EXHIBIT 10.16
                                                          FORM 10-Q
                                        QUARTER ENDED JUNE 30, 1997

                                             Jefferies & Company, Inc.


                              11100 Santa Monica Boulevard, 10th Floor
                                          Los Angles, California 90025
                               Telephone (310) 575-5200 (800) 933-6656
CORPORATE FINANCE                                   Fax (310) 575-5165


                              July 30, 1997


Mr. Williard R. Hildebrand, II
Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
1100 Milwaukee Avenue
South Milwaukee, WI 53172

Dear Mr. Hildebrand:

     This letter agreement (the "Agreement") confirms that Bucyrus
International, Inc. (the "Company") has engaged Jefferies & Company, Inc.
("Jefferies" or the "Financial Advisor") to act as exclusive financial advisor
to the Company in connection with the proposed acquisition of the Company (the
"Acquisition") by American Industrial Partners or another party (the
"Purchaser").

     1.   Retention.  The Company hereby retains Jefferies as its exclusive
financial advisor in connection with the Acquisition.

     2.   Information on the Company.  The Company recognizes and confirms
that in rendering services hereunder, the Financial Advisor has been, prior to
the date hereof, and hereinafter will be, using and relying on and assuming
the accuracy of, without independent verification, data, material and other
information with respect to the Company, furnished to the Financial Advisor by
or on behalf of the Company and their agents, counsel, employees and
representatives (the "Information").

     The Company recognizes and confirms that the Financial Advisor: (a) will
use and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this Agreement without having independently verified the same; (b) does not
assume responsibility for the accuracy or completeness of the Information and
such other information; (c) will not make an appraisal of any assets of the
Company or the Purchaser; and (d) retains the right to continue to perform due
diligence during the course of the engagement.  The Company represents and
warrants that any prospectus, placement memorandum or similar disclosure
materials utilized by the Company in connection with the Acquisition will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
in which they were made, not false or misleading.  The Financial Advisor
agrees to keep the Information confidential so long as it is and remains non-
public, unless disclosure is required by law or requested by any government,
regulatory or self-regulatory agency or body, and the Financial Advisor will
not make use thereof, except in connection with our services hereunder for the
Company.

     3.   Use of Name.  The Company agrees that any reference to the
Financial Advisor in any release, communication, or material distributed by
the Company, is subject to the Financial Advisor's prior written approval.  If
the Financial Advisor resigns prior to the dissemination of any such release,
communication or material, no reference shall be made therein to the Financial
Advisor despite any prior written approval which may have been given therefor.

     4.   Use of Advice.  Except as provided in Section 5(b) below, no
advice rendered by the Financial Advisor in connection with the services
performed by the Financial Advisor pursuant to this Agreement will be quoted
by either party hereto, nor will any such advice be referred to, in any
report, document, release or other communication, whether written or oral,
prepared, issued or transmitted by such party or any person or corporation
controlling, controlled by or under common control with such party or any
director, officer, employee, agent or representative of any such party,
without the prior written authorization of both parties hereto, except to the
extent required by law (in which case the appropriate party shall so advise
the other in writing prior to such use and shall consult with the other with
respect to the form and timing of disclosure), provided that the foregoing
shall not prohibit appropriate internal communication or reference with
respect to such advice internally within such parties.

     5.   Compensation.  In full payment for services rendered and to be
          rendered hereunder by Jefferies, the Company agrees to pay to
          Jefferies as follows:

          (a)  In consideration of the services rendered by Jefferies
hereunder as exclusive financial advisor in connection with the Acquisition,
the Company agrees to pay to Jefferies in cash, immediately upon execution of
this Agreement, $250,000 as a one-time retainer fee (the "Retainer").

          (b)  The Company agrees to pay Jefferies a fee of $250,000 in
cash for the fairness opinion issued in conjunction with the Acquisition
contemplated herein, payable immediately upon delivery of such fairness
opinion.

          (c)  In consideration of the services rendered by Jefferies
hereunder as exclusive financial advisor in connection with the Acquisition,
the Company agrees to pay to Jefferies in cash upon the successful
consummation of the Acquisition, $1,250,000 as a success fee (the "Success
Fee").

