FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
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 No. 1-985
INGERSOLL-RAND COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-5156640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Woodcliff Lake, New Jersey 07675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)573-0123
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Series A Preference New York, London and
Stock Purchase Rights Amsterdam Stock Exchanges
Common Stock, $2 par value New York, London and
Amsterdam Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
1
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The aggregate market value of common stock held by nonaffiliates
on March 10, 1994 was $4,063,998,940 based on the closing price
of such stock on the New York Stock Exchange.
The number of shares of common stock outstanding as of March 10,
1994 was 105,447,690.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended December 31,
1993. With the exception of those portions which are
incorporated by reference into Parts I, II and IV of this Form
10-K Annual Report, the 1993 Annual Report to Shareowners is not
to be deemed filed as part of this report.
Proxy Statement for Annual Meeting of Shareholders to be held
on April 28, 1994. See Part III of this Form 10-K Annual Report
for portions incorporated by reference. (A definitive proxy
statement has been filed with the Commission since the close of
the fiscal year).
PART I
Item 1. BUSINESS
Ingersoll-Rand Company (the company) was organized in
1905 under the laws of the State of New Jersey as a consolidation
of Ingersoll-Sergeant Drill Company and the Rand Drill Company,
whose businesses were established in the early 1870's. Over the
years the company has supplemented its original business, which
consisted primarily of the manufacture and sale of rock drilling
equipment, with additional products which have been developed
internally or obtained through acquisition.
On December 31, 1986, the company and Dresser Industries,
Inc. (Dresser) formed Dresser-Rand Company (Dresser-Rand), a
partnership comprising the worldwide reciprocating compressor and
turbomachinery businesses of the two companies. Dresser-Rand,
originally a 50/50 partnership, commenced operations on January
1, 1987. Effective October 1, 1992, Dresser increased its
ownership interest in the partnership to 51 percent from 50
percent. The company's ownership interest is now 49 percent.
Dresser-Rand manufactures products such as gas turbines, gas
compressors, power recovery systems, reciprocating gas engines
and steam turbines, which were previously manufactured by the
company.
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Effective October 1, 1992, the company and Dresser formed
Ingersoll-Dresser Pump Company (IDP), a partnership which is
owned 51 percent by the company and 49 percent by Dresser. This
joint venture includes the majority of the worldwide pump
operations of the two companies, and its results have been
included in the consolidated financial statements of the company
since the formation date.
The following acquisitions have been accounted for as
purchases and, accordingly, each purchase price was allocated to
the acquired assets and assumed liabilities based on their
estimated fair values. The results of operations since the dates
of acquisition are included in the consolidated financial
statements.
o Effective February 1, 1990, the company completed the
acquisition of The Aro Corporation (Aro) and its subsidiaries
for $131.5 million in cash, from Todd Shipyards Corporation.
Aro is a manufacturer of air-powered tools, valves, pumps and
related equipment.
o On October 31, 1990, the company acquired ABG Verwaltungs GmbH
and related entities (ABG) for $35.4 million in cash. ABG is
a manufacturer of paving equipment and other road machinery.
During 1990, the company also acquired several smaller
operations for approximately $27.7 million in cash.
o In early 1992, the company acquired Industrias del Rodamiento,
S.A. (IRSA) for $14.0 million in cash and $1.8 million in
notes. IRSA manufactures and markets an extensive line of
bearings, as well as wheel kits and automotive accessories.
o In August 1993, the company acquired the Kunsebeck, Germany,
needle and cylindrical bearing business of FAG Kugelfischer
Georg Schafer AG of Schweinfurt, Germany, for $42.5 million in
cash, subject to final contract negotiations.
Dispositions that the company has made in recent years
are as follows:
o The company sold on January 18, 1991, Schlage Electronics, a
business unit of the company's Schlage Lock Company. The
sales price was in excess of the carrying value of the
investment in Schlage Electronics.
o The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash.
3
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Products
The company manufactures and sells primarily
nonelectrical machinery and equipment. Principal products
include the following:
Abrasive blasting and recovery Industrial pumps
systems Lubrication equipment
Air compressors Material handling equipment
Air dryers Mining machinery
Air logic controls Monitoring drills
Air motors Needle roller bearings
Air tools Pavement-milling machines
Architectural hardware trim Paving equipment
Asphalt compactors Pellet mills
Automated-parts finishing Pneumatic cylinders
systems Pneumatic valves
Automated production systems Portable compressors
Automotive components Portable generators
Ball bearings Portable light towers
Construction equipment Pulp-processing machinery
Dewatering presses Road-building machinery
Diaphragm pumps Rock drills
Door closers Roller bearings
Door hardware Roller mills
Door locks Rotary drills
Emergency exit devices Rough-terrain forklifts
Engineered pumps Separation equipment
Engine-starting systems Soil compactors
Extrusion systems Spray-coating systems
Fluid-handling equipment Waterjet-cutting systems
Food-processing equipment Water well drills
Foundation drills Winches
Hoists
These products are sold primarily under the company's
name and also under other names including Torrington, Fafnir,
Klemm, Schlage, CPM, LCN Closers, Von Duprin, Aro, ABG,
Ingersoll-Dresser Pumps, Pacific, Worthington, Jeumont-Schneider
Pumps and Pleuger.
During the past three years, the division of the
company's sales between capital goods and expendables has been in
the approximate ratio of 56 percent and 44 percent,
respectively. The company generally defines as expendables those
products which are not capitalized by the ultimate user.
Examples of such products are parts sold for replacement
purposes, power tools and needle bearings.
The seasonal business of the company is insignificant.
4
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Additional information on the company's business and
financial information about industry segments is presented in
Footnote 16 of the Annual Report to Shareowners for 1993,
incorporated by reference in this Form 10-K Annual Report.
Distribution
The company's products are distributed by a number of
methods which the company believes are appropriate to the type of
product. Sales are made domestically through branch sales
offices and through distributorships and dealers across the
United States. International sales are made through
approximately 60 subsidiary sales and service companies with a
supporting chain of distributors in over 100 countries.
Working Capital
The working capital requirements of the company vary with
respect to the many products and industries in which it is
involved. In general, the requirements of its Engineered
Equipment Segment, which manufactures machinery for specialized
customer needs, involve a relatively long lead time and, at
times, more significant company investment with respect to the
particular product or order. Historically, these orders are
generally covered by progress payments, which reduce the
company's investment in the amount of inventory maintained by
this segment. The products manufactured by the company's
Standard Machinery and Bearings, Locks and Tools segments are
more in the nature of standard equipment. Consequently, a wider
variety must usually be more readily available to meet rapid
delivery requirements. Such working capital requirements are
not, however, in the opinion of management, materially different
from those experienced by the company's major competitors.
Customers
No material part of the company's business is dependent
upon a single customer or very few customers, the loss of any one
of which would have a material adverse effect on the company's
operations.
Competitive Conditions
The company's products are sold in highly competitive
markets throughout the world against products produced by both
foreign and domestic corporations. The principal methods of
competition in these markets relate to price, quality and
service. The company believes that it is one of the leading
manufacturers in the world of a broad line of air compression
systems, anti-friction bearings, construction equipment, air
tools and pumps (through the IDP joint venture). In addition, it
believes it is also an important factor in domestic markets for
locks and other door hardware products.
5
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International Operations
Sales to customers outside the United States, including
domestic sales for export, accounted for approximately 40 percent
of the consolidated net sales in 1993. Information as to
operating income by geographic area is set forth in Footnote 16
of the Annual Report to Shareowners for 1993, incorporated by
reference in this Form 10-K Annual Report. Sales outside of the
United States are made in more than 100 countries; therefore, the
attendant risks of manufacturing or selling in a particular
country, such as nationalization and establishment of common
markets, would not have a significant effect on the company's
international operations.
Raw Materials
The company manufactures many of the components included
in its products. The principal raw materials required for the
manufacture of the company's products are purchased from numerous
suppliers, and the company believes that available sources of
supply will generally be sufficient for its needs for the
foreseeable future.
Backlog
The company's approximate backlog of orders at December
31, 1993, believed by it to be firm, was $134 million for the
Standard Machinery Segment, $393 million for the Engineered
Equipment Segment and $395 million for the Bearings, Locks and
Tools Segment as compared to $131 million, $428 million and $373
million, respectively, at December 31, 1992. These backlog
figures are based on orders received. While the major portion of
the company's products are built in advance of order and either
shipped or assembled from stock, orders for specialized machinery
or specific customer application are submitted with extensive
lead time and are often subject to revision, deferral,
cancellation or termination. The company estimates that
approximately 90 percent of the backlog will be shipped during
the next twelve months.
Research, Engineering and Development
The company maintains extensive research, engineering and
development facilities for experimenting, testing and developing
high quality products. The company employs approximately 1,500
professional employees for its research, engineering and
development activities. The company spent $150 million in 1993,
$138 million in 1992 and $124 million in 1991 on research,
engineering and development.
6
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Patents and Licenses
The company owns numerous patents and patent applications
and is licensed under others. While it considers that in the
aggregate its patents and licenses are valuable, it does not
believe that its business is materially dependent on its patents
or licenses or any group of them. In the company's opinion,
engineering and production skills, and experience are more
responsible for its market position than patents or licenses.
Environmental Matters
The company's facilities are subject to environmental
regulation by federal, state and local authorities. It is the
company's policy to comply with all environmental regulatory
requirements and the company is in substantial compliance with
those laws and regulations. While there is some degree of
uncertainty associated with the compliance costs resulting from
new regulatory initiatives such as the 1990 Amendments to the
Clean Air Act, which have not as yet been fully implemented, the
ongoing cost of compliance has not had, nor is it expected to
have, a material adverse effect upon the company's capital
expenditures or financial position.
Federal Superfund and similar state laws impose joint and
several responsibility for cleaning up designated hazardous sites
not only on the owner and operator but also on any person who
contributed hazardous waste to the site. As of December 31,
1993, the company has been identified as a potentially
responsible party ("PRP") in connection with 29 federal and state
superfund sites. At all these sites there are other PRPs and to
date there is no indication the company will be liable for more
than its pro rata share of remediation costs at any site. While
some of these sites are still under investigation, in the
aggregate, the company's anticipated pro rata share of
responsibility at these sites is not deemed to be material.
Additional lawsuits and claims involving environmental matters
are likely to arise from time to time. In addition, the company
continues to investigate and remediate environmental
contamination from past operations at its facilities.
Based upon the company's experience to date with
environmental claims and litigation and with site investigation
and remediation, its expenditures for environmental purposes have
not been and are not expected to be material or to have a
material adverse effect on the company's capital expenditures,
earnings or competitive position. (See also Financial Review and
Management Analysis in the Annual Report to Shareowners for 1993
included as Exhibit 13 to this report.)
7
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Employees
There are approximately 35,100 employees of the company
throughout the world, of whom approximately 22,800 work in the
United States and 12,300 in foreign countries. Approximately 18
percent of the company's production and maintenance employees,
who work in 9 plants in the United States, are represented by 7
unions. The company believes relations with its employees are
satisfactory.
Item 2. PROPERTIES
The company's executive offices are located at Woodcliff
Lake, New Jersey. Manufacturing and assembly operations are
conducted in 48 plants in the United States; 6 plants in Canada;
26 plants in Europe; 5 plants in the Far East; 5 plants in Latin
America; 2 plants in Asia and 1 plant in Africa. The company
also maintains various warehouses, offices and repair centers in
the United States, Canada and abroad.
Substantially all plant facilities are owned by the
company and the remainder are under long-term lease. The company
believes that its plant and equipment have been well maintained
and are generally in good condition. The company has several
closed facilities that it is actively marketing with the intent
of selling them at their net realizable value.
The operating segments for which the facilities are
primarily used are as described below. Facilities that produce
products in several operating segments are classified by the
products which they primarily manufacture. Facilities under
long-term lease are included below and are not significant to
each operating segment's total number of plants or square
footage.
Standard Machinery
This segment's products include machinery regularly used
in general manufacturing and in industries such as mining and
construction. Products range from blasthole drills used in
mining and construction to small air compressors found worldwide
in auto service stations. The segment is aligned into two
operating groups: Air Compressor Group and Construction and
Mining Group. The segment's manufacturing locations are as
follows:
Approximate
Number of Plants Square Footage
Domestic 7 1,884,000
International 11 1,889,000
Total 18 3,773,000
8
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Engineered Equipment
The products manufactured by this segment are
predominantly designed for specific customer applications. The
segment's diverse product line includes pumps, liquid/solid
separation and densification machinery. The segment is organized
into two operating groups: Pump Group and Process Systems Group.
The segment's manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 12 2,473,000
International 19 2,457,000
Total 31 4,930,000
Bearings, Locks and Tools
This segment primarily serves the automotive, capital
goods, energy and construction industries. Products in this
segment include bearings for specialized and industrial
application, locks and door hardware for residential and
commercial buildings, air tools for industrial use, air winches,
hoists and engine starting systems, and automated production
systems for transportation equipment manufacturers. There are
three operating groups in this segment: Bearings and Components
Group, Production Equipment Group and Door Hardware Group. The
segment's manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 29 6,358,000
International 15 1,607,000
Total 44 7,965,000
Item 3. LEGAL PROCEEDINGS
In the normal course of business, the company is involved
in a variety of lawsuits, claims and legal proceedings, including
proceedings for the cleanup of 29 waste sites under Superfund and
similar state laws. In the opinion of the company pending legal
matters, including those discussed below, are not expected to
have a material adverse effect on its operations or financial
condition.
9
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By letter received on May 8, 1991, the Connecticut
Department of Environmental Protection ("CTDEP") assessed a civil
penalty in the amount of $207,500 on The Torrington Company, a
wholly-owned subsidiary of the company ("Torrington"), for
alleged effluent violations of a state wastewater discharge
permit issued to Torrington's Newington facility. This penalty
amount was calculated by CTDEP based on a stipulated judgment
dated September 29, 1988, which provides for civil penalties to
be assessed against Torrington for effluent violations of its
discharge permit. This Stipulated Judgment was entered in an
action entitled Stanley J. Pac, Commissioner of Environmental
Protection v. Fafnir Bearing Division, The Torrington Company, in
the Superior Court for the Judicial District of Hartford/New
Britain at Hartford. Pursuant to a settlement agreement with
CTDEP in February 1994, the penalty assessment was reduced to
$130,475 and was paid by Torrington.
By letter dated June 18, 1992, Torrington was notified by
the Office of the Attorney General of the state of Connecticut of
a $675,000 penalty assessed against several of its plants located
in Connecticut for alleged violations of state wastewater
discharge regulations. On February 28, 1994, a Stipulated
Judgment was entered in an action entitled Timothy R. E. Keeney,
Commissioner of Environmental Protection v. The Torrington
Company, in the Superior Court for the Judicial District of
Hartford/New Britain at Hartford, pursuant to which the penalty
assessment was reduced to $271,525 and paid by Torrington.
Torrington is required under the Stipulated Judgment to perform
certain investigative and testing activities to identify
potential sources of contaminants at the involved plants. The
Stipulated Judgment also includes stipulated penalties for any
future violations of effluent limitations contained in discharge
permits held by the involved plants.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's security
holders during the last quarter of its fiscal year ended December
31, 1993.
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The following information is included in accordance with the
provision of Part III, Item 10.
Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
James E. Perrella(58) 5/4/77 Chairman of the Board,
President and Chief
Executive Officer,
Director (President and
Director, September 1992 -
October 1993; Executive
Vice President, 1982 -
1992)
Thomas E. Bennett(64) 8/7/74 Executive Vice President
(Executive Vice President
and President of IDP,
October 1992 - March 1994;
Executive Vice President
and President of the
Bearings and Components
Group, 1989 - October
1992; Vice President and
President of the Bearings
and Components Group,
1981 - 1989)
William G. Mulligan(63) 5/2/73 Executive Vice President
J. Frank Travis(58) 2/7/90 Executive Vice President
(Vice President and
President of the Bearings
and Components Group,
February 1992 - December
1993; President of the Air
Compressor Group, 1989 -
February 1992)
Thomas F. McBride(58) 9/5/79 Senior Vice President and
Chief Financial Officer
(Senior Vice President
and Comptroller, February
1992 - May 1993; Vice
President and Comptroller,
1981 - 1992)
William J. Armstrong(52) 8/3/83 Vice President and Treasurer
Paul L. Bergren(44) 12/2/92 Vice President and President
of the Air Compressor
Group (Vice President and
General Manager -
Centrifugal Compressor
Division, 1989 - 1992)
Frederick W. Hadfield(57) 8/1/79 Vice President and President
of IDP (Vice President,
1979 - March 1994)
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Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
Daniel E. Kletter(55) 2/7/90 Vice President and President
of the Construction and
Mining Group (Vice
President and General
Manager - Portable
Compressor Division,
1981 - 1989)
David W. Lasier(61) 3/2/88 Vice President and
President of Door Hardware
Group
Patricia Nachtigal(47) 11/2/88 Vice President and General
Counsel (Secretary and
Managing Attorney, 1988 -
1991)
James R. O'Dell(55) 12/3/88 Vice President
Larry H. Pitsch(53) 2/7/90 Vice President and President
of the Process Systems
Group (President of
Industrial Process
Machinery Group, 1985 -
1989)
Gerald E. Swimmer(49) 5/1/82 Vice President
R. Barry Uber(48) 2/7/90 Vice President and President
of the Production
Equipment Group (Vice
President and General
Manager - Power Tool
Division, 1985 - 1989)
Ronald G. Heller(47) 2/6/91 Secretary and Assistant
General Counsel (Assistant
General Counsel, 1988 -
1991)
No family relationship exists between any of the above-listed
executive officers of the company. All officers are elected to
hold office for one year or until their successors are elected
and qualify.
12
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the principal market for the
company's common stock and related stockholder matters are as
follows:
Quarterly share prices and dividends for the common stock are
shown in the following tabulation. The common shares are listed
on the New York Stock Exchange and also on the London and
Amsterdam exchanges.
Common Stock
High Low Dividend
1993
First quarter $36 1/4 $28 3/4 $.175
Second quarter 35 3/8 29 1/2 .175
Third quarter 39 3/4 31 .175
Fourth quarter 39 7/8 35 .175
High
Low Dividend
1992
First quarter $33 3/16 $26 1/4 $.165
Second quarter 32 1/4 25 3/8 .175
Third quarter 30 1/4 25 .175
Fourth quarter 34 1/4 26 3/8 .175
The Bank of New York (Church Street Station, P.O. Box
11258, New York, NY 10286-1258,(800)524-4458) is the transfer
agent, registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of
dividends.
The approximate number of record holders of common stock
as of March 10, 1994 was 16,000.
13 <PAGE>
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December
31, 1993, is as follows (in thousands except per share amounts):
<TABLE>
December 31 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales $4,021,071 $3,783,787 $3,586,220 $3,737,847 $3,447,407
Net earnings (loss) 142,524 (234,406) 150,589 185,343 210,751
Total assets 3,375,332 3,387,552 2,979,560 2,982,507 2,594,591
Long-term debt 314,136 355,598 375,846 265,163 279,916
Shareowners' equity 1,349,825 1,293,375 1,633,056 1,556,424 1,376,865
Earnings (loss) per
common share $1.36 $(2.25) $1.45 $1.78 $1.98
Dividends per
common share 0.70 0.69 0.66 0.63 0.58
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial
condition and results of operations is included as Financial
Review and Management Analysis in Exhibit 13 - the Annual Report
to Shareowners for 1993 and is incorporated by reference in this
Form 10-K Annual Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
financial information included in the accompanying Annual Report
to Shareowners for 1993 are incorporated by reference in this
Form 10-K Annual Report:
(a) The consolidated financial statements and the report
thereon of Price Waterhouse dated February 1, 1994, are included
as Exhibit 13 - the Annual Report to Shareowners (excluding the
Financial Review and Management Analysis) for 1993.
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(b) The unaudited quarterly financial data for the
two-year period ended December 31, 1993, is as follows (in
thousands except per share amounts):
<TABLE>
Earnings
Net (loss) per
Net Cost of Operating earnings common
1993 sales goods sold income (loss) share
<S> <C> <C> <C> <C> <C>
First quarter $ 952,105 $ 728,042 $ 45,150 $ 3,628 $ .04
Second quarter 1,006,773 752,816 69,344 35,937 .34
Third quarter 973,524 736,244 64,505 35,186 .33
Fourth quarter 1,088,669 799,588 112,515 67,773 .65
Year 1993 $4,021,071 $3,016,690 $291,514 $ 142,524 $ 1.36
1992
First quarter $ 861,242 $ 666,132 $ 40,422 $(329,438) $(3.16)
Second quarter 926,932 708,874 62,049 32,638 .31
Third quarter 904,015 695,563 40,097 29,970 .29
Fourth quarter 1,091,598 811,292 32,671 32,424 .31
Year 1992 $3,783,787 $2,881,861 $175,239 $(234,406) $(2.25)
</TABLE>
o During the fourth quarter of 1993, the company retroactively
changed its method of accounting for postemployment benefits.
The effect of this change on the company amounted to $21.0
million (net of tax) and resulted in the restatement of the
company's net earnings for the first quarter from $24.6
million ($0.24 per share) to $3.6 million ($0.04 per share).
o During the second quarter of 1993, the company recorded a
$5.0 million ($0.03 per share) restructure of operations
charge, related to the sale of substantially all of the
underground coal-mining machinery assets (see Note 4 to the
Consolidated Financial Statements).
o The reductions in LIFO inventory quantities increased net
earnings per share by $0.02, $0.05, $0.01 and $0.02 in the
second and fourth quarters of 1993 and 1992, respectively.
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o During the fourth quarter of 1992, the company retroactively
changed its method of accounting for postretirement benefits
other than pensions and deferred income taxes. The effect of
these changes for the periods prior to January 1, 1992,
amounted to $350.0 million (net of tax), and resulted in the
restatement of the company's net earnings for the first
quarter from $26.4 million ($0.25 per share) to a net loss of
$329.4 million ($3.16 per share). These changes also
resulted in the restatement of the company's net earnings for
the second and third quarters of the year from $38.6 million
($0.37 per share) and $35.9 million ($0.35 per share) to
$32.6 million ($0.31 per share) and $30.0 million ($0.29 per
share), respectively.
o The fourth quarter of 1992 included the results of the
Ingersoll-Dresser Pump Company formed on October 1, 1992 (see
Note 2 to the Consolidated Financial Statements).
o In the third quarter of 1992, the company recorded a $10.0
million ($0.06 per share) restructure of operations charge
relating to its aerospace bearings business (see Note 4 to
the Consolidated Financial Statements).
o The fourth quarter of 1992 included a $70.0 million
restructuring charge relating to the Ingersoll-Dresser Pump
Company. The company's portion of the restructure of
operations charge for IDP was $35.0 million pretax and $25.7
million ($0.25 per share) after-tax.
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is (i) incorporated
by reference in this Form 10-K Annual Report from pages 3, 4, 6,
and 7 of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 28, 1994, and (ii)
included in Part I on pages 11 and 12 of this Form 10-K Annual
Report.
Item 11. EXECUTIVE COMPENSATION
Information on executive compensation is incorporated by
reference in this Form 10-K Annual Report from pages 7 through 19
of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 28, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information on security ownership of directors and
nominees, directors and officers as a group and certain
beneficial owners is incorporated by reference in this Form 10-K
Annual Report on pages 5 and 6 of the company's definitive proxy
statement for the Annual Meeting of Shareholders to be held on
April 28, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by
reference in this Form 10-K Annual Report from page 20 of the
company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 28, 1994.
17
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. and 2. Financial statements and financial statement
schedules
The financial statements, together with the
report thereon of Price Waterhouse dated
February 1, 1994, included as Exhibit 13
(excluding Financial Review and Management
Analysis) and the unaudited quarterly financial
data included in Part II Item 8(b) are
incorporated by reference in this Form 10-K
Annual Report. The financial statement
schedules listed in the accompanying index on
page 19 should be read in conjunction with the
financial statements in such Annual Report to
Shareowners for 1993.
Separate financial statements for all 50
percent or less owned companies, accounted for
by the equity method have been omitted because
no individual entity constitutes a significant
subsidiary.
3. Exhibits
The exhibits listed on the accompanying
index to exhibits on pages 26 and 27 are filed
as part of this Form 10-K Annual Report.
(b) Reports on Form 8-K
None.
18
<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a) 1 and 2)
Form
10-K
Consolidated Financial Statements:
Report of independent accountants . . . . . . . . . . *
Consolidated balance sheet at
December 31, 1993 and 1992 . . . . . . . . . . . . *
For the years ended December 31, 1993, 1992
and 1991:
Consolidated statement of income . . . . . . . . . *
Consolidated statement of shareowners'
equity . . . . . . . . . . . . . . . . . . . . . *
Consolidated statement of cash flows . . . . . . . *
Notes to consolidated financial statements . . . . . *
Selected unaudited quarterly financial data . . . . . . 15
Financial Statement Schedules:
Report of independent accountants on
financial statement schedules . . . . . . . . . . . 20
Consolidated schedules for the years ended
December 31, 1993, 1992 and 1991:
Schedule V -- Property, Plant and Equipment . . . . 21
Schedule VI -- Accumulated Depreciation and
Amortization of Property, Plant and
Equipment . . . . . . . . . . . . . . . . . . . . 22
Schedule VIII -- Valuation and Qualifying
Accounts . . . . . . . . . . . . . . . . . . . . 23
Schedule IX -- Short-Term Borrowings . . . . . . . 24
Schedule X -- Supplementary Income Statement
Information . . . . . . . . . . . . . . . . . . . 25
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to
Shareowners for 1993.
Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements of the company's 50 percent or less owned
companies, are omitted because individually they do not meet the
significant subsidiary test of Rule 3-09 of Regulation S-X.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Ingersoll-Rand Company:
Our audits of the consolidated financial statements referred to
in our report dated February 1, 1994 included as part of Exhibit
13 - the Annual Report to Shareowners for 1993 of Ingersoll-Rand
Company, (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules
listed in Item 14(a) of this Form 10-K. In our opinion, these
Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/S/ Price Waterhouse
PRICE WATERHOUSE
Hackensack, New Jersey
February 1, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on
Form S-3 (No. 33-53696) and Form S-8 (Post-Effective Amendment
No. 4 to No. 2-64708, No. 2-67834, No. 2-98258 and No. 33-35229)
of Ingersoll-Rand Company of our report dated February 1, 1994
included as part of Exhibit 13 - the Annual Report to Shareowners
for 1993, which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedules, which appears on
this page.
/S/ Price Waterhouse
PRICE WATERHOUSE
Hackensack, New Jersey
March 30, 1994
20 <PAGE>
<TABLE>
SCHEDULE V
INGERSOLL-RAND COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(Amounts in thousands)
Balance at Balance
beginning Additions Retirements at end
Classification of year at cost or sales Other (*) of year
Year ended December 31, 1993
<S> <C> <C> <C> <C> <C>
Land $ 43,813 $ 2,697 $ 684 $ (375) $ 45,451
Buildings 448,086 40,682 11,645 (826) 476,297
Machinery, tools
and equipment 1,030,443 139,827 142,787 1,728 1,029,211
Furniture and fixtures 93,016 12,849 10,921 748 95,692
Vehicles 19,559 2,288 2,440 (630) 18,777
$1,634,917 $198,343 $168,477 $ 645 $1,665,428
Year ended December 31, 1992
Land $ 33,256 $ 2,770 $ 327 $ 8,114 $ 43,813
Buildings 391,585 24,854 8,036 39,683 448,086
Machinery, tools
and equipment 873,057 150,454 109,997 116,929 1,030,443
Furniture and fixtures 89,629 8,055 8,444 3,776 93,016
Vehicles 17,909 2,643 2,005 1,012 19,559
$1,405,436 $188,776 $128,809 $169,514 $1,634,917
Year ended December 31, 1991
Land $ 34,537 $ 74 $ 1,211 $ (144) $ 33,256
Buildings 383,183 21,022 10,782 (1,838) 391,585
Machinery, tools
and equipment 826,950 145,277 93,315 (5,855) 873,057
Furniture and fixtures 86,488 15,552 11,456 (955) 89,629
Vehicles 17,477 2,913 2,326 (155) 17,909
$1,348,635 $184,838 $119,090 $ (8,947) $1,405,436
The classification "Machinery, tools and equipment" includes the activity and
balances of the company's rental fleet.
(*) "Other" items represent foreign currency translation and acquisitions. In 1992,
amounts contributed by Dresser Industries, Inc. to Ingersoll-Dresser Pump Company,
were also included.
</TABLE>
21 <PAGE>
<TABLE>
INGERSOLL-RAND COMPANY SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(Amounts in thousands)
Additions
Balance at charged to Balance
beginning costs and Retirements at end
Classification of year expenses or sales Other (*) of year
Year ended December 31, 1993
<S> <C> <C> <C> <C> <C>
Buildings $176,879 $ 19,730 $ 7,193 $ (3,598) $185,818
Machinery, tools
and equipment 539,752 96,343 99,739 (7,481) 528,875
Furniture and fixtures 58,663 15,071 9,602 (1,767) 62,365
Vehicles 12,519 2,082 979 (396) 13,226
$787,813 $133,226 $117,513 $(13,242) $790,284
Year ended December 31, 1992
Buildings $143,402 $ 15,957 $ 4,763 $ 22,283 $176,879
Machinery, tools
and equipment 417,655 99,011 70,848 93,934 539,752
Furniture and fixtures 50,935 12,895 7,855 2,688 58,663
Vehicles 10,337 3,202 1,552 532 12,519
$622,329 $131,065 $ 85,018 $119,437 $787,813
Year ended December 31, 1991
Buildings $136,269 $ 14,170 $ 6,608 $ (429) $143,402
Machinery, tools
and equipment 390,207 87,736 56,748 (3,540) 417,655
Furniture and fixtures 47,765 14,474 10,968 (336) 50,935
Vehicles 8,472 3,782 1,844 (73) 10,337
$582,713 $120,162 $ 76,168 $ (4,378) $622,329
Depreciation on buildings is provided principally on a straight-line basis over estimated
useful lives of 10 to 40 years. Depreciation for all other fixed assets is calculated on
an accelerated basis (principally, the sum-of-the-years digits method) over estimated
useful lives; machinery, tools and equipment - 6 to 12 years; furniture and fixtures - 5
to 10 years; vehicles - 3 to 7 years. The classification "Machinery, tools and equipment"
includes the activity and balances of the company's rental fleet.
(*) "Other" represents foreign currency translation. In 1992, amounts contributed by
Dresser Industries, Inc. to Ingersoll-Dresser Pump Company, were also included.
</TABLE>
22 <PAGE>
SCHEDULE VIII
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(Amounts in thousands)
Additions
charged to
Balance at costs and Balance
beginning expenses Deductions at end
Description of year (*) (**) of year
1993
Doubtful accounts $23,057 $10,218 $11,186 $22,089
1992
Doubtful accounts $18,772 $12,590 $ 8,305 $23,057
1991
Doubtful accounts $17,045 $ 9,157 $ 7,430 $18,772
(*) "Additions" include foreign currency translation and in
1992 amounts contributed by Dresser Industries, Inc. to
Ingersoll-Dresser Pump.
(**) "Deductions" include accounts and advances written off,
less recoveries.
