SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.4a-12 or Section 240.14a-12
HARNISCHFEGER INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
(1) Title of each class of securities to which
transaction applies:
-------------------------------------------------
(2) Aggregate number of securities to which
transactions applies:
-------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined):
-------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------
(5) Total fee paid:
-------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
-------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------
3) Filing Party:
------------------------------
4) Date Filed:
-------------------------------
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
Notice of 1999
Annual Meeting of
Stockholders and
Proxy Statement
<PAGE>
CONTENTS
NOTICE OF ANNUAL MEETING
PROXY STATEMENT
INTRODUCTION 1
PRINCIPAL STOCKHOLDERS; STOCK OWNERSHIP
OF EXECUTIVE OFFICERS AND DIRECTORS 2
ELECTION OF DIRECTORS 5
CONTINUING DIRECTORS 7
BOARD MEETINGS AND BOARD COMMITTEES 10
COMPENSATION OF DIRECTORS 12
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS; TRANSACTIONS WITH
MANAGEMENT 13
SUMMARY COMPENSATION TABLE 14
HUMAN RESOURCES COMMITTEE REPORT ON
EXECUTIVE COMPENSATION 16
PERFORMANCE GRAPH 20
PENSION PLAN TABLE 21
OPTION GRANTS 22
OPTION EXERCISES AND FISCAL YEAR-END VALUES 23
LONG-TERM INCENTIVE COMPENSATION 24
OTHER INFORMATION 25
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
HARNISCHFEGER INDUSTRIES, INC.
P.O. Box 554
Milwaukee, WI 53201-0554
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders of Harnischfeger
Industries, Inc. will be held at the Sheraton El
Conquistador, 10000 N. Oracle Road, Tucson, Arizona, on
Tuesday, February 23, 1999 at 8:00 a.m. for the following
purposes:
1. To elect four persons to the corporation's Board of
Directors; and
2. To transact such other business as may properly come
before the meeting or any adjournment or postponement
of the meeting.
Stockholders of record at the close of business on January
7, 1999 are entitled to receive notice of and to vote at the
annual meeting and any adjournment or postponement of the
meeting. A list of stockholders entitled to vote will be
available at the Sheraton El Conquistador at least ten days
prior to the meeting and may be inspected by any stockholder
for any purpose germaine to the meeting during usual
business hours.
Whether or not you plan to attend the meeting, we urge you
to mark, date and sign the enclosed proxy card and return it
promptly so that your shares will be voted at the meeting in
accordance with your instructions.
By order of the Board of Directors,
JAMES A. CHOKEY
Secretary
January 20, 1999
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY IN
THE ENCLOSED ENVELOPE.
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Harnischfeger Industries, Inc. for use at the 1999 annual
meeting of stockholders to be held on Tuesday, February 23,
1999 and at any adjournment or postponement of the annual
meeting. The proxy statement, proxy card and annual report
are being mailed to stockholders on or about January 20,
1999.
Proxies
Properly signed and dated proxies received by the
corporation's Secretary prior to or at the annual meeting
will be voted as instructed on the proxies or, in the
absence of such instruction, (a) FOR the election to the
Board of Directors of the persons nominated by the Board and
(b) in accordance with the best judgment of the persons
named in the proxy on any other matters which may properly
come before the meeting.
Any proxy may be revoked by the person executing it for any
reason at any time before the polls close at the meeting by
filing with the corporation's Secretary a written revocation
or duly executed form of proxy bearing a later date or by
voting in person at the meeting. The Board of Directors has
appointed an officer of Boston EquiServe, transfer agent for
the corporation, to act as an independent inspector at the
annual meeting.
If a stockholder is a participant in a Harnischfeger
Industries, Inc. Employees' Savings Plan (a "401(k) Plan"),
the proxy also serves as voting instructions with respect to
shares allocated to the stockholder's 401(k) Plan account.
If voting instructions on a proposal are not received for
shares in the 401(k) Plan at least five days prior to the
meeting, those shares will be voted in the same proportion
as the proportion of instructed votes for the 401(k) Plan.
Record Date, Voting and Shares Outstanding
Stockholders of record of the corporation's
common stock, $1 par value per share (the "Common Stock"),
at the close of business on January 7, 1999 (the "Record
Date") are entitled to vote on all matters presented at the
annual meeting. As of the Record Date, 47,349,089 shares of
Common Stock were outstanding and entitled to vote at the
annual meeting. Each share is entitled to one vote.
A majority of the shares entitled to vote,
represented in person or by proxy, constitutes a quorum.
Under the corporation's bylaws, if a quorum is present, the
affirmative vote of a majority of the shares represented at
the meeting and entitled to vote on the subject matter is
required for the election of directors. The independent
inspector will count the votes. Abstentions are considered
as shares represented and entitled to vote; therefore,
abstentions are counted for purposes of the quorum
determination but are not counted as votes cast on a given
matter, having the effect of a negative vote.
Broker or nominee "non-votes" on a matter will not be
considered as shares entitled to vote on that matter and
therefore will not be counted by the inspector in
calculating the number of shares represented and entitled to
vote on that matter. Such non-votes are, however, counted
toward the quorum requirement.
If less than a majority of the outstanding shares of Common
Stock are represented at the meeting, a majority of the
shares represented at the meeting may adjourn the meeting
from time to time without further notice.
<PAGE>
PRINCIPAL STOCKHOLDERS; STOCK OWNERSHIP OF EXECUTIVE
OFFICERS AND DIRECTORS
The following table lists the beneficial ownership of Common
Stock as of January 7, 1999 by any person known to the
corporation to own beneficially more than 5% of its Common
Stock, each of the executive officers named in the Summary
Compensation Table, and the corporation's executive officers
and directors as a group. Beneficial ownership of these
shares consists of sole voting power and sole investment
power except as noted below. All shares beneficially owned
by the directors under the Directors Stock Compensation Plan
are voted by the trustee of the corporation's Deferred
Compensation Trust as directed by the corporation's
Management Policy Committee.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
<S> <C> <C>
Name and Address Shares Percent
of Beneficial Owner Owned of Class(1)
- ---------------------------------------------------------------
Trimark Financial Corporation 5,000,300(2) 10.27%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario
Canada M5X 1E5
Brinson Partners, Inc. 4,609,548(3) 9.47%
209 South LaSalle
Chicago, Illinois 60604-1295
Trinity I Fund, L.P. 4,325,250(4) 8.88%
201 Main Street, Suite 3200
Fort Worth, Texas 76102
Morgan Stanley, Dean Witter,
Discover & Co. 4,261,530(5) 8.75%
1585 Broadway
New York, New York 10036
Pilgrim Baxter & Associates, Ltd. 2,628,478(6) 5.40%
825 Duportail Road
Wayne, Pennsylvania 19087-5525
Jeffery T. Grade 684,403(7) 1.41%
John Nils Hanson 193,644(8) 0.40%
Francis M. Corby, Jr. 359,203(9) 0.74%
Mark E. Readinger 16,745(10) 0.03%
James A. Chokey 17,922(11) 0.04%
All executive officers and
directors as a group
(19 persons) 1,426,290(12) 2.92%
- ---------------------------------------------------------------
</TABLE>
Notes:
(1) Based on 47,349,089 shares of Common Stock outstanding
and 1,334,827 shares which are subject to options
currently exercisable or options which will become
exercisable within sixty days of January 7, 1999.