          (d)  In addition to the compensation to be paid to Jefferies as
provided in Sections 5(a), 5(b) and 5(c) hereof, the Company shall pay to, or
on behalf of, Jefferies, promptly as billed, all out-of-pocket expenses
incurred by Jefferies in connection with its services to be rendered hereunder
(including, without limitation, the fees and disbursements of Jefferies'
counsel, travel and lodging expenses, word processing charges, messenger and
duplicating services, facsimile expenses and other customary expenditures).

          (e)  Jefferies may resign at any time and the Company may
terminate Jefferies' services at any time, each by giving notice to the other. 
If Jefferies resigns or the Company terminates Jefferies' services for any
reason, Jefferies and its counsel shall be entitled to receive all of the
amounts due pursuant to Sections 5(a), 5(b), 5(c) and 5(d) hereof up to and
including the effective date of such termination or resignation, as the case
may be.  In addition, if Jefferies' services hereunder are terminated by the
Company, and the Company completes a transaction similar to the Acquisition
contemplated herein within one year of Jefferies being terminated, then the
Company shall pay Jefferies within five (5) days of the closing of such
transaction in cash the fees as outlined in Sections 5(a), 5(b) and 5(c) as
applicable.

          (f)  No fee paid or payable to Jefferies or any of its affiliates
shall be credited against any other fee paid or payable to Jefferies or any of
its affiliates.

     6.   Representations and Warranties.  The Company represents and
warrants to Jefferies that this Agreement has been duly authorized, executed
and delivered by the Company; and, assuming the due execution by the Financial
Advisor, constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company, in accordance with its terms.  The Company
represents that, to the best of its knowledge, the Information will not, when
delivered and at the closing of the Acquisition, contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein in light of the circumstances under which they were made
not misleading.  The Company agrees to advise the Financial Advisor promptly
of the occurrence of any event or any other change prior to the closing known
to it which results in the Information containing any untrue statement of a
material fact or omitting to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.

     7.   Indemnity.  In partial consideration of the services to be
rendered hereunder the Company agrees to indemnify Jefferies and certain other
Indemnified Persons in accordance with Schedule A attached hereto.

     8.   Survival of Certain Provisions.  The indemnity and contribution
agreements contained in Section 7 and Schedule A to this Agreement, the
representations and warranties of the Company contained in Section 6 of this
Agreement, and the provisions of Sections 5 of this Agreement shall remain
operative and in full force and effect regardless of (a) any investigation
made by or on behalf of the Financial Advisor, or by or on behalf of any
affiliate of the Financial Advisor or any person controlling either, (b)
completion of the Acquisition, (c) the resignation of the Financial Advisor or
any termination of the Financial Advisor's services or (d) any expiration or
termination of this Agreement, and shall be binding upon, and shall inure to
the benefit of, any successors, assigns, heirs and personal representatives of
the Company, the Financial Advisor, and the Indemnified Persons identified in
Schedule A.

     9.   Notices.  Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) if to the
Company, at the address set forth above, and (b) if to Jefferies, at the
offices of Jefferies at 11100 Santa Monica Boulevard, Suite 1000, Los Angeles,
California 90025, Attention: Jerry M. Gluck, Executive Vice President and
General Counsel.

     10.  Counterparts.  This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.

     11.  Third Party Beneficiaries.  This Agreement has been and is made
solely for the benefit of the Company, the Financial Advisor and the other
Indemnified Persons referred to in Schedule A hereof and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement.

     12.  Construction.  This Agreement incorporates the entire
understanding of the parties and supersedes all previous agreements relating
to the subject matter hereof should they exist and shall be governed by, and
construed in accordance with, the laws of the State of New York, without
regard to principles of conflicts of law.

     13.   Headings.  The section headings in this Agreement have been
inserted as a matter of convenience of reference and are not part of this
Agreement.