23 <PAGE>
<TABLE>
SCHEDULE IX
INGERSOLL-RAND COMPANY
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(Dollar amounts in thousands)
Weighted Maximum Average Weighted
Category of average amount amount average
aggregate Balance at interest outstanding outstanding interest rate
short-term end of rate at during the during the during the
borrowings period end of period period period period
1993
<S> <C> <C> <C> <C> <C>
Bank loans $124,977 7.89% $184,103 $159,108 7.77%
Commercial paper -- -- -- -- --
Current maturities
of long-term debt 81,962 8.55% 88,319 38,459 8.19%
1992(*)
Bank loans $184,106 9.64% $223,580 $166,495 10.39%
Commercial paper -- -- -- -- --
Current maturities
of long-term debt 17,231 7.73% 17,231 11,210 7.47%
1991
Bank loans $109,941 11.33% $212,075 $173,697 11.80%
Commercial paper -- -- 124,000 56,861 6.63%
Current maturities
of long-term debt 8,380 7.05% 21,200 8,775 7.32%
The average short-term borrowings and interest rates were based on the sum of the month-end
borrowings and interest rates divided by the number of months outstanding.
Maturities of commercial paper at issuance can range up to 180 days. Bank loans represent
obligations payable to various banks and financial institutions and are obtained on an as
needed basis at various terms.
(*) The company had $64,000,000 of short-term debt and equivalent amounts of short-term
investments at December 31, 1992 for which the company had a right of offset.
Accordingly, the debt and investments have been eliminated from the December 31, 1992
balance sheet and this schedule.
</TABLE>
24 <PAGE>
SCHEDULE X
INGERSOLL-RAND COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(Amounts in thousands)
Item Charged to costs and expenses
1993 1992 1991
Maintenance and repairs . . . . $78,794 $73,216 $72,771
Amortization of intangible
assets . . . . . . . . . . . $ 5,852 $ 5,597 $ 6,675
Taxes, other than payroll and
income taxes . . . . . . . . $24,875 $28,545 $28,823
Royalties and advertising costs were less than one percent of
sales.
25
<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
Description Page
3 (i) Amendment to Restated Certificate of Incorporation
of Ingersoll-Rand Company filed May 28, 1992. 30-32
3 (ii) Restated Certificate of Incorporation of
Ingersoll-Rand Company as amended through May 28, 1992. 33-60
3 (iii) By-Laws of Ingersoll-Rand Company, as amended
through October 1, 1993. 61-77
4 (iii) Ingersoll-Rand Company is a party to several
long-term debt instruments under which in each case the
total amount of securities authorized does not exceed
10% of the total assets of Ingersoll-Rand Company and
its subsidiaries on a consolidated basis. Pursuant to
paragraph 4(iii)(A) of Item 601(b) of Regulation S-K,
Ingersoll-Rand Company agrees to furnish a copy of such
instruments to the Securities and Exchange Commission
upon request. --
10 (iii) The following exhibits constitute management
contracts or compensatory plans or arrangements required
by Item 601 of Regulation S-K. --
10 (iii) (a) Management Incentive Unit Plan of Ingersoll-
Rand Company. Amendment to the Management Incentive Unit
Plan, effective January 1, 1982. Amendment to the
Management Incentive Unit Plan, effective January 1, 1987.
Amendment to the Management Incentive Unit Plan, effective
June 3, 1987. 78-92
10 (iii) (b) Description of Compensation Plan for Retired
Directors of Ingersoll-Rand Company. 93
10 (iii) (c) Form of Contingent Compensation Agreements
with Executive Vice Presidents and Group Presidents of
Ingersoll-Rand Company. 94-99
10 (iii) (d) Description of Bonus Arrangements for
Chairman, President and Staff Officers. 100
10 (iii) (e) Form of Change of Control Arrangements with
Chairman and Chief Executive Officer. 101-113
10 (iii) (f) Form of Change of Control Arrangements
with selected executive officers. 114-126
26
<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
10 (iii) (g) Executive Supplementary Retirement Plan
for selected senior executives. 127-132
10 (iii) (h) Incentive Stock Plan of 1985 of Ingersoll-
Rand Company. 133-151
10 (iii) (i) Forms of insurance and related letter
agreements with certain executive officers. 152-160
10 (iii) (j) Incentive Stock Plan of 1990 of Ingersoll-
Rand Company. 161-182
10 (iii) (k) Restated Supplemental Pension Plan effective
January 1, 1992. 183-188
10 (iii) (l) Supplemental Stock and Savings Investment
Plan effective as of January 1, 1989. 189-198
10 (iii) (m) Supplemental Retirement Account Plan
effective as of January 1, 1989. 199-206
11 (i) Computation of Primary Earnings Per Share. 207-208
11 (ii) Computation of Fully Diluted Earnings Per Share. 209-210
12 Computations of Ratios of Earnings to Fixed Charges. 211
13 Ingersoll-Rand Company Annual Report to
Shareowners for 1993. (Not deemed to be filed as
part of this report except to the extent incorporated
by reference). 212-275
21 List of Subsidiaries of Ingersoll-Rand Company. 276-278
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INGERSOLL-RAND COMPANY
(Registrant)
By /S/ Thomas F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
Date March 30, 1994
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
Chairman, President,
Chief Executive Officer
and Director (Principal
/S/ James E. Perrella Executive Officer) March 30, 1994
(James E. Perrella)
Senior Vice President
Chief Financial Officer
(Principal Financial
/S/ Thomas F. McBride Officer) March 30, 1994
(Thomas F. McBride)
Controller -
Accounting and Reporting
(Principal Accounting
/S/ Richard A. Spohn Officer) March 30, 1994
(Richard A. Spohn)
/S/ Donald J. Bainton Director March 30, 1994
(Donald J. Bainton)
/S/ Theodore H. Black Director March 30, 1994
(Theodore H. Black)
28
<PAGE>
Signature Title Date
/S/ Brendan T. Byrne Director March 30, 1994
(Brendan T. Byrne)
/S/ Joseph P. Flannery Director March 30, 1994
(Joseph P. Flannery)
/S/ William G. Kuhns Director March 30, 1994
(William G. Kuhns)
/S/ Alexander H. Massad Director March 30, 1994
(Alexander H. Massad)
/S/ John E. Phipps Director March 30, 1994
(John E. Phipps)
/S/ Donald E. Procknow Director March 30, 1994
(Donald E. Procknow)
/S/ Cedric E. Ritchie Director March 30, 1994
(Cedric E. Ritchie)
/S/ Willis A. Strauss Director March 30, 1994
(Willis A. Strauss)
29 <PAGE>
EXHIBIT
3(i)
Page 1 of 3
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
INGERSOLL-RAND COMPANY
To: Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:7-15.1(2) of the
New Jersey Business Corporation Act, the undersigned corporation,
organized under the laws of the State of New Jersey, executes and
submits the following certificate for the purpose of amending its
Restated Certificate of Incorporation:
FIRST: The name of the corporation is Ingersoll-Rand
Company (the "Company").
SECOND: On May 6, 1992, the Board of Directors of the
Company approved a resolution declaring a share dividend of one
additional share of Common Stock, $2 par value per share, of the
Company (the "Common Stock") for each outstanding share of the
Common Stock, payable June 1, 1992 to shareholders of record of
Common Stock as of the close of business on May 19, 1992, and in
connection therewith adopted a resolution amending, effective
June 1, 1992, the first paragraph of Article Fourth of the
Company's Restated Certificate of Incorporation to increase the
number of shares of Common Stock which the Company is authorized
to issue to 400,000,000. The first paragraph of said Article
Fourth, as so amended, shall read as follows:
"The aggregate number of shares which the Company shall have
authority to issue is 410,000,000, consisting of 10,000,000
shares of Preference Stock, without nominal or par value
(hereinafter referred to as "Preference Stock"), and
400,000,000 shares of Common Stock, of the par value of $2
per share (hereinafter referred to as 'Common Stock')."
30
<PAGE>
EXHIBIT
3(i)
Page 2 of 3
THIRD: The foregoing amendment to the Restated Certificate
of Incorporation will not adversely affect the rights or
preferences of the holders of outstanding shares of any class or
series and will not result in the percentage of authorized shares
that remains unissued after the share dividend exceeding the
percentage of authorized shares that was unissued before the
share dividend.
FOURTH: The number of shares of Common Stock subject to the
share dividend is 54,029,308 and the number of shares to be
issued in connection with the share dividend is 54,029,308.
FIFTH: The share dividend and the amendment referred to
above shall become effective on June 1, 1992.
Dated this 26th day of May 1992
INGERSOLL-RAND COMPANY
By /S/ Patricia Nachtigal
Vice President
31
<PAGE>
EXHIBIT
3(i)
Page 3 of 3
I, The Secretary of State of the State of New
Jersey, DO HEREBY CERTIFY that the foregoing is a true copy
of CERTIFICATE OF Amendment and the endorsements thereon, as
the same is taken from and compared with the original filed
in my office on the 28th day of May, A.D. 1992 and now
remaining on file and of record therein.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and affixed my
Official Seal at Trenton, this day 28th
of May, A.D. 1992
SECRETARY OF STATE
/S/ Daniel J. Dalton
32
<PAGE>
EXHIBIT 3(ii)
Page 1 of 28
COMPOSITE 5/28/92
RESTATED CERTIFICATE OF INCORPORATION
OF
INGERSOLL-RAND COMPANY
Pursuant to Section 14A:9-5 of the New Jersey
Business Corporation Act
INGERSOLL-RAND COMPANY, a corporation organized and existing
under the laws of the State of New Jersey (hereinafter called the
"Company") restates and integrates its certificate of
incorporation to read in full as herein set forth.
First. The name of the Company is INGERSOLL-RAND COMPANY.
Second. The address of the Company's current registered
office is 28 West State Street, Trenton, New Jersey 08608, and
the name of its current registered agent is The Corporation Trust
Company.
Third. The Company may engage in any activity within the
purposes for which corporations may be organized under the New
Jersey Business Corporation Act.
Fourth. The aggregate number of shares which the Company
shall have authority to issue is 410,000,000, consisting of
10,000,000 shares of Preference Stock, without nominal or par
value (hereinafter referred to as "Preference Stock"), and
400,000,000 shares of Common Stock, of the par value of $2 per
share (hereinafter referred to as "Common Stock").
The designations, preferences, voting powers and other
special rights, qualifications, limitations and restrictions of
the Preference Stock and Common Stock of the Company are as
follows:
33
<PAGE>
EXHIBIT 3(ii)
Page 2 of 28
A. PREFERENCE STOCK:
(1) Manner of Issue; Series. The Board of Directors is
empowered to cause the Preference Stock to be issued from time to
time as shares of one or more series of Preference Stock, and in
the resolution or resolutions providing for the issue of shares
of each particular series, before issuance, the Board of
Directors is expressly authorized to fix:
(a) the distinctive designation of such series and the
number of shares which shall constitute such series, which
number may be increased (except as otherwise provided by the
Board of Directors in creating such series) or decreased
(but not below the number of shares thereof then
outstanding) from time to time by resolution of the Board of
Directors;
(b) the rate of dividends payable on shares of such
series and the date or dates from which dividends shall
accumulate;
(c) the terms, if any, on which shares of such series
may be redeemed, including, without limitation, the
redemption price or prices for such series, which may
consist of a redemption price or scale of redemption prices
applicable only to redemption in connection with a sinking
fund (which term as used herein shall include any fund or
requirement for the periodic purchase or redemption of
shares), and the same or a different redemption price or
scale of redemption prices applicable to any other
redemption;
(d) the terms and amount of any sinking fund provided
for the purchase or redemption of shares of such series;
(e) the amount or amounts which shall be paid to the
holders of shares of such series in case of liquidation,
dissolution or winding up of the Company, whether voluntary
or involuntary;
(f) the terms, if any, upon which the holders of
shares of such series may convert shares thereof into stock
of any other class or classes or of any one or more series
of the same class or of another class or classes; and
(g) such other rights, preferences and limitations as
may be permitted to be fixed by the Board of Directors of
the Company under the laws of the State of New Jersey as in
effect at the time of the creation of such series.
34
<PAGE>
EXHIBIT 3(ii)
Page 3 of 28
All shares of Preference Stock, irrespective of series, shall be
of equal rank, and shall be identical in all respects except as
to the terms fixed by the Board of Directors as permitted in this
Section A. The Board of Directors is authorized to change the
designation, rights, preferences and limitations of any series of
Preference Stock theretofore established, no shares of which have
been issued. The Board of Directors is authorized to amend the
Company's certificate of incorporation to set forth the
designation, number of shares, rights, preferences and
limitations of any series of Preference Stock fixed by the Board
of Directors, or to reflect any change therein made by the Board
of Directors, as permitted in this Section A.
(2) Dividends. The holders of the Preference Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Company legally available for the
payment of dividends, cumulative dividends in cash at the annual
rate for each particular series theretofore fixed by the Board of
Directors as hereinabove provided, and no more, payable in
respect of each series on the date or dates which shall be fixed
by the Board of Directors with respect to each particular series.
If at any time there are two or more series of Preference
Stock outstanding, any dividend paid upon shares of Preference
Stock in an amount less than all dividends accrued and unpaid on
all outstanding shares of Preference Stock shall be paid ratably
among all series of Preference Stock in proportion to the full
amount of dividends accrued and unpaid on each such series.
So long as any of the Preference Stock is outstanding, no
dividend whatever shall be paid or declared, nor any distribution
be made, on the Common Stock or any other stock of the Company
ranking junior to the Preference Stock in the payment of
dividends (other than a dividend payable in stock of junior rank
as aforesaid), nor shall any shares of Common Stock or any other
stock of junior rank as aforesaid be acquired for a consideration
by the Company or by any subsidiary except in exchange for shares
of stock of junior rank as aforesaid unless (i) full dividends
on the Preference Stock for all past dividend periods shall have
been paid or shall have been declared and a sufficient sum set
apart for the payment thereof, and (ii) all obligations of the
Company, if any, with respect to the redemption or purchase of
shares of Preference Stock in accordance with the requirements of
any sinking fund have been met. Subject to the foregoing
provisions, such dividends (payable in cash, stock or otherwise)
35
<PAGE>
EXHIBIT 3(ii)
Page 4 of 28
as may be determined from time to time by the Board of Directors
may be declared and paid on the Common Stock or any other stock
of junior rank out of the remaining funds of the Company legally
available for the payment of dividends; and the Preference Stock
shall not be entitled to participate in any such dividends,
whether payable in cash; stock or otherwise.
(3) Redemption. If so provided by the Board of Directors
pursuant to paragraph (1)(c) of this Section A, the Company, at
the option of the Board of Directors, or in accordance with the
requirements of any sinking fund for the Preference Stock or any
series thereof, may redeem the whole or any part of the
Preference Stock at any time outstanding, or the whole or any
part of any series thereof, at such time or times and from time
to time and at such redemption price or prices as may be fixed by
the Board of Directors pursuant to this Section A, together in
each case with an amount equal to all unpaid dividends accrued
thereon to the date fixed for such redemption, and otherwise upon
the terms and conditions fixed by the Board of Directors for any
such redemption; provided, however, that no optional redemption
of less than all of the Preference Stock shall take place unless
(i) full dividends on the Preference Stock for all past dividend
periods shall have been paid or declared and a sufficient sum set
apart for the payment thereof, and (ii) all obligations of the
Company, if any, with respect to the redemption or purchase of
shares of Preference Stock in accordance with the requirements of
any sinking fund have been met. If at any time there are two or
more series of Preference Stock outstanding, any amount expended
in purchasing or redeeming shares of Preference Stock pursuant to
the provisions of sinking funds therefor which is less than the
amount then required to be so expended under all such funds shall
be expended ratably among all series of Preference Stock in
proportion to the full amount of expenditures of such funds then
required in respect of each such series.
(4) Liquidation, Dissolution and Winding Up. In the event
of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each series of
Preference Stock then outstanding shall be entitled to receive
out of the assets of the Company, before any distribution or
payment shall be made to the holders of the Common Stock or any
other stock of Company ranking junior to the Preference Stock
with respect to the distribution of assets, the amount determined
by the Board of Directors in creating such series, plus in each
36
<PAGE>
EXHIBIT 3(ii)
Page 5 of 28
case an amount equal to all unpaid dividends accrued thereon to
the date fixed for such payment to the holders of the Preference
Stock. If upon any such liquidation, dissolution or winding up,
two or more series of Preference Stock are outstanding, any
distribution to holders of Preference Stock in an aggregate
amount less than the total payable with respect to all
outstanding Preference Stock shall be made ratably among all
series of Preference Stock in proportion to the full amount
payable upon such liquidation, dissolution or winding up in
respect of each such series.