(2) Based on information contained in a Schedule 13G filed
with the Securities Exchange Commission on October 3,
1997 by Trimark Financial Corporation.
(3) Based on information contained in a Schedule 13G,
amendment no. 1, filed with the Securities Exchange
Commission on February 11, 1998 by Brinson Partners,
Inc. ("Brinson"). Brinson, an investment adviser
registered under Section 203 of the Investment
Advisors Act of 1940, reported shared voting power and
shared dispositive power as to these shares. The
report was also filed on behalf of Brinson Holdings,
Inc., SBC Holding (USA), Inc. and Swiss Bank
Corporation.
(4) Based on information contained in a Schedule 13D,
amendment no. 3, filed with the Securities Exchange
Commission on October 13, 1998 by Trinity I Fund, L.P.
(5) Based on information contained in a Schedule 13G filed
with the Securities Exchange Commission on February
11, 1998 by Morgan Stanley, Dean Witter, Discover &
Co. and its wholly-owned subsidiary, Miller, Anderson
& Sherrerd, LLP, investment advisers registered under
Section 203 of the Investment Advisors Act of 1940.
Morgan Stanley, Dean Witter, Discover & Co. reported
shared voting power as to 3,745,331 shares and shared
dispositive power as to 4,261,530 shares. Miller,
Anderson & Sherrerd, LLP reported shared voting power
as to 3,515,200 shares and shared dispositive power as
to 4,004,500 shares.
(6) Based on information contained in a Schedule 13G filed
with the Securities Exchange Commission on February
12, 1998 by Pilgrim Baxter & Associates, Ltd.
("Pilgrim"). Pilgrim reported shared voting power as
to these shares.
(7) Includes 327,863 shares Mr. Grade has a right to
acquire upon exercise of stock options, 950 shares
beneficially owned under the Profit Sharing Plan and
105,205 shares Mr. Grade has agreed not to sell as
long as he remains employed by the corporation.
(8) Includes 53,807 shares Mr. Hanson has a right to
acquire upon exercise of stock options.
(9) Includes 197,910 shares Mr. Corby has a right to
acquire upon exercise of stock options, 950 shares
beneficially owned under the Profit Sharing Plans, 46
shares owned under the 401(k) Plan and 52,550 shares
Mr. Corby has agreed not to sell as long as he remains
employed by the corporation. Also includes 10,200
shares owned by Mr. Corby's three sons.
<PAGE>
Notes (continued)
(10) Shares Mr. Readinger has a right to acquire upon
exercise of stock options.
(11) Includes 10,004 shares Mr. Chokey has a right to
acquire upon exercise of stock options.
(12) Includes the following shares held by executive
officers who are not named in the table: 63,675
shares which three executive officers have a right to
acquire upon exercise of stock options, 2,488 shares
beneficially owned by three executive officers under
the Profit Sharing Plan, 110 shares beneficially owned
by one executive officer under the 401(k) Plan, and
400 shares held by the wife of an executive officer as
custodian for their minor children. Also includes
12,435 shares for Mr. Ralph C. Joynes, 11,435 of which
are beneficially owned under the Directors' Stock
Compensation Plan. Mr. Joynes is retiring as a
director as of the date of the 1999 annual meeting.
See the Notes under the headings "Election of Directors" and
"Continuing Directors" on pages 6 and 9 for additional
information on beneficial ownership of Common Stock by
directors.
<PAGE>
ELECTION OF DIRECTORS
The following table shows certain information (including
principal occupation, business experience and beneficial
ownership of the corporation's Common Stock as of January 7,
1999) for each of the individuals nominated by the Board of
Directors for election at the 1999 annual meeting. All of
the nominees are presently directors whose terms expire in
1999 and who are nominated to serve terms ending at the
annual meeting in 2002. If for any unforeseen reason any of
these nominees should not be available for election, the
proxies will be voted for such person or persons as may be
nominated by the Board.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Director Proposed Shares
Since Term Owned(1)
- --------------------------------------------------------------------------------------
Robert M. Gerrity Chairman and Chief Executive 1994 2002 3,747(2)
Officer of Antrim Group Inc.,
a technology corporation, since
December, 1996. Director and
former President and Chief
Executive Officer of Ford New
Holland, now New Holland n.v.,
a London-based agricultural
and industrial equipment
manufacturer. Director,
Libralter Engineered
Systems, Rubbermaid, Inc.
and Standard Motor Products,
Inc. Age 61.
Jeffery T. Grade Chairman and Chief Executive 1983 2002 684,403(3)
Officer since 1993. President
and Chief Executive Officer
from 1992 to 1993. President
and Chief Operating Officer from
1986 to 1992. Senior Vice
President and Chief Financial
Officer from 1983 to 1986.
Director, Case Corporation and
LG&E Energy Corp. Age 55.
L. Donald LaTorre President of L & G Management 1997 2002 3,971(4)
Consultants, Inc., since 1997.
Retired director of Engelhard
Corporation, a world-leading
provider of environmental
technologies, specialty
chemical products, engineered
materials and related services,
since 1997. President and
Chief Operating Officer from
1995 to 1997. Senior Vice
President and Chief Operating
Officer from 1990 to 1995.
Trustee, Bloomfield College;
Chairman and director, Mercer
University School of Engineering
Board. Age 61.
<PAGE>
Election of Directors (continued)
Leonard E. Redon Director, Rochester Area 1997 2002 3,060(5)
Operations, and Vice President
of Eastman Kodak Company,
a company engaged worldwide in
developing, manufacturing and
marketing consumer and
commercial imaging products,
since 1997. President and
Chief Executive Officer
of Qualex, Inc., the world's
largest wholesale photoprocessor,
in 1997. Vice President of
Eastman Kodak Company and
President, Customer Equipment
Services Division of Eastman
Kodak, 1995 to 1997. General
Manager and Vice President of
Government and Education Markets
from 1994 to 1995. General
Manager and Vice President of
Market Development, U.S. and
Canada, from 1991 to 1994. Age 47.
- ------------------------------------------------------------------------------
</TABLE>
Notes
(1) Beneficial ownership of these shares consists of sole
voting power and sole investment power except as noted
below. None of the nominees beneficially owned 1% or
more of the corporation's Common Stock except Mr.