     14.   Press Announcements.  At any time after the consummation or other
public announcement of the Acquisition, the Financial Advisor may place an
announcement in such newspapers and publications as it may choose, stating
that the Financial Advisor has acted as exclusive financial advisor to the
Company in connection with the Acquisition contemplated by this Agreement.

     15.  Amendment.  This Agreement may not be modified or amended except
in a writing duly executed by the parties hereto.

     16.  Term.  Except as provided herein, this Agreement shall run from
the date of this letter to a date of one year thereafter, unless extended by
mutual consent of the parties (the "Term").

     Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein,
whereupon this letter and your acceptance shall constitute a binding agreement
between the Company and Jefferies as of the date first above written.

                              Sincerely,

                              JEFFERIES & COMPANY, INC.



                              By /s/David J. Losito
                                 Joseph J. Radecki, Jr.
                                 Executive Vice President


Accepted and Agreed:
BUCYRUS INTERNATIONAL, INC.




By /s/W.R. Hildebrand
   Mr. Williard R. Hildebrand
   Chief Executive Officer

<PAGE>
                                
                                 SCHEDULE A


                              July 30, 1997



JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, CA  90025

Ladies and Gentlemen:

     This letter agreement is entered into pursuant to, and in order to
induce Jefferies & Company, Inc.  ("Jefferies" or the "Financial Advisor") to
enter into, the engagement letter dated July 30, 1997 (the "Agreement")
between Bucyrus International, Inc. (the "Company") and Jefferies.  Unless
otherwise noted, all capitalized terms used herein shall have the meanings set
forth in the Agreement.

     Since Jefferies will be acting on behalf of the Company in connection
with the transactions contemplated by the Agreement, and as part of the
consideration for the agreement of Jefferies to furnish its services pursuant
to such Agreement, the Company agrees to indemnify and hold harmless Jefferies
and its affiliates and their officers, directors, partners, counsel, employees
and agents, and any other persons controlling Jefferies or any of its
respective affiliates within the meaning of either Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934,
and the respective agents, employees, officers, directors, partners, counsel
and shareholders of such persons (Jefferies and each such other person being
referred to as an "Indemnified Person"), to the fullest extent lawful, from
and against all claims, liabilities, losses, damages and expenses (or actions
in respect thereof) related to or arising out of (i) actions taken or omitted
to be taken by the Company, its affiliates, employees or agents, (ii) actions
taken or omitted to be taken by any Indemnified Person (including acts or
omissions constituting ordinary negligence) pursuant to the terms of, or in
connection with services rendered pursuant to, the Agreement or any
transaction or proposed transaction contemplated thereby or any Indemnified
Person's role in connection therewith, provided, however, that the Company
shall not be responsible for any losses, claims, damages, liabilities or
expenses of any Indemnified Person to the extent that it is finally judicially
determined that they result solely from actions taken or omitted to be taken
by such Indemnified Person in bad faith or to be due primarily to such
Indemnified Person's gross negligence, and (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Information, or
in any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading.

     Each Indemnified Person shall give prompt written notice to the Company
after the receipt by such Indemnified Person of any written notice of the
commencement of any action, suit or proceeding for which such Indemnified
Person will claim indemnification or contribution pursuant to this Agreement. 
The Company shall have the right, exercisable by giving written notice to an
Indemnified Person within 10 business days after the receipt of written notice
from such Indemnified Person of such commencement, to assume, at its expense,
the defense of any such action, suit or proceeding; provided, however, that an
Indemnified Person shall have the right to employ counsel in any such action,
suit or proceeding, and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Person unless: (i) the Company fails to assume the defense of such action,
suit or proceeding or fails to employ separate counsel reasonably satisfactory
to such Indemnified Person in any such action, suit or proceeding; or (ii) the
Company and such Indemnified Person shall have been advised by counsel that
there may be one or more defenses available to such Indemnified Person which
are in conflict with, different from or additional to those available to the
Company, any of its affiliates, or another Indemnified Person, as the case may
be (in which case, if such Indemnified Person notifies the Company in writing
that it elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such action, suit or 
proceeding on behalf of such Indemnified Person); it being understood,
however, that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time acting for each
Indemnified Person in any one jurisdiction.  The Company shall not settle or
compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, suit or proceeding in which
any Indemnified Person is or could be a party and as to which indemnification
or contribution could have been sought by such Indemnified Person hereunder
(whether or not such Indemnified Person is a party thereto), unless such
Indemnified Person has given its prior written consent or the settlement,
compromise, consent or termination includes an express unconditional release
of such Indemnified Person, satisfactory in form and substance to such
Indemnified Person, from all losses, claims, damages or liabilities arising
out of such action, claim, suit or proceeding.