(5) Voting. The holders of the Preference Stock shall have
the voting rights set forth below:
(a) Except as otherwise expressly provided in the
Company's certificate of incorporation, as amended, or as may be
required by law, the holders of the Preference Stock shall be
entitled at all meetings of stockholders to three votes for each
five shares of such stock held by them respectively (a holder of
less than five shares being entitled to no vote) and the holders
of all series of Preference Stock shall vote together with the
holders of the Common Stock as one class. At all elections of
directors each holder of Preference Stock shall be entitled to as
many votes as shall equal the number of votes which such holder
would be entitled to cast, multiplied by the number of directors
to be elected, and such holder may cast all such votes for a
single director, or may distribute them among the number to be
voted for or any two or more of them as such holder may see fit.
(b) If and whenever dividends on the Preference Stock
shall be in arrears in an amount equivalent to six quarterly
dividends or mandatory sinking fund payments shall be in arrears
in an amount equal to the aggregate of all such payments required
during one year, then, at any ensuing annual meeting of
stockholders at which at least a majority of the outstanding
shares of Preference Stock are represented, the holders of the
Preference Stock of all series thereof then outstanding, voting
separately as a class, shall be entitled to elect two directors.
Such right of the holders of the Preference Stock shall continue
to be exercisable until all dividends in arrears on the
Preference Stock shall have been paid in full or declared and a
sum sufficient for the payment thereof set apart and all
mandatory sinking fund payments in arrears shall have been paid
in full, whereupon such right shall cease. During any time that
the holders of the Preference Stock are entitled to elect two
directors as hereinabove provided, they shall also be entitled to
participate with the Common Stock in the election of any other
directors.
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EXHIBIT 3(ii)
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(c) Notwithstanding any other provision of the
Company's certificate of incorporation, as amended,
(i) the affirmative approval of the holders of at
least two-thirds in interest of the Preference Stock of all
series thereof then outstanding present and voting at a meeting,
acting as a single class without regard to series, shall be
required for any amendment of the certificate of incorporation
altering materially and adversely any existing provision of the
Preference Stock or for the creation, or an increase in the
authorized amount, of any class of stock ranking, as to dividends
or assets, prior to the Preference Stock; and
(ii) the affirmative approval of the holders of
at least a majority in interest of the Preference Stock of all
series thereof then outstanding present and voting at a meeting,
acting as a single class without regard to series, shall be
required for an increase in the authorized amount of the
Preference Stock, or for the creation, or an increase in the
authorized amount, of any class of stock ranking, as to dividends
or assets, on a parity with the Preference Stock;
provided, however, that if any amendment of the certificate of
incorporation shall affect adversely the rights or preferences of
one or more, but not all, of the series of Preference Stock at
the time outstanding, or shall unequally adversely affect the
rights or preferences of different series of Preference Stock at
the time outstanding, the affirmative approval of the holders of
at least two-thirds in interest of the shares of each such series
so adversely or unequally adversely affected present and voting
at a meeting shall be required in lieu of or (if such affirmative
approval is required by law) in addition to the affirmative
approval of the holders of at least two-thirds in interest of the
shares of Preference Stock as a class present and voting at such
meeting.
(6) Preemptive Rights. No holder of shares of any series
of the Preference Stock shall, as such, have any preemptive or
preferential rights to subscribe to or purchase shares of any
class or series of stock of the Company, now or hereafter
authorized, or any securities convertible into, or warrants or
other evidences of optional rights to purchase or subscribe to,
shares of any class or series of the Company, now or hereafter
authorized.
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EXHIBIT 3(ii)
Page 7 of 28
(7) Other Provisions. Subject to the requirements of
paragraph (5)(c) of this Section A, but notwithstanding any other
of the foregoing provisions of this Section A, the Board of
Directors, in the resolution or resolutions providing for the
issue of any series of Preference Stock, may determine to the
extent that the Board of Directors may be permitted to do so
under the laws of the State of New Jersey as in effect at the
time of the creation of such series:
(a) the voting rights, full or limited, if any, of the
shares of such series; and whether or not and under what
conditions the shares of such series (alone or together with the
shares of one or more other series having similar provisions)
shall be entitled to vote separately as a single class, for the
election of one or more additional directors of the Company in
case of dividend arrearages or other specified events, or upon
other matters;
(b) whether or not and upon what conditions dividends
on shares of such series shall be cumulative and, if cumulative,
the date or dates from which dividends shall accumulate;
(c) whether or not the holders of shares of such
series, as such, shall have any preemptive or preferential rights
to subscribe to or purchase shares of any class or series of
stock of the Company, now or hereafter authorized, or any
securities convertible into, or warrants or other evidences of
optional rights to purchase or subscribe to, shares of any class
or series of the Company, now or hereafter authorized; and
(d) whether or not the issuance of additional shares
of such series, or of any shares of any other series, shall be
subject to restrictions as to issuance, or as to the preferences,
rights and qualifications of any such other series.
(8) Creation and Terms of Series A Preference Stock.
There is hereby created a series of Preference Stock, without par
value, of the Company, which shall have the designation and
number of shares, and voting powers, preferences and relative,
participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions
thereof (in addition to those provisions set forth above in this
Section A that are applicable to the Preference Stock of all
series) as follows:
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EXHIBIT 3(ii)
Page 8 of 28
(a) Designation and Amount. The shares of such series
shall be designated "Series A Preference Stock" ("Series A
Preference Stock") and the number of shares constituting such
series shall be 750,000. Subject to subparagraph (d)(iii) of
this paragraph (8), such number may be increased or decreased by
resolution of the Board of Directors; provided, however, that no
decrease shall reduce the number of shares of Series A Preference
Stock to a number less than that of the shares then outstanding.
(b) Dividends and Distributions.
(i) Subject to the prior and superior rights of
the holders of any shares of any series of Preference Stock
ranking prior and superior to the Series A Preference Stock and
subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preference Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, (A)
cash dividends in an amount per share (rounded to the nearest
cent) equal to 100 times the aggregate per share amount of all
cash dividends declared or paid on the Common Stock, and (B) a
preferential cash dividend (a "Preferential Dividend"), if any,
on the fifteenth day of January, April, July and October of each
year (each a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preference
Stock, in an amount equal to $1.00 per share of Series A
Preference Stock less the per share amount of all cash dividends
declared on the Series A Preference Stock pursuant to clause (A)
of this sentence since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preference Stock. In the event
the Company shall, at any time after the issuance of any share or
fraction of a share of Series A Preference Stock, make any
distribution on the shares of Common Stock, whether by way of a
dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Company or
otherwise, which is payable in cash or any debt security, debt
instrument, real or personal property or any other property
(other than cash dividends subject to clause (A) of the
immediately preceding sentence and other than a distribution of
shares of Common Stock or other capital stock of the Company and
other than a distribution of rights or warrants to acquire any
such share, including any debt security convertible into or
40
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EXHIBIT 3(ii)
Page 9 of 28
exchangeable for any such share, at a price less than the Current
Market Price of such share), then and in each such event the
Company shall simultaneously pay on each then outstanding share
of Series A Preference Stock of the Company a distribution, in
like kind, of 100 times (subject to the provisions for adjustment
hereinafter set forth) such distribution paid on a share of
Common Stock. The dividends and distributions on the Series A
Preference Stock to which holders thereof are entitled pursuant
to clause (A) of the first sentence of this paragraph and the
second sentence of this paragraph are hereinafter referred to as
"Participating Dividends", and the multiple of cash and non-cash
dividends on the Common Stock applicable to the determination of
the Participating Dividends, which shall be 100 initially but
shall be adjusted from time to time as hereinafter provided, is
hereafter referred to as the "Dividend Multiple." In the event
the Company shall at any time after December 22, 1988 declare or
pay any dividend or make any distribution on Common Stock payable
in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares
of Common Stock, then in each such event the Dividend Multiple
thereafter applicable to the determination of the amount of
Participating Dividends which holders of shares of Series A
Preference Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event
multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(ii) The Company shall declare each Participating
Dividend at the same time it declares any cash or non-cash
dividend or distribution on the Common Stock in respect of which
a Participating Dividend is required to be paid. No cash or non-
cash dividend or distribution on the Common Stock in respect of
which a Participating Dividend is required shall be paid or set
aside for payment on the Common Stock unless a Participating
Divided in respect of such dividend or distribution on the Common
Stock shall be simultaneously paid or set aside for payment on
the Series A Preference Stock.
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EXHIBIT 3(ii)
Page 10 of 28
(iii) Preferential Dividends shall begin to
accumulate on outstanding shares of Series A Preference Stock
from the Quarterly Dividend Payment Date next preceding the date
of issuance of any shares or Series A Preference Stock.
Accumulated but unpaid Preferential Dividends shall cumulate but
shall not bear interest. Preferential Dividends paid on the
shares of Series A Preference Stock in an amount less than the
total amount of such dividends at the time accumulated and
payable on such shares shall be allocated pro rata on a share-by-
share basis among all shares at the time outstanding. The Board
of Directors may fix a record date for the determination of
holders of shares of Series A Preference Stock entitled to
receive payment of a dividend or distribution thereon, which
record date shall be no more than 60 days prior to the date fixed
for payment thereof.
(c) Voting Rights. The holders of shares of Series A
Preference Stock shall have the following voting rights:
(i) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preference Stock
shall entitle the holder thereof to one hundred votes on all
matters submitted to a vote of the stockholders of the Company.
In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preference Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(ii) Except as otherwise provided herein or by
law, the holders of shares of Series A Preference Stock and the
holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the
Company.
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EXHIBIT 3(ii)
Page 11 of 28
(iii) In the event that a default in preference
dividends on any Series A Preference Stock of the Company shall
exist, the number of directors constituting the Board of
Directors of the Company shall be increased by two, and the
holders of Series A Preference Stock shall have the right at the
next meeting of stockholders called for the election of directors
voting separately as a class with the holders of shares of any
other series of Preference Stock entitled to vote thereon (if
any) (as used in this subparagraph (c)(iii), "Preference Stock"
shall refer to the Series A Preference Stock and such other
series (if any) upon which such voting rights have been
conferred, but shall not include any other series of Preference
Stock (if any) upon which such voting rights have not been
conferred) to the exclusion of the holders of Common Stock, to
elect two directors of the Company to fill such newly created
directorships. Such right shall continue until there are no
dividends in arrears upon the Series A Preference Stock. Each
director elected by the holders of shares of Preference Stock
(herein called a "Preference Director") shall continue to serve
as such director for the full term for which he shall have been
elected, notwithstanding that prior to the end of such term a
default in preference dividends shall cease to exist. Any
Preference Director may be removed by, and shall not be removed
without cause except by, the vote of the holders of record of the
outstanding shares of Preference Stock, voting separately as a
class at a meeting of the stockholders, or of the holders of
shares of Preference Stock, called for the purpose. So long as a
default in any preference dividends on the Preference Stock shall
exist (A) any vacancy in the office of a Preference Director may
be filled (except as provided in the following clause (B)) by an
instrument in writing signed by the remaining Preference Director
and filed with the Company and (B) in case of the removal of any
Preference Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preference Stock at the same
meeting at which such removal shall be voted. Each director
appointed as aforesaid by the remaining Preference Director shall
be deemed, for all purposes hereof, to be a Preference Director.
Whenever the term of office of the Preference Directors shall end
and a default in preference dividends shall no longer exist, the
number of directors constituting the Board of Directors shall be
reduced by two. For the purposes hereof, a "default in
preference dividends" on the Series A Preference Stock shall be
deemed to have occurred whenever the amount of accrued dividends
upon Series A Preference Stock shall be equivalent to six full
quarter-yearly dividends or more and, having so occurred, such
43
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EXHIBIT 3(ii)
Page 12 of 28
default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all shares of Series A Preference
Stock then outstanding shall have been paid to the end of the
last preceding quarterly dividend period.
(iv) Except as otherwise required by law or set
forth herein, holders of Series A Preference Stock shall have no
special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for the taking of any corporate
action.
(d) Certain Restrictions.
(i) Whenever Preferential Dividends or
Participating Dividends are in arrears or the Company shall be in
default in payment thereof, thereafter and until all accumulated
and unpaid Preferential Dividends and Participating Dividends,
whether or not declared, on shares of Series A Preference Stock
outstanding shall have been paid or set aside for payment in
full, and in addition to any and all other rights which any
holder of shares of Series A Preference Stock may have in such
circumstances, the Company shall not
(A) declare or pay dividends on, make any other
distributions on or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preference Stock;
(B) declare or pay dividends or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series A Preference Stock, unless dividends
are paid ratably on the Series A Preference Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
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EXHIBIT 3(ii)
Page 13 of 28
(C) except as permitted by subparagraph (D) of
this subparagraph (d)(i), redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preference Stock, provided that the Company may
at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Company ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series A
Preference Stock; or
(D) purchase or otherwise acquire for
consideration any shares of Series A Preference Stock, or any
shares of stock ranking on a parity with the Series A Preference
Stock (either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(ii) The Company shall not permit any subsidiary
of the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could,
under subparagraph (i) of this paragraph (d), purchase or
otherwise acquire such shares at such time and in such manner.
(iii) The Company shall not issue any shares of
Series A Preference Stock except upon exercise of Rights issued
pursuant to that certain Rights Agreement dated as of December 7,
1988 between the Company and The Bank of New York (the "Rights
Agreement"), a copy of which is on file at the principal
executive office of the Company and shall be made available to
holders of record of Common Stock or Series A Preference Stock
without charge upon written request therefor addressed to the
Secretary of the Company. Notwithstanding the foregoing
sentence, nothing contained in the provisions hereof shall
prohibit or restrict the Company from issuing for any purpose any
series of Preference Stock with rights and privileges similar to,
different from, or greater than those of the Series A Preference
Stock.
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EXHIBIT 3(ii)
Page 14 of 28
(e) Reacquired Shares. Any shares of Series A
Preference Stock purchased or otherwise acquired by the Company
in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. The Company shall cause all such
shares upon their retirement and cancellation to become
authorized but unissued shares of Preference Stock, without
designation as to series, and such shares may be reissued as part
of a new series of Preference Stock to be created by resolution
or resolutions of the Board of Directors.
(f) Liquidation, Dissolution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up
of the Company, no distribution shall be made (i) to the holders
of shares of stock ranking junior to the Series A Preference
Stock (upon liquidation, dissolution or winding up) unless the
holders of shares of Series A Preference Stock shall have
received, subject to adjustment as hereinafter provided, the
greater of either (A) $100.00 per share plus an amount equal to
accumulated and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, or (B) the
amount equal to 100 times the aggregate amount to be distributed
per share to holders of Common Stock, or (ii) to the holders of
stock ranking on a parity upon liquidation, dissolution or
winding up with the Series A Preference Stock, unless
simultaneously therewith distributions are made ratably on the
Series A Preference Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of
shares of Series A Preference Stock are entitled under clause
(i)(A) of this sentence and to which the holders of such parity
shares are entitled, in each case upon such liquidation,
dissolution or winding up. The amount to which holders of Series
A Preference Stock shall be entitled upon liquidation,
dissolution or winding up of the Company pursuant to clause
(i)(B) of the foregoing sentence is hereinafter referred to as
the "Participating Liquidation Amount," and the multiple of the
amount to be distributed to holders of shares of Common Stock
upon the liquidation, dissolution or winding up of the Company
applicable pursuant to said clause to the determination of the
Participating Liquidation Amount, which shall be 100 initially
but shall be adjusted from time to time as hereinafter provided,
is hereinafter referred to as the "Liquidation Multiple." In the
event the Company shall at any time after December 22, 1988
declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of
46
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EXHIBIT 3(ii)
Page 15 of 28
Common Stock into a greater or lesser number of shares of Common
Stock, then in each such case the Liquidation Multiple thereafter
applicable to the determination of the Participating Liquidation
Amount to which holders of Series A Preference Stock shall be
entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(g) Certain Reclassification and Other Events.
