)
multiplied by the Change in Control Price as defined below
shall be paid by the Company to each Participant in lieu of
any payment under Section 11. If the Company chooses not to
make such payment directly to a Participant or Participants,
the Company shall within such fifteen (15) day period purchase
for cash, at the Change in Control Price, from the Rabbi Trust
a sufficient number of shares of Stock to provide the full
cash payment and the Trustee is directed to sell such shares
upon such terms. 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 sixty (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.
Exhibit 10(e)
HARNISCHFEGER INDUSTRIES, INC.
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LONG-TERM COMPENSATION PLAN FOR DIRECTORS
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(as amended and restated February 9, 1998)
1. Purpose. The Harnischfeger Industries,
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Inc. Long-Term Compensation Plan for Directors (the "Plan"),
established effective as of September 8, 1997 by Harnischfeger
Industries, Inc. (the "Company"), is intended to provide
directors who are not employees of the Company a one-time
grant of long-term compensation incentives directly linked to
achieving high performance for Company shareholders.
2. Administration. The Plan will be
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administered by the Human Resources Committee of the Board of
Directors of the Company or such other 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 as the Board of
Directors may designate from time to time (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. Awards under the Plan
shall be granted on the basis of five consecutive years (each
a "Plan Year" and, individually, Plan Years 1, 2, 3, 4 and 5,
respectively) consisting of the five 12-month periods
beginning on September 8, 1997 and ending on September 7,
2002. 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 procedures with respect to the administration of the
Plan. Any decision made by the Committee in good faith in
connection with its administration of or responsibilities
under the Plan shall be conclusive on all persons.
3. Participation. Each director of the
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Company listed on Schedule I shall be a participant in the
Plan (a "Participant").
4. Shares. The total number of shares of
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the Company's common stock ("Stock") (other than Dividend
Shares (as defined below) and Stock awarded through the
reinvestment of cash distributions as provided in paragraph
6(b) hereof) on which the value of a Participant's award under
the Plan is based (the "Total Share Award") is listed on
Schedule I. As share awards are earned by a Participant
pursuant to Section 6, a bookkeeping account maintained on
behalf of the Participant (the "Account") shall be credited to
reflect the earned awards.
5. Stock Price Targets. The Stock prices
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at which awards are made under the Plan (the "Stock Price
Targets") and corresponding proportions of Total Share Awards
to be granted under the Plan (the "Proportions of Total Share
Award") for each Plan Year are listed on Schedule II.
6. Awards. If at any time during a Plan
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Year the average closing price of the Stock on the New York
Stock Exchange Composite Tape for twenty (20) consecutive
trading days equals or exceeds a Stock Price Target for such
Plan Year, each Participant who is then a director of the
Company shall earn for purposes of crediting the Participant's
Account) (i) an amount measured by a number of shares of Stock
(a "Stock Award") which together with all previous Stock
Awards equals the Total Share Award for such Participant
multiplied by the Proportion of Total Share Award
corresponding to such Stock Price Target and (ii) an
additional amount (the "Dividend Shares") equal to the number
of shares of Stock (rounded to the nearest whole number of
shares) that would have been credited to the Participant's
Account as the result of the reinvestment of cash
distributions in the manner and at the prices specified in
paragraph 6(b) below had such Stock Award been made on
September 8, 1997. Any Participant who ceases to be a
director of the Company for any reason prior to September 8,
2002 shall not be eligible for additional Stock Awards under
the Plan following the date he ceases to be a director of the
Company. On the date a Participant earns a Stock Award, the
Company shall deliver into the Harnischfeger Industries
Deferred Compensation Trust ("Rabbi Trust") a number of shares
of Stock equal to the Stock Award and Dividend Shares
corresponding to such Stock Award to be held under the terms
of the Rabbi Trust subject to the terms hereinafter set forth:
(a) Shares of Stock required to be delivered to
the Rabbi Trust by the Company shall be registered by
the Company in the name of the Rabbi Trust, provided,
however,
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that the Company may direct the trustee of the
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Rabbi Trust (the "Trustee") to use for this purpose shares of
Stock previously delivered by the Company to the Rabbi Trust
to the extent shares held in the Rabbi Trust exceed the
Company's aggregate obligation under all plans covered by the
Rabbi Trust. The Stock transferred to the Rabbi Trust
hereunder may at the Company's option be acquired through open
market purchases or may be treasury shares provided that any
such shares are duly registered or exempted from registration
pursuant to applicable federal and state securities laws.
Although the Company intends to exert its best efforts so that
the shares transferred to the Rabbi Trust or distributed to
Participants or their beneficiaries 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 transfer or
distribution be deferred until the Company has taken
appropriate action to avoid any such violation.
(b) Each Participant's Account shall be credited
to reflect all dividends, stock splits and other
distributions with respect to such shares. The number
of shares credited to each Participant's Account in
respect of each cash distribution with respect to
Stock transferred to the Rabbi Trust hereunder 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 in connection with
such discounted purchase of Stock with cash
dividends. Each Participant's Account shall be
debited to reflect any distributions made to a
Participant when made.