     If for any reason (other than the bad faith or gross negligence of an
Indemnified Person as provided above) the foregoing indemnity is unavailable
to an Indemnified Person or insufficient to hold and Indemnified Person
harmless, then the Company, to the fullest extent permitted by law, shall
contribute to the amount paid or payable by such Indemnified Person as a
result of such claims, liabilities, losses, damages or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by Jefferies on the other, from the transaction or
proposed transaction under the Agreement or, if allocation on that basis is
not permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one hand
and by Jefferies on the other, but also the relative fault of the Company and
Jefferies, as well as any relevant equitable considerations.  Notwithstanding
the provisions hereof, the aggregate contribution of all Indemnified Persons
to all claims, liabilities, losses, damages and expenses shall not exceed the
amount of fees actually received by Jefferies pursuant to the Agreement.  It
is hereby further agreed that the relative benefits to the Company on the one
hand and Jefferies on the other with respect to any transaction or proposed
transaction contemplated by the Agreement shall be deemed to be in the same
proportion as (i) the total value of the transaction bears to (ii) the fees
paid to Jefferies with respect to such transaction.  The relative fault of the
Company on the one hand and Jefferies on the other with respect to the
transaction shall be determined by reference to, among other things, whether
any untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or by Jefferies and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  No Indemnified Person shall have any liability to the Company or
any other officer, director, employee or affiliate thereof in connection with
the services rendered pursuant to the Agreement except for any liability for
claims, liabilities, losses or damages finally judicially determined to have
resulted primarily from actions taken or omitted to be taken by such
Indemnified Person in bad faith or as a result of gross negligence.  The
indemnity, contribution and expense reimbursement obligations set forth herein
(i) shall be in addition to any liability the Company may have to any
Indemnified Person at common law or otherwise, (ii) shall survive the
expiration of the Term, (iii) shall apply to any modification of Jefferies'
engagement and shall remain in full force and effect following the completion
or termination of the Agreement, (iv) shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of Jefferies
or any other Indemnified Person and (v) shall be binding on any successor or
assign of the Company and successors or assigns to all or substantially all of
the Company's business and assets.

     In addition, the Company agrees to reimburse the Indemnified Persons for
all expenses (including fees and expenses of counsel) as they are incurred in
connection with investigating, preparing or defending any such action or
claim, whether or not in connection with litigation in which any Indemnified
Person is a named party.  If any of Jefferies' personnel appears as witnesses,
are deposed or are otherwise involved in the defense of any action against
Jefferies, the Company or the Company's directors, the Company will pay
Jefferies (i) with respect to each day that one of Jefferies' professional
personnel appears as a witness or is deposed and/or (ii) with respect to each
day that one of Jefferies' professional personnel is involved in the
preparation therefor, (a) a fee of $2,000 per day for each such person with
respect to each appearance as a witness or for a deposition and (b) at a rate
of $200 per hour with respect to each hour of preparation for any such
appearance and the Company will reimburse Jefferies for all reasonable
expenses incurred by Jefferies by reason of any of its personnel being
involved in any such action.

     Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein,
whereupon this letter and your acceptance shall constitute a binding agreement
between the Company and Jefferies as of the date of the Agreement.

                              Sincerely,

                              BUCYRUS INTERNATIONAL, INC.



                              By /s/W. R. Hildebrand
                                 Williard R. Hildebrand
                                 Chief Executive Officer


Accepted and Agreed:
JEFFERIES & COMPANY, INC.


By /s/David J. Losito
   Joseph J. Radecki, Jr.
   Executive Vice President