(i) In the event that holders of shares of Common
Stock receive after December 22, 1988 in respect of their shares
of Common Stock any share of capital stock of the Company (other
than any share of Common Stock of the Company), whether by way of
reclassification, recapitalization, reorganization, dividend or
other distribution or otherwise ("Transaction"), then in each
such event the dividend rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series
A Preference Stock shall be adjusted so that after such event the
holders of Series A Preference Stock shall be entitled, in
respect of each share of Series A Preference Stock held, in
addition to such rights in respect thereof to which such holder
was entitled immediately prior to such adjustment, to (A) such
additional dividends as equal the Dividend Multiple in effect
immediately prior to such transaction multiplied by the
additional dividends which the holder of a share of Common Stock
shall be entitled to receive by virtue of the receipt in the
Transaction of such capital stock and (B) such additional
distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately
prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to
receive upon liquidation, dissolution or winding up of the
Company by virtue of the receipt in the Transaction of such
capital stock, as the case may be, all as provided by the terms
of such capital stock.
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EXHIBIT 3(ii)
Page 16 of 28
(ii) In the event that holders of shares of
Common Stock receive after December 22, 1988 in respect of their
shares of Common Stock any right or warrant to purchase Common
Stock (including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share less than the Current
Market Price (as hereinafter defined) of a share of Common Stock
on the date of issuance of such right or warrant, then in each
such event the dividend rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series
A Preference Stock shall each be adjusted so that after such
event the Dividend Multiple and the Liquidation Multiple shall
each be the product of the Dividend Multiple and the Liquidation
Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the maximum
number of shares of Common Stock which could be acquired upon
exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Common Stock which could be
purchased, at the Current Market Price of the Common Stock at the
time of such issuance, by the maximum aggregate consideration
payable upon exercise in full of all such rights or warrants.
(iii) In the event that holders of shares of
Common Stock receive after December 22, 1988 in respect of their
shares of Common Stock any right or warrant to purchase capital
stock of the Company (other than shares of Common Stock),
including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock
of the Company (other than Common Stock), at a purchase price per
share less than the Current Market Price of such shares of
capital stock on the date of issuance of such right or warrant,
then in each such event the dividend rights and rights upon
liquidation, dissolution or winding up of the Company of the
shares of Series A Preference Stock shall each be adjusted so
that after such event each holder of a share of Series A
Preference Stock held, in addition to such rights in respect
thereof to which such holder was entitled immediately prior to
such event, to receive (A) such additional dividends as equal the
Dividend Multiple in effect immediately prior to such event
multiplied, first, by the additional dividends to which the
holder of a share of Common Stock shall be entitled upon exercise
48
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EXHIBIT 3(ii)
Page 17 of 28
of such right or warrant by virtue of the capital stock which
could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined) and (B) such
additional distributions upon liquidation, dissolution or winding
up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the
additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or
winding up of the Company upon exercise of such right or warrant
by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a
fraction the numerator of which shall be the difference between
the Current Market Price (as hereinafter defined) of a share of
the capital stock subject to a right or warrant distributed to
holders of shares of Common Stock as contemplated by this
paragraph immediately after the distribution thereof and the
purchase price per share for such share of capital stock pursuant
to such right or warrant and the denominator of which shall be
the Current Market Price of a share of such capital stock
immediately after the distribution of such right or warrant.
(iv) For purposes of this paragraph (g), the
"Current Market Price" of a share of capital stock of the Company
(including a share of Common Stock) on any date shall be deemed
to be the average of the daily closing prices per share thereof
over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, provided that in the
event that such Current Market Price of any such share of capital
stock is determined during a period which includes any date that
is within 30 Trading Days after the ex-dividend date for (A) a
dividend or distribution on stock payable in shares of such stock
or securities convertible into shares of such stock or (B) any
subdivision, split, combination, consolidation, reverse stock
split or reclassification of such stock, then in each such event,
the Current Market Price shall be appropriately adjusted by the
Board of Directors to reflect the Current Market Price of such
stock to take into account ex-dividend trading. The closing
price for any day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading
on the New York Stock Exchange, or, if the shares are not listed
or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
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EXHIBIT 3(ii)
Page 18 of 28
system with respect to securities listed on the principal
national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted
to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or
if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
shares selected by the Board of Directors. The term "Trading
Day" shall mean a day on which the principal national securities
exchange on which the shares are listed or admitted to trading is
open for the transaction of business or, if the shares are not
listed or admitted to trading on any national securities
exchange, on which the New York Stock Exchange or such other
national securities exchange as may be selected by the Board of
Directors is open. If the shares are not publicly held or not so
listed or traded on any day within the period of 30 Trading Days
applicable to the determination of Current Market Price thereof
as aforesaid, "Current Market Price" shall mean the fair market
value thereof per share as determined in good faith by the Board
of Directors. In either case referred to in the foregoing
sentence, the determination of Current Market Price shall be
described in a statement filed with the Secretary of the Company.
(h) Consolidation, Merger, etc. In the event that the
Company shall enter into any consolidation, merger, combination
or other transaction in which shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such event each
outstanding share of Series A Preference Stock shall at the same
time be similarly exchanged for or changed into the aggregate
amount of stock, securities, cash and other property (payable in
like kind), as the case may be, for which or into which each
share of Common Stock is changed or exchanged multiplied by the
higher of the Dividend Multiple or the Liquidation Multiple in
effect immediately prior to such event.
(i) Effective Time of Adjustments.
(i) Adjustments to the Series A Preference Stock
required by the provisions hereof shall be effective as of the
time at which the event requiring such adjustments occurs.
50
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EXHIBIT 3(ii)
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(ii) The Company shall give prompt written notice
to each holder of a share of Series A Preference Stock of the
effect on any such shares of any adjustment to the dividend
rights or rights upon liquidation, dissolution or winding up of
the Company required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of
or the requirement for such adjustment.
(j) No Redemption. The shares of Series A Preference
Stock shall not be redeemable at the option of the Company or any
holder thereof. Notwithstanding the foregoing sentence of this
paragraph, the Company may acquire shares of Series A Preference
Stock in any other manner permitted by law and the provisions of
the certificate of incorporation.
(k) Ranking. Unless otherwise provided in the
certificate of incorporation or a certificate of amendment of the
certificate of incorporation relating to a subsequent series of
Preference Stock of the Company, the Series A Preference Stock
shall rank junior to all other series of the Company's Preference
Stock as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and senior to
the Common Stock of the certificate of incorporation.
(l) Amendment. After the Distribution Date (as
defined in the Rights Agreement), the provisions of the
certificate of incorporation shall not be amended in any manner
which would materially affect the rights, privileges or powers of
the Series A Preference Stock without, in addition to any other
vote of stockholders required by law, the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of
Series A Preference Stock, voting together as a single class.
(m) Fractional Shares. Series A Preference Stock may
be issued in fractions of a share which shall entitle the holder,
in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series
A Preference Stock.
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B. COMMON STOCK:
(1) Dividends. Subject to the provisions of Section A of
this Article Fourth, the Board of Directors may, in its
discretion, out of funds legally available for the payment of
dividends and at such times and in such manner as determined by
the Board of Directors, declare and pay dividends on the Common
Stock.
(2) Liquidation, Dissolution and Winding Up. In the event
of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, after payment in full has been
made to the holders of the Preference Stock of the amounts to
which they are respectively entitled or sufficient sums have been
set apart for the payment thereof, the holders of the Common
Stock shall be entitled to receive ratably any and all assets
remaining to be paid or distributed, and the holders of the
Preference Stock shall not be entitled to share therein.
(3) Voting. Except as otherwise expressly provided in the
Company's certificate of incorporation, as amended, or as may be
required by law, the holders of the Common Stock of the Company
shall be entitled at all meetings of stockholders to one vote for
each share of such stock held by them respectively and shall vote
together with the holders of the Preference Stock as one class.
At all elections of directors each holder of Common Stock shall
be entitled to as many votes as shall equal the number of votes
which such holder would be entitled to cast, multiplied by the
number of directors to be elected, and no such holder may cast
all such votes for a single director, or may distribute them
among the number to be voted for or any two or more of them as
such holder may see fit.
(4) Preemptive Rights. No holder of shares of Common Stock
shall, as such, have any preemptive or preferential rights to
subscribe to or purchase any shares of any class or series of
stock of the Company, now or hereafter authorized, or any series
convertible into, or warrants or other evidences of optional
rights to purchase or subscribe to, shares of any class or series
of the Company, now or hereafter authorized.
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EXHIBIT 3(ii)
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C. QUORUM:
A quorum for the election of directors or for the
consideration of any question shall consist of a majority of the
voting power of the stock issued and outstanding and entitled to
vote for the election of directors or upon such question,
respectively; except that where a vote of a particular class of
stock or of a particular series of a class is required, a quorum
shall consist of a majority of the voting power of the stock
issued and outstanding of each class or series so entitled to
vote separately, and except that if several classes are entitled
to vote together as a single class, a quorum shall consist of a
majority of the voting power of the stock of all such classes
issued and outstanding; provided, however, that any meeting may
be adjourned by a majority of the votes properly cast, whether or
not a quorum is present.
D. VOTING REQUIREMENTS:
(1) Majority Voting Requirements. Subject to the
provisions of paragraph (2) of this Section D and except as
otherwise expressly provided in the Company's certificate of
incorporation, as amended, or as may be required by law, the
majority voting requirements prescribed in subsections 14A:10-
3(2) and 14A:12-4(4) and in paragraphs 14A:9-2(4)(c) and 14A:10-
11(1)(c) of the New Jersey Business Corporation Act shall apply
to the Company.
(2) Greater Voting Requirements. The affirmative vote of
the holders of four-fifths of the outstanding shares of all
classes of stock of the Company entitled to vote, considered for
the purposes of this paragraph (2) as one class, shall be
required to authorize
(i) the merger or consolidation of the Company or a
subsidiary of the Company with or into any other corporation,
person or other entity, (ii) any sale, lease, exchange or other
disposition of all or any material part of the assets of the
Company or of any subsidiary of the Company to or with any other
corporation, person or other entity or (iii) any issuance or
transfer of securities of the Company upon conversion of or in
exchange for the securities or assets of any other corporation,
person or entity if (as of the date of any action taken by the
Board of Directors with respect to such transaction or as of any
record date for the determination of stockholders entitled to
notice and to vote with respect thereto or immediately prior to
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EXHIBIT 3(ii)
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the consummation of such transaction) such other corporation,
person or other entity referred to in clause (i), clause (ii) or
clause (iii) above is the beneficial owner, directly or
indirectly, of more than 10% of any class of capital stock of the
Company. For the purposes hereof any corporation, person or
other entity shall be deemed to be the beneficial owner of any
shares of capital stock of the Company, (x) which it has the
right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise, or (y)
which are beneficially owned, directly or indirectly (including
shares deemed owned through application of clause (x) above) by
any other corporation, person or other entity with which it has
any agreement, arrangement or understanding with respect to the
acquisition, holding, voting or disposition of stock or of any
material part of the assets of the Company or of it, or which is
its "affiliate" or "associate" as those terms are defined in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on January 1, 1970. Any
determination made in good faith by the Board of Directors, on
the basis of information at the time available to it, as to
whether any corporation, person or other entity is the beneficial
owner of more than 10% of any class of capital stock of the
Company, or is an "affiliate" or "associate", as above defined,
shall be conclusive and binding for all purposes of this
paragraph (2). The provisions of this paragraph (2) shall not
apply to any agreement for the merger of any subsidiary of the
Company with the Company or with another subsidiary of the
Company where the Company or such other subsidiary shall be the
surviving corporation and where the provisions of this paragraph
(2) shall not be changed or otherwise affected by or by virtue of
the merger.
Fifth. The number of directors constituting the current
Board of Directors of the Company is ten (10). The names and
addresses of the members of said Board are as follows:
Theodore H. Black P.O. Box 8738
Woodcliff Lake, N.J. 07675
Brendan T. Byrne 6 Becker Farm Road
Roseland, N.J. 07068
Joseph P. Flannery 455 Chase Parkway
Waterbury, CT 06708
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EXHIBIT 3(ii)
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Clyde H. Folley P.O. Box 8738
Woodcliff Lake, N.J. 07675
William G. Kuhns 100 Interpace Parkway
Parsippany, N.J. 07054
Alexander H. Massad 1601 Rio Grande
Austin, TX 78701
John E. Phipps P.O. Box 3048
Tallahassee, FL 32315
Donald E. Procknow 18 Saw Mill Road
Saddle River, N.J. 07458
Cedric E. Ritchie 44 King Street West
Toronto, Ontario M5H 1H1
Willis A. Strauss Two Central Park Plaza
222 South 15th Street
Omaha, Nebraska 68102
Sixth. The number of directors of the Company shall be at
no time less than eight, and may be increased or thereafter
decreased as may be provided from time to time in the by-laws.
The Board of Directors shall be divided as equally as may be into
three classes, each of which shall consist of such number as the
by-laws may from time to time provide, but no class shall consist
of less than two members. At the annual election to be held in
1942 the directors of the first class shall be elected for a term
of one year, the directors of the second class shall be elected
for a term of two years, and the directors of the third class
shall be elected for a term of three years. At each annual
election thereafter, the successors of the directors of the class
whose terms expire in that year shall be elected to hold office
for the term of three years, so that the term of office of one
class of directors shall expire in each year. If the number of
directors is changed, any newly created directorships or decrease
in directorships shall be so apportioned among the classes as to
make all classes as nearly equal in number as possible. In case
of any increase in the number of directors of any class or
classes, the additional directors may be elected by the Board of
Directors, but any such director so elected shall hold office
only until the next succeeding annual meeting of stockholders and
until his successor shall have been elected and qualified. No
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EXHIBIT 3(ii)
Page 24 of 28
decrease in the number of directors shall shorten the term of any
incumbent director. Directors may be removed without cause only
upon the affirmative vote of the holders of at least four-fifths
of the shares of capital stock entitled to vote for the election
of directors. Directors may be removed for cause upon the
affirmative vote of two-thirds of the entire Board. The
affirmative vote of the holders of at least four-fifths of the
shares of capital stock entitled to vote for the election of
directors shall be required for any amendment or deletion of this
paragraph of this Article Sixth, unless such amendment or
deletion shall have been approved by the unanimous vote of the
directors then in office, in which case the majority voting
requirements prescribed in paragraph 14A:9-2(4)(c) of the New
Jersey Business Corporation Act shall apply thereto.
The provisions of this Article Sixth shall have no
application to any directors who may be elected by the holders of
Preference Stock or any series thereof, voting as a class or
series, as the case may be, pursuant to a right to elect
directors conferred upon such holders by reason of default in the
payment of dividends, failure to discharge sinking fund
obligations or otherwise. Any such directors shall be in
addition to the directors to be elected pursuant to the paragraph
immediately above and shall be elected in the manner, and serve
for such term, as may be provided in the certificate of
incorporation, as from time to time amended.
The Board of Directors, by the affirmative vote of a
majority of the entire Board, may appoint from their number an
executive committee of which committee a majority shall
constitute a quorum; and to such extent as shall be provided in
the by-laws and as may be permitted by law, such committee shall
have and may exercise all or any of the powers of the Board of
Directors.
The Board of Directors, by the affirmative vote of a
majority of the whole Board, may appoint any other standing
committees; and such standing committees shall have and may
exercise such powers as may be conferred and authorized by the
by-laws or by the Board of Directors and as may be permitted by
law.
The Board of Directors may appoint, not only other officers
of the Company, but also one or more Vice-Presidents, one or more
Assistant Treasurers, and one or more Assistant Secretaries; and,
to the extent provided in the by-laws, or by the Board of
Directors, the persons so appointed, respectively, shall have and
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EXHIBIT 3(ii)
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may exercise all the powers of the President and of the Treasurer
and of the Secretary respectively.
Subject always to the by-laws made by the stockholders, the
Board of Directors may make by-laws; but any by-laws made by the
Board of Directors may be altered or repealed by the stockholders
at any annual meeting or any special meeting, provided notice of
such proposed alteration or repeal be included in the notice of
the meeting.