(c) Stock equal to the number of shares
credited to a Participant's Account shall be
distributed to him (or to his beneficiary in the
event of his death) promptly (but not sooner than
fifteen (15) days) following the date he ceases to be
a director of the Company; provided, however, that
a Participant may upon written notice to the
Committee given at least one year prior to the date
he ceases to be a director of the Company, 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 prior to his
termination of employment elect to delay until the
next calendar year following the date he ceases to be
a director of the Company 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 ten
(10) days following the date a Participant ceases to
be a director of the Company, the Participant (or the
Participant's beneficiary in the event of the
Participant's death) shall have the right to elect to
receive payment hereunder 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 adjust such Participant's bookkeeping 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.
(d) Notwithstanding the foregoing, promptly (but
not later than fifteen (15) days) following a "Change
in Control" of the Company (as defined in the Rabbi
Trust), an amount of cash equal to (i) the number of
shares of Stock credited to each Participant's
Account (ii) multiplied by the Change in Control
Price as defined below shall be paid by the Company
to each Participant in lieu of any payment described
in Section 6(c). If the Company chooses not to make
such payment directly to a Participant or
Participants, the Company shall within such fifteen
(15) day period purchase for cash, at the Change in
Control Price, from the Rabbi Trust a sufficient
number of shares of Stock to provide the full cash
payment and the Trustee is directed to sell such
shares upon such terms. 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 sixty (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).
7. Designation of Beneficiaries. Each
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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 full benefits hereunder. 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.
8. General. No Participant or other person
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shall have any right, title or interest in any property of the
Company as a result of an award under the Plan. No rights or
interests of Participants under this Plan shall be assignable
either voluntarily or involuntarily nor shall the
establishment nor continuance of this Plan affect or enlarge
the employment rights of any Participant or constitute a
contract of employment with any Participant. No 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 6 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.
9. Facility of Payment. When a person
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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.
10. Benefit Statements. The Company shall
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provide statements of their Accounts to Participants on a
periodic basis but not less than annually in such form and at
such time as it deems appropriate.
11. Amendment and Termination. The Company
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may not amend or terminate the Plan without the express
written consent of each Participant who is affected by such
amendment or termination.
12. Controlling Law. The laws of Wisconsin
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shall be controlling in all matters relating to the Plan.
13. Gender and Number. Where the context
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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.
14. Gross-Up Payments. Subject to
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Participants complying with the requirements of this Section
14, in the event it shall be determined that any payment or
distribution under the Plan to or for the benefit of a
Participant, determined without regard to any additional
payments required by this first paragraph of this Section 14
(a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") or any interest or penalties are incurred by a
Participant with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Participant shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by
the Participant of all taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest or
penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Participant retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
Subject to the provisions of the third paragraph
of this Section 14, all determinations required to be made
under this Section 14, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by Price Waterhouse LLP or any
successor thereto (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and
Participants within thirty (30) business days of the receipt
of notice from a Participant that there has been a Payment, or
such earlier time as is requested by the Company. All fees
and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payments, as determined pursuant to
this Section 14, shall be paid by the Company to Participants
within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall
be binding upon the Company and Participants. As a result of
the uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to
be made hereunder. In the event that the Company exhausts its
remedies pursuant to the third paragraph of this Section 14
and the Participant thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Participant.
Participants shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after
the Participant is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Participant
shall not pay such claim prior to the expiration of the thirty
(30)-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Participant in writing
prior to the expiration of such period that it desires to
contest such claim, the Participant shall: (i) give the
Company any information reasonably requested by the Company
relating to such claim; (ii) take such action in connection
with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and (iv) permit the Company
to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and
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pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Participant harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this third paragraph of Section 14, the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Participant to
pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Participant shall prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company
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directs the Participant to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Participant, on an interest-free basis and shall
indemnify and hold the Participant harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension
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of the statute of limitations relating to payment of taxes for
the taxable year of the Participant with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
If, after the receipt by the Participant of an
amount advanced by the Company pursuant to the third paragraph
of this Section 14, the Participant becomes entitled to
receive any refund with respect to such claim, the Participant
shall (subject to the Company's complying with the
requirements of the third paragraph of this Section 14)
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Participant of an amount advanced by the Company pursuant to
the third paragraph of this Section 14, a determination is
made that the Participant shall not be entitled to any refund
with respect to such claim and the Company does not notify the
Participant in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 18,065
<SECURITIES> 0
<RECEIVABLES> 893,278
<ALLOWANCES> 7,655
<INVENTORY> 623,160
<CURRENT-ASSETS> 1,669,727
<PP&E> 1,155,808
<DEPRECIATION> 516,366
<TOTAL-ASSETS> 2,954,226
<CURRENT-LIABILITIES> 1,029,320
<BONDS> 895,011
0
0
<COMMON> 51,610
<OTHER-SE> 694,197
<TOTAL-LIABILITY-AND-EQUITY> 2,954,226
<SALES> 634,327
<TOTAL-REVENUES> 644,485
<CGS> 479,253
<TOTAL-COSTS> 591,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,772
<INCOME-PRETAX> 34,279
<INCOME-TAX> 11,650
<INCOME-CONTINUING> 22,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,729
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