Grade who beneficially owned 1.41%.
(2) Includes 2,747 shares beneficially owned under the
Directors Stock Compensation Plan.
(3) See note 7 on page 3.
(4) Includes 2,971 shares beneficially owned under the
Directors Stock Compensation Plan.
(5) Shares beneficially owned under the Directors Stock
Compensation Plan.
<PAGE>
CONTINUING DIRECTORS
The following table shows certain information for directors
whose terms continue after the 1999 annual meeting,
including principal occupation, experience and beneficial
ownership of the corporation's Common Stock as of January 7,
1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Director Current Shares
Since Term Owned(1)
- --------------------------------------------------------------------------------------
Donna M. Alvarado Principal of Aguila International, 1992 2000 5,692(2)
an international business development
consulting firm, since 1994.
President and Chief Executive
Officer of Quest International, a
non-profit educational organization,
from 1989 to 1994. Director, Park
National Bank. Age 50.
Harry L. Davis Professor of Creative Management 1987 2000 13,835(3)
at the University of Chicago since
1994. Professor of Marketing from
1963 to 1994. Deputy Dean of the
Graduate School of Business at the
University of Chicago from 1983 to
1993. Director, Golden Rule
Insurance Company and Peter
Martin Associates. Age 61.
John Nils Hanson Vice Chairman, President and Chief 1996 2000 193,644(4)
Operating Officer since 1998.
President and Chief Operating
Officer from 1996 to 1998.
Executive Vice President and Chief
Operating Officer from 1995 to 1996.
President and Chief Executive
Officer of Joy Technologies Inc.
from 1994 to 1995. President,
Chief Operating Officer and
director of Joy from 1993 to 1994.
Director, Arrow Electronics. Age 56.
Stephen M. Peck Maintains an office at Gilder, 1998 2000 None
Gagnon, Howe & Co. since 1988.
General Partner at SMP Associates,
L.P., an investment partnership,
since 1989. Director, Greyhound
Lines Inc., and Chairman of the
Mount Sinai-NYU Medical Center and
Health System. Age 63.
Larry D. Brady President of FMC Corporation, a 1995 2001 5,693(5)
world leader in production of
chemicals and machinery for
industry, government
<PAGE>
Continuing Directors (continued)
and agriculture, since 1993.
Director of FMC Corporation
since 1989. Director, National
Merit Scholarship Foundation,
National Association of
Manufacturers and Tenneco Inc.
Age 56.
Francis M. Corby, Jr.Executive Vice President, 1996 2001 359,203(6)
Finance and Administration
since 1995. Senior Vice
President, Finance and Chief
Financial Officer from 1986 to
1995. Age 54.
John D. Correnti President, Chief Executive 1994 2001 5,044(3)
Officer and director of Nucor
Corporation, a major steel
producer, since 1996.
President, Chief Operating
Officer and director of
Nucor from 1991 to 1995.
Director, CEM Corporation and
Navistar International
Corporation. Age 51.
Robert B. Hoffman Vice Chairman of Monsanto 1994 2001 4,073(7)
Company, a diversified company
in agriculture, pharmaceuticals
and food products, since 1998.
Vice Chairman and Chief
Financial Officer from 1997 to 1998.
Senior Vice President and Chief
Financial Officer from 1994 to 1997.
Vice President-International of FMC
Corporation from 1990 to 1994.
Director, Kemper Group of Mutual
Funds. Age 62.
Jean-Pierre Labruyere Chairman and Chief Executive 1994 2001 6,911(3)
since 1972 of Labruyere, Eberle
S.A., a financial holding company
based in France with global interests
in many business areas including food
distribution, laser printing,
electronic archiving and wine production.
Director, Promodes S.A., Algeco S.A.
and Martin Maurel Bank - Banque de
France Adviser. Age 61.
______________________________________________________________________________
</TABLE>
Notes
(1) Beneficial ownership of these shares consists of sole
voting power and sole investment power except as noted
below. None of the continuing directors beneficially
owned 1% or more of the corporation's Common Stock.
(2) Includes 5,192 shares beneficially owned under the
Directors Stock Compensation Plan.
(3) Shares beneficially owned under the Directors Stock
Compensation Plan.
(4) See note 8 on page 3.
(5) Includes 500 shares held jointly with his wife and
5,193 shares beneficially owned under the Directors
Stock Compensation Plan.
(6) See note 9 on page 3.
(7) Includes 3,073 shares beneficially owned under the
Directors Stock Compensation Plan.
<PAGE>
BOARD MEETINGS AND BOARD COMMITTEES
The Board of Directors held nine meetings during fiscal
1998. All directors attended at least 75% of the total
number of meetings of the Board and committees of which they
were members except Mr. Labruyere who attended 73% of the
meetings of the Board and committees of which he was a
member.
BOARD COMMITTEES
The Board has Audit, Corporate Governance, Human Resources,
Finance and Strategic Planning, Pension and Executive
Committees. All committees consist entirely of outside
directors except the Executive Committee which is chaired by
Mr. Grade.
Audit Committee
Current members of the Audit Committee are Robert B. Hoffman
(Chair), Larry D. Brady, John D. Correnti, Jean-Pierre
Labruyere and Leonard E. Redon. The functions of the Audit
Committee are to: (i) recommend for appointment independent
auditors for the corporation, (ii) review and approve the
scope of the annual audit and proposed budget for audit
fees, (iii) review the results of the annual audit with
the independent auditors, (iv) review the auditors'
management letters with the independent auditors and engage
in appropriate follow-up with the corporate staff, (v)
determine that appropriate action is taken if any
irregularities are uncovered, (vi) review with the
independent auditors the corporation's internal controls,
(vii) review the activities of the internal auditors, and
(viii) report to the Board on the activities and findings of
the Audit Committee and make recommendations to the Board
based on such findings. The Audit Committee met four times
during fiscal 1998.
Corporate Governance Committee
Current members of the Corporate Governance Committee are L.
Donald LaTorre (Chair), Donna M. Alvarado, Robert M.
Gerrity, Stephen M. Peck and Leonard E. Redon. The
functions of the Corporate Governance Committee are to: (i)
periodically review the policies and practices of the
Board; (ii) report to the Board on director compensation;
(iii) assess the performance of the Board and the
performance of individual directors; (iv) review and present
to the Board for its consideration recommendations for
nominations to fill expiring terms, vacancies or additions
to the Board; (v) review stockholder proposals and proposals
to amend the Articles of Incorporation or the bylaws of the
corporation and recommend to the Board appropriate action
and (vi) review issues relevant to the Board's oversight
responsibilities. The Corporate Governance Committee was
formed in fiscal 1998 and met once during the fiscal year.