The Board of Directors shall have the power, by action which
may be general or confined to specific instances, to authorize
the Company to loan money to, guarantee any obligation of, or
otherwise assist, any officer or other employee or agent of the
Company or of any subsidiary thereof, whenever in the judgement
of the directors such loan, guarantee or assistance may
reasonably be expected to benefit the Company; provided that any
such loan, guarantee or assistance to an officer or employee who
is also a director of the Company shall have been authorized by a
majority of the entire Board of Directors.
Seventh. Limitation of Liability, Indemnification and
Insurance
(a) Limitation of Liability.
To the fullest extent permitted by the laws of the
State of New Jersey, as they exist on the date hereof or may
hereafter be amended, directors and officers of the Company shall
not be personally liable to the Company or its stockholders for
damages for breach of any duty owed to the Company or its
stockholders, except that the provisions of this Article Seventh
shall not relieve a director or officer from liability for any
breach of duty based upon an act or omission (i) in breach of
such person's duty of loyalty to the Company or its stockholders,
(ii) not in good faith or involving a knowing violation of law or
(iii) resulting in receipt by such person of an improper personal
benefit. Neither the amendment or repeal of this Article nor the
adoption of any provision of this Restated Certificate of
Incorporation which is inconsistent with this Article shall
eliminate or reduce the protection afforded by this Article to
any director or officer of the Company for or with respect to any
act or omission of such director or officer occurring prior to
such amendment, repeal, or adoption.
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EXHIBIT 3(ii)
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(b) Indemnification and Insurance.
(1) Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is
involved in any pending, threatened or completed civil, criminal,
administrative or arbitrative action, suit or proceeding, or any
appeal therein or any inquiry or investigation which could lead
to such action, suit or proceeding ("proceeding"), by reason of
his or her being or having been a director or officer of the
Company or of any constituent corporation absorbed by the Company
in a consolidation or merger, or by reason of his or her being or
having been a director, officer, trustee, employee or agent of
any other corporation (domestic or foreign) or of any
partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise (whether or not for profit),
serving as such at the request of the Company or of any such
constituent corporation, or the legal representative of any such
director, officer, trustee, employee or agent, shall be
indemnified and held harmless by the Company to the fullest
extent permitted by the New Jersey Business Corporation Act, as
the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights
than said Act permitted prior to such amendment), from and
against any and all reasonable costs, disbursements and
attorneys' fees, and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties
incurred or suffered in connection with any such proceeding, and
such indemnification shall continue as to a person who has ceased
to be a director, officer, trustee, employee or agent and shall
inure to the benefit of his or her heirs, executors,
administrators and assigns; provided, however, that there shall
be no indemnification hereunder with respect to any settlement or
other non-adjudicated disposition of any proceeding unless the
Company has given its prior consent to such settlement or
disposition. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to
be paid by the Company the expenses incurred in connection with
any proceeding in advance of the final disposition of such
proceeding as authorized by the Board of Directors; provided,
however, that, if the New Jersey Business Corporation Act so
requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer in
advance of the final disposition of a proceeding shall be made
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EXHIBIT 3(ii)
Page 27 of 28
only upon receipt by the Company of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced unless it shall ultimately be determined that such
director or officer is entitled to be indemnified under this
Section or otherwise. The Company may, by action of its Board of
Directors, provide for indemnification and advancement of
expenses to employees and agents of the Company with the same
scope and effect as the foregoing indemnification of directors
and officers.
(2) Right of Claimant to Bring Suit. If a claim under
paragraph (1) of this Section (b) is not paid in full by the
Company within thirty days after a written request has been
received by the Company, the claimant may at any time thereafter
apply to a court for an award of indemnification by the Company
for the unpaid amount of the claim and, if successful on the
merits or otherwise in connection with any proceeding, or in the
defense of any claim, issue or matter therein, the claimant shall
be entitled also to be paid by the Company any and all expenses
incurred or suffered in connection with such proceeding. It
shall be a defense to any such action (other than an action
brought to enforce a claim for the advancement of expenses
incurred in connection with any proceeding where the required
undertaking, if any, has been tendered to the Company) that the
claimant has not met the standard of conduct which makes it
permissible under the New Jersey Business Corporation Act for the
Company to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Directors,
independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such proceeding that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the New Jersey Business Corporation Act, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, nor the
termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall be a defense to the action or create a presumption that the
claimant has not me the applicable standard of conduct.
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EXHIBIT 3(ii)
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(3) Non-Exclusivity of Rights. The right to
indemnification and advancement of expenses provided by or
granted pursuant to this Section (b) shall not exclude or be
exclusive of any other rights to which any person may be entitled
under a certificate of incorporation, by-law, agreement, vote of
stockholders, or otherwise, provided that no indemnification
shall be made to or on behalf of any person if a judgement or
other final adjudication adverse to such person establishes that
such person has not met the applicable standard of conduct
required to be met under the New Jersey Business Corporation Act.
(4) Insurance. The Company may purchase and maintain
insurance on behalf of any director, officer, employee or agent
of the Company, another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any
expenses incurred in any proceeding and any liabilities asserted
against him or her by reason of such person's being or having
been a director, officer, employee or agent, whether or not the
Company would have the power to indemnify such person against
such expenses and liabilities under the provisions of this
Section (b) or otherwise. The Company may purchase such
insurance from, or such insurance may be reinsured in whole or in
part by, an insurer owned or otherwise affiliated with the
Company, whether or not such insurer does business with other
insureds.
IN WITNESS WHEREOF, INGERSOLL-RAND COMPANY has caused
this Restated Certificate of Incorporation to be duly executed
this 3rd day of May , 1991.
INGERSOLL-RAND COMPANY
By /S/ Theodore H. Black
Theodore H. Black
Chairman of the Board
60 <PAGE>
EXHIBIT 3(iii)
Page 1 of 17
BY-LAWS
of
INGERSOLL-RAND COMPANY
As amended through October 1, 1993
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EXHIBIT 3(iii)
Page 2 of 17
BY-LAWS
of
INGERSOLL-RAND COMPANY
ARTICLE I.
STOCKHOLDERS' MEETINGS
Section 1. Annual Meetings: The annual meeting of the
Stockholders of the Company shall be held on the fourth
Thursday of April, in each year, or such other date as
the Board of Directors may determine, at such hour and
at such place within or without the State of New Jersey
as may be fixed by the Board of Directors and stated in
the notice of the meeting, for the election of
Directors of the Company and for the transaction of
such other business as may come before it.
The Secretary of the Company shall mail, at least
twenty (20) days before every such meeting, a notice
thereof addressed to each Stockholder of record of the
Company at his Post Office address, as it appears on
the books of the Company.
Section 2. Special Meetings: Special meetings of the
Stockholders may be held at the principal office of the
Company in the State of New Jersey, or at such other
place within or without said State as may from time to
time be designated by the Board of Directors and stated
in the notice of the meeting, whenever called in
writing by the Chairman of the Board, the Vice-Chairman
or the President, or by vote of a majority of the Board
of Directors, or by demand in writing of the
Stockholders of record owning at least two-fifths (2/5)
in amount of the outstanding shares of stock of the
Company.
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EXHIBIT 3(iii)
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The Secretary of the Company shall mail, at least ten
(10) days prior to any such meeting, notice of such
meeting, indicating briefly the object or objects
thereof, addressed to each Stockholder of record at his
Post Office address as it appears on the books of the
Company.
Section 3. Quorum: Unless otherwise provided in the
Certificate of Incorporation of this Company or by
statute, the presence in person or by proxy of the
holders of record of the shares entitled to cast a
majority of the votes at any meeting of the
Stockholders shall constitute a quorum at such meeting.
Whenever the holders of any class or series of shares
are entitled to vote separately on a specified item of
business, the presence in person or by proxy of the
holders of record of the shares of such class or series
entitled to cast a majority of the votes thereon shall
constitute a quorum for the transaction of such
specified item of business.
If the holders of the amount of stock necessary to
constitute a quorum shall fail to attend in person or
by proxy at the time and place fixed by these By-Laws
for an annual meeting, or as fixed by notice, as above
provided for a special meeting, a majority in interest
of the Stockholders present, in person or by proxy, may
adjourn from time to time without notice other than
announcement at the meeting until the holders of the
amount of stock requisite to constitute a quorum shall
attend. At any such adjourned meeting at which a
quorum shall be present, any business may be transacted
which might have been transacted at the meeting as
originally notified.
Section 4. Organization: The Chairman of the Board
shall call meetings of the Stockholders to order and
shall act as Chairman of such meetings. In the absence
of the Chairman of the Board, the Vice-Chairman or the
President, or in his absence an Executive Vice
President shall preside: and in the absence of any of
the foregoing officers, the Stockholders present, or
the Board of Directors, may appoint any Stockholder to
act as Chairman of any meeting.
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EXHIBIT 3(iii)
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The Secretary of the Company shall act as Secretary of
all meetings of the Stockholders. In the absence of
the Secretary at any meeting of the Stockholders, the
presiding officer may appoint any person to act as
Secretary of the Meeting.
Section 5. Voting: At each meeting of the
Stockholders, every Stockholder shall be entitled to
vote in person or by proxy appointed by instrument in
writing subscribed by such Stockholder or by his duly
authorized attorney and delivered to the inspectors at
the meeting. The votes for Directors and, upon demand
of any Stockholder, the votes upon any question before
the meeting shall be by ballot.
Section 6. Inspectors: At each annual stated meeting
of the Stockholders for the election of Directors, the
presiding officer of such meeting shall appoint two
persons to act as inspectors, who shall be sworn to
perform their duties in accordance with the laws of the
State of New Jersey, and who shall return a formal
certificate.
Section 7. Nominations of Directors: Nominations for
the election of Directors may be made by the Board of
Directors or by any Stockholder entitled to vote for
the election of Directors. Any Stockholder entitled to
vote for the election of Directors at a meeting or to
express a consent in writing without a meeting may
nominate a person or persons for election as a Director
only if written notice of such Stockholder's intent to
make such nomination is given to the Secretary of the
Company, either by personal delivery or by United
States mail, postage prepaid, not later than (a) with
respect to an election to be held at an annual stated
meeting of Stockholders, 90 days in advance of such
meeting, (b) with respect to an election to be held at
a special meeting of Stockholders for the election of
Directors (to the extent such a special meeting is
permitted under applicable law and the Company's
Certificate of Incorporation), the close of business on
the seventh day following the date on which notice of
such special meeting is first given to Stockholders,
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EXHIBIT 3(iii)
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and (c) in the case of any Stockholder who wishes to
nominate a person or persons for election as a Director
pursuant to consents in writing by Stockholders without
a meeting (to the extent election by such consents is
permitted under applicable law and the Company's
Certificate of Incorporation), 60 days in advance of
the date on which materials soliciting such consents
are first mailed to Stockholders or, if no such
materials are required to be mailed under applicable
law, 60 days in advance of the date on which the first
such consent in writing is executed. Each such notice
shall set forth the name and address of the Stockholder
who intends to make the nomination and of the person or
persons to be nominated for election as a Director; a
representation that the Stockholder is a holder of
record of stock of the Company entitled to vote at such
meeting or to express such consent in writing and
intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the
notice or to execute such a consent in writing to elect
such person or persons as a Director; a description of
all arrangements or understandings between the
Stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to
which the nomination or nominations for election as a
Director are to be made by the Stockholder; such other
information regarding each nominee proposed by such
Stockholder as would have been required to be included
in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission if such
nominee had been nominated, or was intended to be
nominated, for election as a Director by the Board of
Directors; and the consent of each nominee to serve as
a Director of the Company if so elected. The Board of
Directors may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing
procedure.
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EXHIBIT 3(iii)
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ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number and Election: The business and the
property of the Company shall be managed by a Board of
eleven (11) Directors; but the number of Directors may
be altered from time to time by the alteration of these
By-Laws, provided that, as required by the Restated
Certificate of Incorporation, the Board shall never
consist of less than eight (8) members.
As provided in the Restated Certificate of
Incorporation, the Board of Directors shall be divided
into three (3) classes, two consisting of (4) Directors
each and the remaining consisting of three (3)
Directors. At each annual election, the successors to
the Directors of the class whose terms shall expire in
that year shall be elected to hold office for the term
of three (3) years, so that the term of office of one
class of Directors shall expire in each year.
Every Director shall be a holder of at least one (1)
share of the capital stock of the Company. Each
Director shall serve for the term for which he shall
have been elected and until his successor shall have
been duly chosen. No Director, however, shall remain
in office after the last day of the month in which he
shall attain his 72nd birthday.
Notwithstanding the foregoing provisions of this
Section 1, if and as long as the Restated Certificate
of Incorporation provides for the election of
additional Directors by class or classes of stock, such
additional Directors shall be elected in the manner and
for the term provided in the Restated Certificate of
Incorporation.
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EXHIBIT 3(iii)
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Section 2. Vacancies: Subject to any requirements of
the Certificate of Incorporation with respect to the
filling of vacancies among additional Directors elected
by a class or classes of stock, if the office of any
Director becomes vacant, the remaining Directors may,
by a majority vote, elect a successor who shall hold
office until the next succeeding annual meeting of the
Stockholders and until his successor shall have been
elected and qualified.
Section 3. Place of Meetings: The Directors may hold
their meetings and may have an office and keep the
books of the Company (except as otherwise may be
provided for by law) in such place or places in the
State of New Jersey or outside of the State of New
Jersey as the Board from time to time may determine.
Section 4. Regular Meetings: Regular meetings of the
Board of Directors shall be held at such times and
intervals as the Board may from time to time determine.
It shall be the duty of the Secretary to send a notice
to each of the Directors at his address as it appears
on the books of the Company at least two (2) days
before the holding of each regular meeting, but a
failure of the Secretary to send such notice shall not
invalidate any proceedings of the said Board.
Section 5. Special Meetings: Special meetings of the
Board of Directors shall be held whenever called by the
Chairman of the Board or the Vice-Chairman or the
President, or by one-third (1/3) of the Directors for
the time being in office.
The Secretary shall give notice of each special meeting
by mailing the same at least two (2) days before the
meeting, or by telegraphing the same at least one (1)
day before the meeting to each Director, but such
notice may be waived by any Director. At any meeting
at which every Director shall be present, even without
notice, any business may be transacted.
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Section 6. Quorum: Six (6) members of the Board of
Directors, but not less than one-third (1/3) of the
entire Board, shall constitute a quorum for the
transaction of business; but if at any meeting of the
Board there be less than a quorum present, those
present may adjourn the meeting from time to time. At
meetings of the Board of Directors, business shall be
transacted in such order as from time to time the Board
may determine.
Section 7. Director Emeritus: The Board of Directors
may appoint a person who has served with distinction
and who has retired from the Board upon reaching
mandatory retirement as provided herein to the position
of Director Emeritus. A Director Emeritus shall be
invited to attend all meetings of the Board and shall
receive the same compensation as that paid to outside
Directors. While serving as a Director Emeritus, he
shall not be considered a retired director for pension
benefit purposes; however, any pension benefits to
which he may be entitled will commence upon his
cessation of service as a Director Emeritus. He shall
be appointed by the Board for a one-year term and may
be reappointed from time to time by action of the
Board. While the presence of a Director Emeritus at a
Board meeting will not be considered for quorum or
voting purposes, nevertheless, his advice and counsel
on all matters to come before the Board is invited.
ARTICLE III.
COMMITTEES
The Board of Directors may appoint from their number
such standing committees as they deem best and to the
extent permitted by statute may invest them with such
of their own powers as they may deem advisable, subject
to such conditions as they may prescribe.
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ARTICLE IV.
OFFICERS
Section 1. Officers: The executive officers of the
Company shall include a Chairman of the Board of
Directors, President, Treasurer and Secretary and may
also include one or more Vice-Chairmen, Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents,
and such other officers as the Board of Directors shall
deem necessary or otherwise appropriate to elect. The
Chief Executive Officer may hold the title of Chairman
of the Board, or President, or both titles.
The Board of Directors may appoint such other officers
and advisory boards as they shall deem necessary, who
shall have such authority and who shall perform such
duties as from time to time may be prescribed by the
Board of Directors.
Any executive officer elected by the Board of Directors
may be removed at any time with or without cause by the
affirmative vote of two-thirds (2/3) of the entire
Board of Directors.
Any other appointed or elected officer, agent, employee
or member of an advisory board may be removed at any
time with or without cause by affirmative vote of the
Directors or by the Committee or superior officer upon
whom such power of removal may be conferred.
Section 2. Powers and Duties: The Chairman of the
Board shall preside at all meetings of the Board of
Directors and Stockholders. Subject to designation by
the Board of Directors he shall be the Chief Executive
Officer of the Company, and he shall have
responsibility for the active management of the
business of the Company. He may sign and execute
contracts and agreements authorized by the Board,
delegate other officers to do so and may, from time to
time, require from other officers and from employees of
the Company opinions, reports or information upon any
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matter specified by him or generally upon the interests
or affairs of the Company under the supervision of such
officers or employees respectively. He may appoint and
remove assistant officers and other employees and
agents. He may exercise any other powers conferred
upon him by the Board of Directors.
Other officers shall have all the usual and customary
powers and shall perform all the usual and customary
duties incident to their respective offices and, in
addition thereto and to any duties specifically
prescribed by any subsequent provisions of these
By-Laws, they shall respectively perform such other
general or special duties as may from time to time be
assigned to them by the Board of Directors or the Chief
Executive Officer.
The Board of Directors may appoint an officer to act as
Chief Financial Officer of the Company, who shall have
responsibility for the financial affairs of the
Company. He will be responsible for the preparation of
the financial statements of the Company, and such other
duties as from time to time may be assigned to him by
the Board of Directors or the Chief Executive Officer.
The Board of Directors may appoint an officer to act as
General Counsel of the Company, who shall have
responsibility for the legal affairs of the Company.
The Board of Directors may appoint the Comptroller to
be the principal accounting and financial control
officer of the Company.
Securities of other corporations or interests in other
entities held by the Company may be voted by the
Chairman of the Board or by any other person designated
by the Board of Directors or Chief Executive Officer.
Section 3. Term: The executive officers elected by
the Board of Directors shall hold office for one year
or until their successors are elected and qualify. The
Chairman, and any Vice-Chairman, shall be elected by
the Directors from among their own number. One person
may hold more than one office.
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ARTICLE V.
BILLS, NOTES, AND CHECKS
All bills, notes, checks or other negotiable
instruments of the Company shall be made in the name of
the Company and shall be signed by two executive
officers or by any two persons duly authorized by the
Board of Directors. No officers or agents of the
Company, either singly or together shall have power to
make any bill, note or check or other negotiable
instrument in the name of the Company to bind the
Company thereby, except as in this Article prescribed
and provided.
No officer or agent of this Company shall have power to
endorse in the name, for or in behalf of the Company,
any note, bill of exchange, draft, check or other
written instrument for the payment of money, save only
for purposes of the discount or the collection of the
said instrument, unless thereunto duly and specially
authorized by the vote of the Directors of this Company
entered on the minutes of said Board.
ARTICLE VI.
CAPITAL STOCK
Section 1. Certificates for Shares: The certificates
for shares of the capital stock of the Company shall be
in such form not inconsistent with the Certificate of
Incorporation as shall be prepared or be approved by
the Board of Directors. The certificates shall be
signed by or bear thereon the facsimile signature of
the Chairman, the Vice-Chairman, President, or an
Executive Vice President, or a Vice President, and also
be signed by or bear thereon the facsimile signature of
the Treasurer or an Assistant Treasurer. The
certificates shall be consecutively numbered. The name
of the person owning the shares represented thereby,
with the number of such shares and the date of issue,
shall be entered in the Company's books.
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Section 2. Transfers: Shares of the capital stock of
the Company shall be transferred only on the books of
the Company by the holder thereof in person or by his
attorney, upon surrender of the certificate or
certificates properly endorsed. The Board of Directors
shall have power and authority to make all such rules
and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for
shares of the capital stock of the Company. The Board
of Directors may appoint Transfer Agents and Stock
Registrars and may require all stock certificates to
bear the signatures of such a Transfer Agent and of
such a Registrar of Transfers, or any of them.
The stock transfer books may be closed for such period
next preceding any Stockholders' meeting, or the
payment of dividends as the Board of Directors may from
time to time determine, and during such period no stock
shall be transferable.
The Board of Directors may also fix in advance a date
not more than 60 nor less than 10 days preceding the
date of any meeting of Stockholders, nor more than 60
days preceding the date for the payment of any dividend
on the Common Stock or any series of Preference Stock,
or the date for allotment of rights, or the date when
any change or conversion or exchange of capital stock
shall go into effect, as a record date for the
determination of the Stockholders entitled to notice of
and to vote at any such meeting, or entitled to receive
payment of any such dividend, or any such allotment of
rights, or to exercise the rights in respect to any
such change, conversion or exchange of capital stock.
In such cases only Stockholders of record on the date
so fixed shall be entitled to such notice of and vote
at such meeting, or to receive payment of such
dividend, or allotment of rights, or to exercise such
rights, as the case may be, and notwithstanding any
transfer of any stock on the books of the Company after
any such record date fixed as aforesaid.
Section 3. Lost Stock Certificates: In case any stock
certificate shall be lost, the Board of Directors may
order a new certificate to be issued in its place upon
receiving such proof of loss and such security therefor
as may be satisfactory to it.
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ARTICLE VII.
THE CORPORATE SEAL
The Corporate Seal of the Company shall consist of a
circle formed by the words "Ingersoll-Rand Company" and
the letters "N. J." with the words "Corporate Seal" and
the figures "1905" in the center.
The Seal shall be attested by the signature of the
Secretary or the Assistant Secretary or of the
Treasurer or the Assistant Treasurer.
When authorized by the Board of Directors, the
Secretary shall affix the Seal, or cause it to be
affixed, to all documents executed on behalf of the
Company. The Board of Directors may also specifically
or generally authorize other persons to affix the Seal.
ARTICLE VIII.
REACQUIRED SHARES
When shares of the Company are reacquired by the
Company by purchase, by redemption or by their
conversion into other shares of the Company, such
shares shall be treated by the Company as treasury
shares, unless and to the extent the Board of Directors
determines at any time that any such shares shall be
cancelled.
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ARTICLE IX.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. Right to Indemnification: Each person who
was or is made a party or is threatened to be made a
party to or is involved in any pending, threatened or
completed civil, criminal, administrative or
arbitrative action, suit or proceeding, or any appeal
therein or any inquiry or investigation which could
lead to such action, suit or proceeding ("proceeding"),
by reason of his or her being or having been a Director
or officer of the Company or of any constituent
corporation absorbed by the Company in a consolidation
or merger, or by reason of his or her being or having
been a Director, officer, trustee, employee or agent of
any other corporation (domestic or foreign) or of any
partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise (whether or
not for profit), serving as such at the request of the
Company or of any such constituent corporation, or the
legal representative of any such Director, officer,
trustee, employee or agent, shall be indemnified and
held harmless by the Company to the fullest extent
permitted by the New Jersey Business Corporation Act,
as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that
such amendment permits the Company to provide broader
indemnification rights than said Act permitted prior to
such amendment), from and against any and all
reasonable costs, disbursements and attorneys' fees,
and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and
penalties, incurred or suffered in connection with any
such proceeding, and such indemnification shall
continue as to a person who has ceased to be a
Director, officer, trustee, employee or agent and shall
inure to the benefit of his or her heirs, executors,
administrators and assigns; provided, however, that
there shall be no indemnification hereunder with
respect to any settlement or other nonadjudicated
disposition of any proceeding unless the Company has
given its prior consent to such settlement or
disposition. The right to indemnification conferred in
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this Section 1 shall be a contract right and shall
include the right to be paid by the Company the
expenses incurred in connection with any proceeding in
advance of the final disposition of such proceeding as
authorized by the Board of Directors; provided,
however, that, if the New Jersey Business Corporation
Act so requires, the payment of such expenses incurred
by a Director or officer in his or her capacity as a
Director or officer in advance of the final disposition
of a proceeding shall be made only upon receipt by the
Company of an undertaking, by or on behalf of such
Director or officer, to repay all amounts so advanced
if it shall ultimately be determined that such Director
or officer is not entitled to be indemnified under this
Section 1 or otherwise. The Company may, by action of
its Board of Directors, provide for indemnification and
advancement of expenses to employees and agents of the
Company with the same scope and effect as the foregoing
indemnification of Directors and officers.
Section 2. Right of Claimant to Bring Suit: If a
claim under Section 1 of this Article IX is not paid in
full by the Company within thirty days after a written
request has been received by the Company, the claimant
may at any time thereafter apply to a court for an
award of indemnification by the Company for the unpaid
amount of the claim and, if successful on the merits or
otherwise in connection with any proceeding, or in the
defense of any claim, issue or matter therein, the
claimant shall be entitled also to be paid by the
Company any and all expenses incurred or suffered in
connection with such proceeding. It shall be a defense
to any such action (other than an action brought to
enforce a claim for the advancement of expenses
incurred in connection with any proceeding where the
required undertaking, if any, has been tendered to the
Company) that the claimant has not met the standard of
conduct which makes it permissible under the New Jersey
Business Corporation Act for the Company to indemnify
the claimant for the amount claimed, but the burden of
proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of
Directors, independent legal counsel or its
stockholders) to have made a determination prior to the
commencement of such proceeding that indemnification of
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the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set
forth in the New Jersey Business Corporation Act, nor
an actual determination by the Company (including its
Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such
applicable standard of conduct, nor the termination of
any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its
equivalent, shall be a defense to the action or create
a presumption that the claimant has not met the
applicable standard of conduct.
Section 3. Non-Exclusivity of Rights: The right to
indemnification and advancement of expenses provided by
or granted pursuant to this Article IX shall not
exclude or be exclusive of any other rights, including
the right to be indemnified against any and all
reasonable costs, disbursements and attorneys' fees,
and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and
penalties incurred or suffered in proceedings by or in
the right of the Company, to which any person may be
entitled under a certificate of incorporation, by-law,
agreement, vote of stockholders, or otherwise, provided
that no indemnification shall be made to or on behalf
of any person if a judgment or other final adjudication
adverse to such person establishes that such person has
not met the applicable standard of conduct required to
be met under the New Jersey Business Corporation Act.
ARTICLE X.
AMENDMENTS
The Board of Directors may, by a majority vote of the
entire Board, make By-Laws and from time to time alter,
amend or repeal any By-Law, but any By-Law made by the
Board of Directors may be altered or repealed by the
Stockholders at any annual or special meeting. Notice
of such proposed alteration, amendment or repeal of any
By-Law shall be included in the notice of the meeting
of the Directors or Stockholders.
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ARTICLE XI.
AUDITORS
The Board of Directors may appoint a firm of certified
public accountants to audit the books and accounts of
the Company for the calendar year in which such
appointment is made.
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MANAGEMENT INCENTIVE UNIT PLAN OF INGERSOLL-RAND COMPANY
As Amended Effective January 1, 1980
I. Purpose
The purpose of this Plan is to provide additional incentive
which will enable the Company to attract to and retain in its
employment over the years persons of outstanding competence, and
to promote the stockholder point of view among key employees of
the Company.
II. Definitions
(a) "Company" means Ingersoll-Rand Company or any company
successor thereto by merger, consolidation, or other
reorganization which has made provision for adoption of this Plan
and the assumption of the Company's obligations thereunder.
(b) "Subsidiary" means any corporation more than 50 per
cent of whose total combined voting stock of all classes is owned
by the Company or by another corporation qualifying as a
subsidiary within this definition.
(c) "Common Stock" means shares of the common stock of
Ingersoll-Rand Company.
(d) "Committee" means the committee appointed by the Board
of Directors of the Company pursuant to Article III hereof.
(e) "Common Stock Equivalents" shall provide the holder
with such of the rights and benefits of the actual owner of
shares of Common Stock as the Board of Directors may determine,
including the right to receive dividends and the right to receive
the amount of appreciation in value, if any, on such shares of
Common Stock from the date the grant of such Common Stock
Equivalents became effective until they become payable to the
Participant.
(f) "Disability" means such term as defined under the
pension, retirement or appropriate benefit plan or plans of the
Company or a Subsidiary applicable to the Participant.
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(g) "Dividend Equivalents" means a right to receive
immediately or on a deferred basis, whether or not subject to
forfeiture, an amount not exceeding one-half of the dividends
paid or payable on a share of Common Stock subject to a Unit.
(h) "Employee" means any person, including an officer of
the Company (whether or not he is also a director thereof), who
is (1) employed by the Company or a subsidiary on a full-time
basis, (2) primarily compensated for such employment by a regular
salary or by commissions on sales or both, and (3) in the opinion
of the Committee, is one of the key personnel of the Company in a
position to contribute materially to its continued growth and
development and to its future financial success. The term does
not include persons who are retained by the Company as
consultants only.
(i) "Participant" means an employee who is awarded
Management Incentive Units hereunder.
(j) "Retirement" means such term as defined under the
pension or retirement plan or plans of the Company or a
Subsidiary applicable to the Participant, pursuant to which he is
or will, upon such retirement, be entitled to receive retirement
benefits.
(k) "Termination Date" shall mean the date of termination
of a Participant's employment with the Company by death,
retirement, resignation, discharge or otherwise.
(l) "Fair Market Value" of the Common Stock shall be, as
applied to any date, the mean between the high and low sales
prices, regular way, of a share of Common Stock on such date as
reported on the Composite Tape, or, if no such sales were made on
such date, on the next preceding date on which there were such
sales of Common Stock as reported on the Composite Tape.
III. Administration and Eligibility
(a) The Board of Directors of the Company shall appoint a
Committee consisting of three or more members of the Board, who
shall serve at the pleasure of the Board of Directors, to
administer, construe and interpret this Plan. No member of the
Committee shall be liable for any act done or determination made
in good faith. No member of the Committee shall participate in
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any determination either to award himself Management Incentive
Units or to accelerate benefits to him pursuant to Article XI
hereof.
(b) The construction and interpretation by the Committee of
any provision of this Plan shall be final and conclusive. It
shall determine, subject to the provisions of this Plan:
(i) The Employees who shall participate in the Plan
from time to time; and
(ii) The number of Management Incentive Units
(sometimes herein called "Units") to be set aside
for each Participant.
(c) The Committee may, in its discretion, delegate its
duties to an officer or employee, or a committee composed of
officers or employees of the Company, except that it may not
delegate its authority to construe and interpret this Plan, or to
make the determinations specified in Items (i) and (ii) of
Paragraph (b) of this Article III, or in Articles XI and XII.
IV. Establishment of Management Incentive Units
The Company shall set up an appropriate record (hereinafter
called the "Incentive Ledger") and thereafter from time to time
enter therein an account in the name of each Participant, showing
the number of Units awarded to him by the Committee, and an
amount equivalent to the Fair Market Value of an equal number of
shares of Common Stock on the day such Units were awarded him.
Such latter amount shall not constitute a credit to the account
of a Participant, but is to be used solely in the computation of
credits, under certain circumstances, as hereinafter set forth.
V. Aggregate Number of Units
The aggregate number of Units standing in the Incentive
Ledger to the credit of Participants at any one time shall not
exceed 600,000, and the aggregate number of Units awarded to any
one Participant shall not exceed 10,000, provided, however, that
upon termination of employment of any Participant for any cause
including Retirement, any Units theretofore awarded to him shall
no longer be considered outstanding for the purposes of the
limitations of this Article V only.