Stockholders who wish to recommend persons to become
directors of the corporation should direct their
recommendations to the Corporate Governance Committee in
care of the corporation.
Human Resources Committee
Current members of the Human Resources Committee are Harry
L. Davis (Chair), Donna M.Alvarado, Larry D. Brady, John D.
Correnti and Robert M. Gerrity. The functions of the Human
Resources Committee are to: (i) periodically review and
approve the compensation structure for the corporation's key
executives, including salary rates, participation in any
incentive bonus plan, fringe benefits, non-cash perquisites
and all other forms of compensation, (ii) administer the
corporation's stock option and stock-based compensation
plans, and (iii) periodically review the executive staffing
of the corporation and make recommendations to the Board as
appropriate. The Human Resources Committee met eight times
during fiscal 1998.
Finance and Strategic Planning Committee
Current members of the Finance and Strategic Planning
Committee are Larry D. Brady (Chair), Harry L. Davis, Robert
M. Gerrity, Robert B. Hoffman and L. Donald LaTorre. The
functions of the Finance and Strategic Planning Committee
are to: (i) periodically review with management of the
corporation the financial structure of the corporation and
the appropriateness of such structure given the short-term
and long-term goals of the corporation, (ii) review specific
financial proposals of management which require Board
approval and make recommendations to the Board as
appropriate, (iii) review with management the strategic
plans of management for the corporation and (iv) review
specific recommendations of management relating to
acquisitions, divestitures and other strategic
activities requiring approval of the Board and make
recommendations to the Board as appropriate. The Finance
and Strategic Planning Committee met once during fiscal
1998.
Pension Committee
Current members of the Pension Committee are Donna M.
Alvarado (Chair), Jean-Pierre Labruyere, L. Donald LaTorre,
Stephen M. Peck and Leonard E. Redon. The functions of the
Pension Committee are to: (i) periodically review the
investment policy of the corporation's Pension and
Investment Committee, (ii) periodically review the actions
and performance of the Pension and Investment Committee and
any other administrative committees for retirement plans and
trusts for which the corporation sponsors or may hereafter
sponsor (a "Plan" or "Trust"), including the implementation
by such committees of the investment policy, (iii) make
recommendations to the Board regarding the membership of the
Pension and Investment Committee, (iv) review the need for
the establishment of any new Plan or Trust, the termination
of any existing Plan or Trust and the adoption of any
amendment to any single Plan that would result in an
increase in current Plan liabilities in excess of $5 million
and (v) report to the Board on the activities and findings
of the Pension Committee and make recommendations to the
Board based on those findings. The Pension Committee met
twice during fiscal 1998.
Executive Committee
Current members of the Executive Committee are Jeffery
T. Grade (Chair), Donna M. Alvarado, Larry D. Brady, John D.
Correnti, Harry L. Davis and Robert B. Hoffman. The
function of the Executive Committee is to act upon a matter
when it determines that prompt action is in the best
interest of the corporation and it is not possible to call a
meeting of the full Board. The Executive Committee did not
meet during fiscal 1998.
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the
corporation receive an annual retainer fee of $22,600 and a
fee of $1,250 for each Board and Board committee meeting
attended. Committee chairs receive $1,500 for each
committee meeting attended. Directors who are officers of
the corporation earn no additional remuneration for their
services as directors.
The corporation has a Directors Stock Compensation Plan
under which non-employee directors are allowed to elect to
defer up to 100% of their fees by converting their fees into
Common Stock to be held in trust until termination of their
status as directors.
The corporation also has an incentive compensation plan for
outside directors based on the same Economic Value Added
("EVA (reg. TM)") performance targets used for the
corporation's Executive Incentive Plan. Under the plan,
non-employee directors are eligible to earn annual incentive
compensation awards in addition to annual retainer and
meeting fees. Incentive compensation is determined by
multiplying $25,000 by a figure which represents the EVA
performance of the corporation in a given year expressed as
a percentage of the EVA performance target for that year.
Incentive compensation awards are converted into shares of
Common Stock under the Directors Stock Compensation Plan and
held in trust until the director's status as a director
terminates.
In October 1997, the Board established a long-term
compensation plan for outside directors designed to reward
directors if the corporation's Common Stock achieves certain
high performance targets over a five year period. Under the
plan, awards of up to 6,000 shares of Common Stock may be
made to each non-employee director upon achievement of
pre-established stock price improvement factors. The base stock
price was set at $40.87 per share. A portion of the shares
will be awarded if the stock price increases by 30% over the
base price within three years and all the shares will be
awarded if the stock price increases 50% within three years
or 70% within five years. If target prices are not met,
none of the shares will be awarded. Any shares that are
awarded will be held in trust until the director's status as
a director terminates.
EVA is a registered trademark of Stern Stewart & Company
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment contracts between the corporation
and any of its executive officers.
The Executive Incentive Plan and the Supplemental Retirement
and Stock Funding Plan provide for the distribution of
accrued benefits following termination of a participant's
employment with the corporation.
These plans also provide that, in the event of a change of
control of the corporation, the corporation will make cash
payments to participants equal to the number of shares of
Common Stock then allocated to such participants' accounts
times the highest per-share price actually paid in
connection with such change of control. The 1996 Stock
Incentive Plan provides that, upon a change of control, all
outstanding option grants become exercisable. All existing
options under the 1988 Incentive Stock Plan become
exercisable upon a change of control.
The Long-Term Compensation Plan for Key Executives was
amended in 1998 to provide payments to the eleven executives
covered by the plan in the event that prior to November 1,
2001 there was a change of control of the corporation or a
termination of employment of any of the executives. In the
event of a change of control, payments would vary depending
on the highest reported sales price of the Common Stock
during the sixty day period prior to and including the date
of the change of control. At a change of control price of
$25 per share or less, the payment would be fifty percent of
the total share award an executive could be awarded under
the plan times $25. At change of control prices greater
than $25 per share, payments would be greater.
In the case of a termination of employment, payments would
equal the number of shares earned by the executive under the
plan prior to the termination of employment multiplied by
the market price of the Common Stock on the date of the
employment termination. In the event of a termination of
employment by retirement, the number of shares earned by the
executive under the plan will be calculated through the
retirement date. In the event of a voluntary termination of
employment, the number of shares earned by the executive
under the plan will be calculated as of the end of the
previous fiscal year. In the event of an involuntary or
constructive termination of employment without cause, the
minimum award will be fifty percent of the total share award
such executive could be awarded under the plan and the
payment will be calculated at the higher of $25 per share or
the market price. The following numbers of shares, plus a
number of shares reflecting the reinvestment of dividends
from September 8, 1997 on such shares, is the total share
award each of the executives named in the Compensation Table
could be awarded under the plan: Jeffery T. Grade, 250,000
shares; John Nils Hanson, 200,000 shares; Francis M. Corby,
Jr., 175,000 shares; Mark E. Readinger, 100,000 shares;
James A. Chokey, 125,000 shares.
TRANSACTIONS WITH MANAGEMENT
Prior to the acquisition of Joy Technologies Inc.
("JTI") by the corporation, JTI lent Mr. Hanson
$240,000 in connection with a program in which
JTI lent executives money to encourage them to purchase and
own JTI stock. The corporation succeeded to the loan as a
result of the JTI acquisition. The loan matured in 1997 and
was extended by the corporation in 1997 and 1998 for one-year
periods. Mr. Hanson pays interest on the balance at
the annual rate of 6.22%. The corporation holds 10,000
shares of Common Stock as collateral for repayment of the
loan.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows compensation awarded to, earned by
or paid to the corporation's Chief Executive Officer and
each of the four most highly compensated executive officers
other than the Chief Executive Officer who were serving as
executive officers at the end of fiscal 1998 for services
rendered to the corporation and its subsidiaries during
fiscal 1998, 1997 and 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term
Annual Compensation Compensation
Awards Payouts
Secu-
Other rities All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Position Year Salary Bonus sation Award(s) Options Payouts sation
($) ($) ($) ($) /SARS ($) ($)
(1) (1) (2) (#) (3) (1)(4)
- -----------------------------------------------------------------------------------------------
Jeffery T. Grade 1998 700,008 - 126,856(5) - 261,863(10) - 8,550
Chairman and 1997 660,000 - 406,393 - - 246,011 686,052
Chief Executive 1996 600,000 - 390,183 - 42,000 253,998 750,102
Officer
John Nils Hanson 1998 462,900 - 43,716(6) - 12,616)10) - 8,550
Vice Chairman, 1997 432,600 260,973 122,699 - - 47,755 233,894
President and Chief 1996 381,691 253,750 104,295 - 31,000 22,683 244,232
Operating Officer
Francis M. Corby,Jr. 1998 371,004 - 73,316(7) - 131,660 - 5,472
Executive Vice 1997 350,004 - 239,391 - - 131,544 367,996
President for 1996 324,000 - 242,694 - 26,000 129,288 409,794
Finance and
Administration
Mark E. Readinger(11) 1998 329,010 - 50,000(8) - - - 1,827
Senior Vice 1997 259,885 175,220 1,031 - - - 3,983
President and
President
Beloit Corporation
James A. Chokey(11) 1998 254,400 - 136,229(9) - 6,004(10) - 6,102
Executive Vice 1997 213,336 109,441 36,480 - - - 114,613
President, Secretary
and General Counsel
</TABLE>
Notes
(1) Participants in the Executive Incentive Plan may
elect to defer up to 100% of their cash bonuses by
converting them into Common Stock at a 25% discount
from the price of the Common Stock on a date selected
by the Human Resources Committee near the beginning
of the fiscal year. All such stock is held in the
corporation's Deferred Compensation Trust and
<PAGE>
Notes (continued)
may not be withdrawn by a participant as long as the
participant remains an employee of the corporation.
All of the named executive officers elected to
convert 100% of their cash bonuses into Common Stock
under this plan in each of the last three fiscal
years except Mr. Hanson who elected to convert 50% of
his 1996 and 1997 cash bonuses into Common Stock
under the plan, Mr. Chokey who elected to convert 50%
of his 1997 cash bonus into Common Stock under the
Plan, and Mr. Readinger who elected to receive his
1997 bonus in cash. The Executive Incentive Plan
also provides that dividends on shares held in
participants' accounts are reinvested in Common Stock
at a 25% discount from market prices. The dollar
values of the differences between (i) the bonus
amount converted and the market value of the shares
purchased and (ii) the dollar amounts attributable to
the discount upon the reinvestment of dividends are
included in the "Other Annual Compensation" column.
The dollar value of the bonus amounts that have been
converted into stock and deferred are reported in the
"LTIP Payouts" and "All Other Compensation" columns.
(2) No restricted Common Stock is outstanding.
(3) Represents the portion of the bonus earned, if any,
that resulted from bonuses that were "banked" in
prior years under the EVA Bonus Program described on
page 24.
(4) Amounts for fiscal 1998 represent group term life
insurance premiums paid by the corporation for the
benefit of the executives.
(5) Includes $33,156 representing dollar amounts
attributable to the discount upon reinvestment of
dividends on Common Stock held under the Executive
Incentive Plan and $63,177 related to automobile
expenses.
(6) Includes $31,133 related to automobile expenses.
(7) Includes $39,301 related to automobile expenses.
(8) Represents payment made to Mr. Readinger in
connection with his transfer to Beloit Corporation.
(9) Includes $50,150 related to automobile expenses and
$83,420 related to country club expenses and initial
membership fees.
(10) All options granted in 1998 equal the number of
shares withheld for tax purposes in connection with
the distribution in 1998 of shares from the
corporation's grantor trust as result of accounting
rule changes in 1998.
(11) Information for Mr. Readinger and Mr. Chokey covers
fiscal 1998 and fiscal 1997, the year each became an
executive officer of the corporation.
<PAGE>
HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE
COMPENSATION
The Human Resources Committee met eight times during the
fiscal year. The Committee Chairperson also discussed
compensation and organizational development issues with
senior management of the corporation throughout the year.
Difficult market conditions for the corporation's
businesses, management changes at Beloit Corporation and
Joy Mining Machinery, uncertainties surrounding the
potential separation of the corporation's core businesses
and historically low prices for the corporation's Common
Stock caused the Committee to take steps to make sure that
the corporation's compensation programs work appropriately.
As a result of operating losses for the year, no bonuses
were earned for fiscal 1998. In addition, the members of
the Management Policy Committee and the presidents of
Beloit, Joy and P&H, the corporation's seven most senior
executives, requested that they not receive base salary
increases for the next fiscal year.
Committee members look at the performance of the
corporation and its businesses and at contributions of
individual executives in making decisions about executive
compensation. Committee members also rely on their
personal knowledge and experience as well as compensation
survey data from a large number of comparable durable goods
manufacturing companies.
The Committee is guided by the following fundamental
considerations:
1. The need to attract and retain competent management.
2. The desire to set pay levels which are competitive
with levels being paid in similar businesses for
comparable positions.
3. The intent to reward management for a balanced mix of
long-term and short-term accomplishments.
4. The need to link executive pay levels to quantifiable
benchmarks.
5. The belief that base salaries should be conservative
(50th percentile of comparable companies) but that
incentive opportunities should allow for above
average total compensation (75th percentile of
comparable companies) if warranted by performance.
Cash Compensation
The Committee uses compensation survey data from comparable
companies when determining the salary and incentive
compensation components of cash compensation. Since 1994,
the corporation's key employee incentive compensation
(bonus) plans have been based on the concept of Economic
Value Added ("EVA"). The EVA concept focuses on after-tax
returns on invested capital. Managers are rewarded for
adding and creating economic value in their respective
businesses. Incentive compensation is linked to the
difference between the corporation's weighted average cost
of capital and corporate after-tax earnings.
If the EVA incentive plan produces bonuses in excess of
125% of the target in any year, two thirds of the excess
amount is "banked" for credit toward incentive compensation
in future years and may be forfeited if future performance
targets are not achieved. More than 300 executives
participated in EVA-based incentive plans in 1998 with
targeted bonus opportunities ranging from 10% to 90% of
base pay. Business losses sustained in 1998 resulted in no
EVA bonuses for corporation employees for the year and the
forfeiture of existing positive "banked" amounts from prior
years.
For fiscal 1999, the Committee eliminated the large
negative "banked" amounts that resulted from the losses in
1998 and set EVA targets designed to return the corporation
to a break-even EVA within three years or less. The
Committee also amended the plan so that the stock price
used to convert incentive compensation into shares of
Common Stock under the stock-in-lieu-of-bonus feature of
the plan will be the market price of the Common Stock on a
day near the beginning of the fiscal year rather than at
the end of the fiscal year.
Profit Sharing
The corporation has a Profit Sharing Plan that is also
based on EVA principles. Most domestic salaried and
non-bargaining unit hourly employees participate in this
plan which pays a 3% cash bonus for attainment of a
business unit's EVA target. For purposes of the plan, the
maximum base pay which can be used for calculations is
$100,000. Because EVA targets were not met, no profit
sharing payments were made for 1998.
Stock-Based Compensation
The Committee administers a number of stock-based plans
that are designed to encourage members of management to own
stock in the corporation. The Committee believes that
managers are more closely aligned with shareholder
interests if they own significant amounts of the
corporation's Common Stock.
Long-Term Compensation Plan for Key Executives
The Long-Term Compensation Plan for Key Executives was
adopted in 1997 and modified in 1998. Under this plan,
senior officers of the corporation agreed to forgo annual
stock option grants during the life of the plan. As
originally adopted, the plan provided that awards of up to
an aggregate of 1,200,000 shares, plus a number of shares
reflecting the reinvestment of dividends from September 8,
1997, would be made if the price of the corporation's
Common Stock reached specified levels.
At the time the plan was adopted, the Common Stock was
trading at about $41 per share and the plan would have
begun making awards at a per-share price of about $53.
The marked deterioration in market conditions for the
corporation's businesses and the sharp drop in the
corporation's Common Stock price since adoption of the plan
nullified the long-term incentive compensation role of the
plan. Accordingly, the Committee modified the plan in 1998
to restore its long-term incentive compensation role.
The performance measure in the plan was changed from the
price of the corporation's Common Stock to "total business
return", a performance measure the Committee believes
provides a better "line of sight" to management
performance. As amended, 10% of plan awards would be
earned if total business return, calculated as net
operating profit after tax (NOPAT) plus the net change in
the value of the business (the amount by which the change
in NOPAT divided by the cost of capital exceeds the change
in capital), equals $388 million, 25% if it equals $520
million and 100% if it equals $1,179 million during the
three years of the plan beginning November 1, 1998.
Taking into consideration extraordinarily difficult market
conditions for the corporation's businesses, uncertainty
surrounding the proposal early in the year to separate the
corporation's businesses, and extremely low prices for the
corporation's Common Stock, the Committee also amended the
plan to provide change of control and executive severance
benefits. In making these changes, the Committee also
considered the fact that the corporation did not have
conventional change of control arrangements or executive
severance contracts.
Stock in Lieu of Bonus
Under the Executive Incentive Plan, selected participants
in the corporation's EVA-based bonus program may elect to
receive all or a part of their incentive compensation in
stock in lieu of cash payments. This plan encourages
approximately sixty members of senior management to convert
up to 100% of their cash bonuses into shares of the
corporation's Common Stock. As both an inducement and due
to restrictions placed on the sale of the stock, the plan
allows executives to convert their bonuses into stock at a
25% discount. The stock is placed in a grantor trust
maintained by the corporation and may not be accessed by
the executive until the executive retires or terminates
employment. Dividends remain in the account and are used
to buy additional shares, also at a 25% discount.
Grantor Trust Distribution
As a result of accounting rule changes relating to shares
held in a grantor trust under deferred compensation plans,
the Committee amended the Executive Incentive Plan to
eliminate the right of participants to receive future
distributions in any form other than Common Stock.
Previously, participants could elect to receive the value
of their stock accounts in cash. The right to receive
distributions in cash was also removed from two other stock
based benefit plans, the Supplemental Retirement and Stock
Funding Plan and the June 8, 1997 Grants. The Committee
made these changes to avoid a significant one-time
reduction in equity and ongoing significant impacts to
earnings upon appreciation of the price of the
corporation's Common Stock that would otherwise have
resulted from the accounting rule changes.
As inducement to participants to agree to the plan changes,
shares of stock accumulated under the plans, less the
number of shares needed to satisfy federal, state, and
local income and social security tax obligations, were
distributed to participants who consented to the plan
amendments. Options to purchase a number of shares equal
to the number of shares withheld for tax purposes were
granted to consenting participants. The options were
priced at the mean of the high and low trading prices on
October 14, 1998, the date of the distribution. The
Committee concluded that these option grants would
partially compensate participants for the loss of the
opportunity to benefit from stock price increases over time
on the shares that were withheld for tax purposes and for
the loss of the tax deferred nature of the incentive
compensation the participants had elected to defer but
which became taxable to the participants as a result of the
October 14, 1998 distribution.
Chief Executive Officer Compensation
The performance and contributions of Chairman and Chief
Executive Officer Jeffery T. Grade were reviewed at length
by the Committee at its October, 1997 meeting. Recognizing
the continued and significant contributions Mr. Grade has
made on behalf of the corporation and shareholders, Mr.
Grade's base pay was increased at the October, 1997 meeting
from $660,000 per year to $700,008, an increase of 6.1%.
Based on outside survey data, Mr. Grade's base salary is
slightly above the 50th percentile for comparable
companies, the 50th percentile being the Committee's stated
compensation benchmark. The Committee believes that Mr.
Grade's salary is in line with that paid to Chief Executive
Officers of comparable companies and is appropriate for the
size of the corporation and his scope of responsibilities.
In light of the difficult financial challenges facing the
corporation at the end of fiscal 1998, Mr. Grade requested
that he receive no increase in base pay for fiscal 1999.
As a result of financial losses incurred by the Corporation
in fiscal 1998, Mr. Grade did not receive any incentive
compensation for fiscal 1998 and positive amounts "banked"
from prior years were forfeited.
The total cash compensation earned by Mr. Grade in 1998 was
$700,008.
Section 162(m)
Section 162(m) of the Internal Revenue Code limits to $1
million the deductibility of the compensation paid in a
taxable year by a publicly held corporation to the Chief
Executive Officer and any other executive officer whose
compensation is required to be reported in the Summary
Compensation Table. However, qualified performance-based
compensation is not subject to the deduction limit if
certain conditions are met. It continues to be the
Committee's intent to take the necessary steps to satisfy
these conditions in order to preserve the deductibility of
executive compensation to the fullest extent possible
consistent with its other compensation objectives and
overall compensation philosophy.
In Summary
The Committee believes that the compensation paid to senior
executives is in line with performance and is comparable to
that being paid in similar corporations.
Respectfully,
Harry L. Davis (Chair)
Donna M. Alvarado
Larry D. Brady
John D. Correnti
Robert M. Gerrity
<PAGE>
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder
return on the corporation's Common Stock over the last five
fiscal years as compared to the returns of the Standard &
Poor's 500 Stock Index and the Dow Jones Heavy Machinery
Index. The Heavy Machinery subgroup consists of AGCO
Corporation, Case Corporation, Caterpillar Inc., Deere &
Co., and Harnischfeger Industries, Inc. AGCO Corporation
and Case Corporation were added to the Heavy Machinery
subgroup on July 1, 1996 while Clark Equipment, Indresco,
Inc., Manitowoc Co. and Nacco Industries were removed from
the subgroup. Case Corporation began trading on June 24,
1996. The graph assumes $100 was invested on October 31,
1993 in (a) the corporation's Common Stock, (b) the
Standard & Poor's 500 Stock Index, and (c) the Heavy
Machinery Index, and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10/31/93 10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
-------- -------- -------- -------- -------- --------
S&P 500 100 104 131 163 215 259
Machinery Group 100 117 127 164 223 158
Harnischfeger 100 115 147 188 187 46
Machinery Group = AG, CSE, CAT, DE, HPH
</TABLE>
<PAGE>
PENSION PLAN TABLE
The following table sets forth the estimated annual
benefits payable upon retirement at normal retirement age
for the years of service indicated under the corporation's
defined benefit pension plan (and excess benefit
arrangements defined below) at the indicated remuneration
levels.
Remuneration covered by the plan includes the following
amounts reported in the Summary Compensation Table: salary
and bonus (including the cash value of bonuses forgone for
stock under the Executive Incentive Plan). "Banked"
bonuses are not included.
The years of service credited for each of the executive
officers named in the Summary Compensation Table are:
Jeffery T. Grade, 30 years; John Nils Hanson, 9 years;
Francis M. Corby, Jr., 18 years; Mark E. Readinger, 4
years; and James A. Chokey, 16 years.
Benefits are based both upon credited years of service with
the corporation or its subsidiaries and the highest
consecutive five year average annual salary and incentive
compensation during the last ten calendar years of service.
Estimated benefits under the retirement plan are subject to
the provisions of the Internal Revenue Code which limit the
annual benefits which may be paid from a tax qualified
retirement plan. Amounts in excess of such limitations
will either be paid from the general funds of the
corporation or funded with Common Stock under the terms of
the Supplemental Retirement and Stock Funding Plan. The
estimated benefits in the table do not reflect offsets
under the plan of 1.25% per year of service (up to a
maximum of 50%) of the Social Security benefit.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Years of Service
-----------------------------------------------------------------
Remuneration 10 15 20 25 30 35
-----------------------------------------------------------------
$ 400,000 $ 60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
500,000 75,000 112,500 150,000 187,500 225,000 262,500
600,000 90,000 135,000 180,000 225,000 270,000 315,000
700,000 105,000 157,500 210,000 262,500 315,000 367,500
800,000 120,000 180,000 240,000 300,000 360,000 420,000
900,000 135,000 202,500 270,000 337,500 405,000 472,500
1,000,000 150,000 225,000 300,000 375,000 450,000 525,000
1,100,000 165,000 247,500 330,000 412,500 495,000 577,500
</TABLE>
<PAGE>
OPTION GRANTS
The following table shows information about stock option
grants during the last fiscal year to the five executive
officers named in the Summary Compensation Table. Options
granted to the named executive officers in 1998 equal the
number of shares withheld for tax purposes in connection
with the distribution in 1998 of shares from the
corporation's grantor trust as a result of accounting rule
changes in 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
Individual Grants
- ---------------------------------------------------------------------------------------------
Number of Percent
Securities of Total
Underlying Options/
Name Options/SARs SARs Granted Exercise or Grant Date
Granted to Employees Base Price Expiration Present
(#) in Fiscal Year ($/sh) Date (2) Value (($)(3)
Jeffery T. Grade 261,863 23.1% $6.85 Oct. 14, 2008 $437,311
John Nils Hanson 12,616 1.1% $6.85 Oct. 14, 2008 $21,069
Francis M. Corby, Jr. 131,660 11.6% $6.85 Oct. 14, 2008 $219,872
Mark E. Readinger -- -- -- -- --
James A. Chokey 6,004 0.5% $6.85 Oct. 14, 2008 $10,027
- ----------------------------------------------------------------------------------------------
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) were granted.
(2) Options became exercisable on the date of grant
(October 14, 1998) and, unless earlier terminated,
expire ten years from the date of grant.
(3) Grant date present values were determined using the
Black-Scholes option pricing model. The actual value,
if any, an executive may realize will depend on the
excess of the stock price over the exercise price on
the date the option is exercised. There is no
assurance the value realized by an executive will be
at or near the value estimated by the Black-Scholes
model. The estimated values are based on assumed
volatility of 30.45%, risk-free rate of return of
4.60%, dividend yield of 5.84% and ten year option
expiration. No adjustments have been made for
non-transferability or risk of forfeiture.
<PAGE>
OPTION EXERCISES AND
FISCAL YEAR-END VALUES
The following table shows information with respect to the
five executive officers named in the Summary Compensation
Table concerning the number of shares acquired on exercise
of options, the value realized and the number and value of
options outstanding at the end of the last fiscal year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options/
Options/SARS at SARs at Fiscal Year-
Shares Fiscal Year End (#) End($)(3)
Acquired
on Value
Exercise Realized
Name (#) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
Jeffery T. Grade - - 327,863 29,750 $677,571 -
John Nils Hanson - - 53,807(4) 22,000 $32,644 -
Francis M. Corby, Jr. - - 197,910 18,250 $340,670 -
Mark E. Readinger - - 16,745 10,498 - -
James A. Chokey - - 10,004 2,500 $15,535 -
</TABLE>
Notes
(1) No Stock Appreciation Rights (SARs) are outstanding.
(2) Based on the market value of the stock on the date of
exercise less the exercise price and withholding tax
paid by the recipient.
(3) Based on the closing price of the corporation's Common
Stock on the New York Stock Exchange at the end of the
fiscal year of $9.4375
(4) Includes 6,191 options under the Joy Technologies Inc.
Stock Option Plan (the "Joy Option Plan"). As a
consequence of the merger of the corporation and Joy
Technologies Inc. in November, 1994, all options that
had been granted under the Joy Option Plan to any Joy
Technologies Inc. employees were converted into
options to purchase the corporation's Common Stock.
<PAGE>
LONG-TERM INCENTIVE
COMPENSATION
The corporation provides long-term incentive compensation
opportunities to its executives through the Long-Term
Compensation Plan for Key Executives and the "Banked Bonus"
feature of the EVA Bonus Program.
Long-Term Compensation Plan for Key Executives
In 1997, the Board of Directors adopted a long-term
compensation plan for eleven of its key executives under
which up to an aggregate of 1,200,000 shares of Common
Stock, plus a number of shares reflecting the reinvestment
of dividends from September 8, 1997, may be awarded. Under
the plan, the officers forgo annual stock option grants
during the life of the plan.
The plan was modified in 1998 to change the performance
measure in the plan from the price of the corporation's
Common Stock to "total business return" measured over a
three-year period. Ten percent of plan awards would be
earned if total business return, calculated as net operating
profit after tax (NOPAT) plus the net change in the value of
the business (the amount by which the change in NOPAT
divided by the cost of capital exceeds the change in
capital), equals $388 million, 25% if it equals $520 million
and 100% if it equals $1,179 million during the three years
of the plan beginning November 1, 1998.
"Banked Bonus"
As described in the Human Resources Committee Report on
Executive Compensation, incentive compensation for senior
executives is based on the concept of Economic Value Added
("EVA"). The EVA method of calculating incentive
compensation has a "Bonus Bank" feature which is designed to
ensure that EVA improvements are sustained over a period of
years. The bonus paid to an executive for any fiscal year
is equal to the earned bonus for the year, up to a maximum
of 125% of the target bonus, plus 33% of the bonus earned,
if any, in excess of 125% of the target bonus. Two-thirds
of any bonus earned in excess of 125% of the target bonus is
credited to the Bonus Bank for possible future payment to
the executive or forfeiture under the terms of the EVA
program. A Bonus Bank account is at risk in the sense that
in any year during which the earned bonus is negative, the
negative bonus amount is subtracted from the Bonus Bank
balance. The executive is not expected to otherwise repay
negative balances in the Bonus Bank.
For those executives who have elected to defer their cash
bonuses by converting such bonuses into Common Stock under
the terms of the Executive Incentive Plan, the "banked"
portion of any bonus is converted into Common Stock on the
same terms as the "unbanked" portion of the bonus. Because
no bonuses were awarded for fiscal 1998, no amounts were
added to the Bonus Bank in 1998.
<PAGE>
OTHER INFORMATION
Auditors
The Board of Directors has selected PricewaterhouseCoopers
LLP as independent accountants for the fiscal year ending
October 31, 1999. PricewaterhouseCoopers has served the
corporation as auditors since 1925. A representative of
PricewaterhouseCoopers is expected to be present at the 1999
annual meeting and to have the opportunity to make a
statement and answer questions that may be asked by
stockholders.
Additional Matters
The Board of Directors is not aware of any other matters
that will be presented for action at the 1999 annual
meeting. Should any additional matters properly come before
the meeting, the persons named in the enclosed proxy will
vote on those matters in accordance with their best
judgment.
Submission of Stockholder Proposals
All stockholder proposals to be presented at the 2000 annual
meeting must be received by the corporation not later than
September 22, 1999 in order to be considered for inclusion
in the corporation's proxy statement and proxy for that
meeting under SEC Rule 14a-8. In addition, the
corporation's bylaws require that stockholder proposals must
be received by the corporation not less than 90 days before
the meeting in order to be submitted at the meeting.
Cost of Proxy Solicitation
The corporation will pay the cost of preparing, printing and
mailing proxy materials as well as the cost of soliciting
proxies on behalf of the Board. In addition to using mail
services, officers and other employees may solicit proxies
in person and by telephone. The corporation has retained
Kissell-Blake, Inc., a professional proxy solicitation firm,
and will pay such firm its customary fee, which is
anticipated to be approximately $6,000, plus expenses, to
solicit proxies from banks, brokers and other nominees
having shares registered in their names which are
beneficially owned by others.
Section 16(a) Beneficial Ownership
Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the corporation during the last fiscal
year and Forms 5 and amendments thereto furnished to the
corporation with respect to the last fiscal year, the
corporation is not aware that any director, officer or
beneficial owner of more than 10% of the corporation's
Common Stock failed to file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act of
1934 during the last fiscal year.
By order of the Board of Directors
JAMES A. CHOKEY
Secretary
January 20, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROXY
HARNISCHFEGER INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS - FEBRUARY 23, 1999
This Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Francis M. Corby, Jr. and James A. Chokey, and each of them,
proxies, with power of substitution, to vote the shares of stock of Harnischfeger Industries,
Inc. which the undersigned is entitled to vote, as specified on the reverse side of this card,
and, if applicable, hereby directs the trustee of employee benefit plan(s) shown on the reverse
side hereof to vote the shares of stock of Harnischfeger Industries, Inc. allocated to the
account(s) of the undersigned or otherwise which the undersigned is entitled to vote pursuant to
such employee benefit plan(s), as specified on the reverse side of this card, at the Annual
Meeting of Stockholders to be held on February 23, 1999 at 8:00 a.m., CST, at the Sheraton El
Conquistador, 10000 N. Oracle Road, Tucson, Arizona, 85737, and at any adjournment or
postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS
SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS IN
PROPOSAL 1 AND IT AUTHORIZES THE ABOVE DESIGNATED PROXIES AND TRUSTEE, AS APPLICABLE, TO VOTE IN
ACCORDANCE WITH THEIR JUDGEMENT ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
/SEE REVERSE (IMPORTANT-TO BE SIGNED AND DATED ON REVERSE SIDE) /SEE REVERSE
SIDE/ SIDE/
<PAGE>
/ X / Please mark
votes as in
this example
The Board of Directors recommends a vote FOR Proposal1.
1. To elect four directors to 2. To transact such other business as may properly
serve for terms of three years. come before the Annual Meeting and any adjournment
or postponement thereof.
Nominees: Robert M. Gerrity,
Jeffery T. Grade,
L. Donald LaTorre and
Leonard E. Redon
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
/ /
--------------------------- MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
For all nominees except as
noted on theline above.
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
Please sign exactly as your name appears. If acting
as attorney, executor, trustee or in representative
capacity, sign name and title.
Signature(s): Date: Signature(s): Date:
---------------- ------- ------------------- -------
</TABLE>