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VI. Payment or Crediting of Amounts Related to Cash Dividends
So long as this Plan remains in effect, the Company shall
pay to each Participant throughout the term of his employment
with the Company or a subsidiary, amounts equal to one-half of
the dividends paid in cash from time to time on issued and
outstanding shares of Common Stock equal to the number of Units
in his account, so that the amount of each such payment will be
equivalent to one-half of the cash dividends which the
Participant would have received had he been the owner of the
number of shares of Common Stock equal to the number of Units in
his account, provided, however, that if the Committee in its sole
discretion shall at any time so direct as to any Participant,
such amounts shall thereafter not be paid to such Participant but
shall be credited to his account in the Incentive Ledger. No
such payment or credit shall be made with respect to any dividend
paid after a Participant's Termination Date or after any date of
termination of this Plan, even though the record date is prior
thereto.
VII. Credits to Accounts of Participants
(a) Subject to the provisions of Paragraphs (b) to (g),
inclusive, of this Article VII, there shall be credited to each
Participant's account in the Incentive Ledger an amount which
shall be equal to the excess, if any, of the aggregate Fair
Market Value on his Termination Date of that number of shares of
Common Stock which is equal to the number of Units then standing
to his credit over the aggregate Fair Market Value of such shares
on the date or dates the Units were awarded him; provided,
however, that after a Unit has been held by a Participant for
five years, instead of the foregoing credit provided in this
Paragraph (a), there shall be credited to the Participant's
account in the Incentive Ledger the same amounts with respect to
each Unit theretofore and thereafter paid or credited to the
Participant under the provisions of Article VI as of the dates of
such payments or credits under Article VI, so long as the Unit
continues to be held by the Participant. The provisions of this
Paragraph (a) of Article VII shall be applicable to former
Participants whose employment terminated before January 1, 1980
and who elected a Selected Value Date pursuant to Paragraph (c)
below which had not yet occurred at said date.
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(b) Subject to the provisions of Article X, upon
termination of a Participant's employment for any reason other
than death, Disability or Retirement, no credit under Paragraph
(a) of this Article VII shall be made to the Participant's
account except and to the extent that the Committee, in its sole
discretion, shall so authorize.
(c) Upon termination of a Participant's employment by
reason of death, Disability or Retirement within five years from
the date of grant, he or his Beneficiary or Beneficiaries
designated pursuant to Paragraph (b) of Article IX hereof shall
have the option, to be exercised in writing filed with the
Secretary of the Company on or before his Termination Date (or in
the event of his death, within thirty days thereafter), to have
his credit under the provisions of this Article VII determined by
using the Fair Market Value of the Common Stock as of a Selected
Value Date in lieu of his Termination Date; provided, however,
that such Fair Market Value may not exceed the highest price at
which a sale of the Common Stock was made on the New York Stock
Exchange between the date such employee became a Participant and
his Termination Date. The Selected Value Date shall be any date
within a three-year period immediately following his Termination
Date which he or his Beneficiary or Beneficiaries may designate
by notice in writing to the Secretary of the Company not less
than three days prior to the date so designated. If no such
designation is made, then his Selected Value Date shall be the
third anniversary of his Termination Date. If such option shall
be exercised, no credit shall be made to such Participant's
account in the Incentive Ledger under the provisions of this
Article VII until the Selected Value Date, except as provided in
Paragraphs (e) and (f) of this Article VII.
(d) Any Participant whose employment is terminated for any
reason other than death, Disability or Retirement within five
years from the date of grant shall have an option to choose a
Selected Value Date, as provided in Paragraph (c) of this Article
VII, only if the Committee, in its sole discretion, shall so
authorize.
(e) If the Board of Directors of the Company shall
terminate this Plan within five years from its effective date, no
credit under the provisions of this Article VII shall be made
thereafter to the account of any Participant; provided, however,
that if the date of such termination occurs after a Participant's
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Page 6 of 15
Termination Date and prior to his Selected Value Date, then such
Participant shall be entitled to any credit resulting under the
provisions of this Article VII from the use of the Fair Market
Value of the Common Stock as of the date of termination of this
Plan in lieu of such Participant's Selected Value Date.
(f) If the Board of Directors of the Company shall
terminate this Plan more than five years after its effective
date, then each Participant who has not received a credit under
the provisions of this Article VII shall be entitled to any
credit resulting thereunder from the use of the Fair Market Value
of the Common Stock on the date of termination of this Plan in
lieu of each such Participant's Termination Date or Selected
Value Date, as the case may be, and any credit so resulting shall
be entered in the Incentive Ledger to the account of each such
Participant as of the date of termination of this Plan, but no
other credits shall be made thereafter to the account of any
Participant.
(g) Anything herein contained to the contrary
notwithstanding, the amount which may be credited to the account
of a Participant under the provisions of this Article VII shall
not exceed the aggregate of all amounts theretofore either paid
to such Participant or credited to his account under the
provisions of Article VI hereof.
VIII. Dividend Equivalents
(a) In lieu of the credits provided in Article VII, the
Committee may provide that an amount equivalent to not more than
one-half of the cash dividend which the Participant would have
received had he been the owner of a number of shares of Common
Stock equal to the number of Units in his account shall be
credited to his account in the Incentive Ledger as Dividend
Equivalents. Such determination may be made either at the time
of granting of a Unit or at any time thereafter, and if granted
after the award of such Unit, such determination may be made
retroactive to the date of the award of such Unit upon
cancellation of any amounts credited or reflected in the
Participant's account under Article VII. Such determination may
contain such provisions and be subject to such terms and
conditions as the Committee may direct. Dividend Equivalents may
be payable or credited either in cash or in Common Stock
Equivalents. If credited in Common Stock Equivalents, they shall
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be credited at the Fair Market Value of an equal number of shares
of Common Stock on the day of such crediting. The Committee may
provide that any amounts representing dividends earned by Common
Stock Equivalents may be paid either currently or in the future
in cash or that they may be represented by further Common Stock
Equivalents, or both. In the event that dividends on Common
Stock Equivalents are paid in further Common Stock Equivalents,
the latter shall be charged against the limit contained in
Article V. As used in the Plan the words Unit or Units shall
include Dividend Equivalents where appropriate in the context,
including, without limitation, references to a Participant's
account in the Incentive Ledger.
(b) Upon termination of a Participant's employment for any
reason other than death, Disability or Retirement, the
Participant's interest in amounts theretofore credited to his
account under Paragraph (a) of this Article VIII and not
theretofore vested under Article X shall be cancelled, except and
to the extent that the Committee, in its sole discretion, shall
otherwise determine. Upon termination of employment for any
reason where benefits have been vested pursuant to Article X,
such vested amounts shall be payable as provided in Article IX.
If such vested amounts have been credited to the account of the
Participant in Common Stock Equivalents, unless the Committee, in
its sole discretion, shall otherwise determine, no further
amounts with respect to dividends paid on a share of Common Stock
shall be credited with respect to such Common Stock Equivalents,
regardless of whether the record date for said dividend occurs
before or after the Participant's Termination Date, and the Fair
Market Value of said Common Stock Equivalents shall be determined
at said Termination Date. Amounts payable to the Participant
thereafter with respect to said Common Stock Equivalents under
Article IX shall not exceed the Fair Market Value as so
determined at the Participant's Termination Date. However, the
Committee, in its sole discretion, may permit said Common Stock
Equivalents to retain any or all their characteristics until
fully paid out following termination of employment.
84
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EXHIBIT
10(iii)(a)
Page 8 of 15
IX. Payment of Benefits
(a) Upon termination of a Participant's employment there
shall be paid to him, or in the event of his death, to the
Beneficiary or Beneficiaries designated under the provisions of
Paragraph (b) of this Article IX, the amount then standing to his
credit or thereafter credited to him in the Incentive Ledger
under the provisions of Article VI and Paragraph (a) of Article
XII hereof and the amounts vested under Article X. The amounts
so credited shall be payable in quarter-annual installments over
a ten-year period. In the case of termination of employment by
reason of death, Disability or Retirement, the payment of such
amounts shall commence within three months after the
Participant's Termination Date. In the event a Participant's
employment with the Company shall have terminated for any other
reason, the payment of such amounts shall commence upon the
occurrence of what would have been the Participant's normal
retirement date under the then existing pension plan of the
Company or a Subsidiary which had been applicable to him, unless
the Committee shall, in its sole discretion, determine to
commence payments earlier. The Committee may, in its sole
discretion, with the written consent of the Participant, if
living, and of each Beneficiary then designated by him or if the
Participant be not then living, with the written consent of each
of his Beneficiaries, or if none of them shall be then living,
with the written consent of the Participant's executors or
administrators, pay in one lump sum the amount payable or reduce
the period of time and the number of installments during which
the payments referred to in this Paragraph (a) of Article IX
shall be made. The aforesaid payments shall be made under such
terms and conditions as the Committee may direct.
(b) Each person upon becoming a Participant shall file with
the Secretary of the Company a notice in writing designating one
or more Beneficiaries to whom payments otherwise due the
Participant shall be made in the event of his death. In case of
a failure to designate a Beneficiary, or if all designated
Beneficiaries shall die before all payments have been made then
any remaining payments shall be made to the Participant's
executors or administrators.
85
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EXHIBIT
10(iii)(a)
Page 9 of 15
X. Vesting
(a) If the Committee, in its sole discretion, shall so
determine, amounts credited to a Participant's account in the
Incentive Ledger under Articles VII and VIII may vest in whole or
in part five years from the dates as of which such amounts are
credited. In the event that such amounts have been credited in
cash, the amount vested shall be the cash credit to the
Participant's account. If credited in Common Stock Equivalents,
the number of Common Stock Equivalents credited shall be the
amount vested. If the Committee, in its sole discretion, shall
so determine, amounts earned and credited on said vested Common
Stock Equivalents, both before and after the date of their
vesting, shall also vest in accordance with such terms and
conditions as the Committee may direct.
(b) All other amounts credited to the Participant's account
in the Incentive Ledger shall vest upon death, Disability or
Retirement, subject to the limitations of Article VII, if
applicable.
XI. Acceleration of Payment of Benefits
Anything herein contained to the contrary notwithstanding,
at any time after five years from the effective date of this Plan
the Committee may in its sole discretion, if it determines that
unusual circumstances exist and that it would be in the best
interest of a Participant and of the Company, accelerate the
payment of benefits to such Participant by paying to him in one
sum in cash:
(a) The amount, if any, credited to his account in the
Incentive Ledger under the provisions of Articles VI, VII and
VIII,
(b) The amount, if any, credited to his account in the
Incentive Ledger under the provisions of Paragraph (a) of Article
XII, and
(c) Under Article VII if applicable, an amount which shall
be equal to the excess of the aggregate Fair Market Value on the
date of such Committee action, of that number of shares of Common
Stock which is equal to the number of Units then standing to the
credit of such Participant over the aggregate Fair Market Value
86
<PAGE>
EXHIBIT
10(iii)(a)
Page 10 of 15
of such shares on the date or dates the Units were awarded to
him; provided, however, that the amount of such payment under
this clause (c) may not exceed the aggregate of all amounts
theretofore either paid to such Participant or credited to his
account under the provisions of Article VI hereof.
At the time of making such payment the Units in respect of which
such amount was paid shall be cancelled and the Participant shall
have no further rights with respect to such Units.
XII. Limitation of Rights
(a) The Committee may at any time prior to a Participant's
Termination Date cancel some or all of the Units standing to his
credit in the Incentive Ledger and thereafter the rights of such
Participant shall be limited to rights accruing in respect of
such number of Units, if any, as shall remain to his credit in
the Incentive Ledger; provided, however, that if such action
shall be taken later than five years after the effective date of
this Plan and within five years from the date of grant, there
shall be credited to the account of such Participant in the
Incentive Ledger with respect to amounts credited under Article
VII, an amount which shall be equal to the excess of the
aggregate Fair Market Value on the date of such Committee action,
of that number of shares of Common Stock which is equal to the
number of Units so cancelled over the aggregate Fair Market Value
of such shares on the date or dates the Units so cancelled were
awarded to him; and provided further, that the amount of such
credit may not exceed the aggregate of all amounts theretofore
either paid to such Participant or credited to his account under
the provisions of Article VI hereof in respect only of the number
of Units so cancelled; and in the event of such action five years
after the date of grant, there shall be credited to the account
of such Participant in the Incentive Ledger other amounts
credited under Articles VII and VIII.
(b) Nothing in this Plan contained shall be construed to:
(i) Give any employee of the Company or a subsidiary
any right to be awarded any Units except in the
sole discretion of the Committee;
(ii) Give a Participant any rights whatsoever with
respect to shares of Common Stock of the Company;
87
<PAGE>
EXHIBIT
10(iii)(a)
Page 11 of 15
(iii) Limit in any way the right of the Company or a
Subsidiary to terminate a Participant's employment
at any time; or
(iv) Be evidence of any agreement or understanding,
express or implied, that the Company or a
subsidiary will employ a Participant in any
particular position or at any particular rate of
remuneration, or for any period of time.
XIII. Adjustment in Number of Units
In the event of any stock dividend on the Common Stock or
any split-up or combination of shares of the Common Stock,
appropriate adjustment shall be made by the Committee in the
aggregate number of Units which may be awarded under this Plan,
in the maximum number of Units which may be awarded to any one
Participant, and in the number of Units standing to the credit of
each Participant in the Incentive Ledger; provided, however, that
the Committee shall not be required to establish any fractional
Units.
XIV. Non-Alienation of Benefits
No right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance
or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities or torts of the person entitled
to such benefits. If any Participant or Beneficiary hereunder
should become bankrupt or attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge any right or benefit
hereunder, then such right or benefit shall, in the discretion of
the Committee, cease and determine, and in such event, the
Company may hold or apply the same or any part thereof for the
benefit of the Participant or Beneficiary, his or her spouse,
children or other dependents, or any of them, in such manner and
in such proportion as the Committee may deem proper.
XV. Amendment or Termination of Plan
(a) The Board of Directors may terminate this Plan at any
time.
88
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EXHIBIT
10(iii)(a)
Page 12 of 15
(b) The Board of Directors may amend this Plan at any time;
except that:
(i) The aggregate number of Units which may be awarded
to all Participants and the aggregate number of
Units which may be awarded to any one Participant
may not be increased except as provided in Article
XIII hereof; and
(ii) This Article XV may not be amended.
(c) Any amendment or termination of this Plan shall not
affect the rights of Participants or Beneficiaries to payments in
accordance with Article IX of amounts standing to the credit of
Participants in the Incentive Ledger at the time of such
amendment or termination.
XVI. Effective Date of Plan
This Plan shall become effective on such date as the Board
of Directors may determine.
89
<PAGE>
EXHIBIT
10(iii)(a)
Page 13 of 15
AMENDMENT TO THE MANAGEMENT
INCENTIVE UNIT PLAN OF INGERSOLL-RAND COMPANY
EFFECTIVE JANUARY 1, 1982
Article VI of the Management Incentive Unit Plan of
Ingersoll-Rand Company, as amended effective January 1, 1980, is
further amended by deleting the last sentence of such Article and
substituting the following:
"The Committee, in its sole discretion, shall
determine whether and to what extent a
Participant, following the Participant's
Termination Date, shall be paid or credited
with amounts equal to all or any part of the
dividends paid by the Company in cash, from
time to time, on issued and outstanding
shares of Common Stock, equal to the number
of Common Stock Equivalents in the
Participant's account."
90
<PAGE>
EXHIBIT
10(iii)(a)
Page 14 of 15
AMENDMENT TO THE MANAGEMENT
INCENTIVE UNIT PLAN OF INGERSOLL-RAND COMPANY
EFFECTIVE MARCH 1, 1987
The Management Incentive Unit Plan of Ingersoll-Rand
Company, as amended effective January 1, 1980, and January 1,
1982, is further amended by deleting Article IX in its entirety
and substituting the following new Article IX:
IX. Payment of Benefits
a) Upon termination of a Participant's employment there
shall be paid to him, or in the event of his death, to
the Beneficiary or Beneficiaries designated under the
provisions of Paragraph (b) of this Article IX, the
amount then standing to his credit or thereafter
credited to him in the Incentive Ledger under the
provisions of Article VI and Paragraph (a) of Article
XII hereof and the amounts vested under Article X. In
the case of termination of employment by reason of
death, disability or retirement, the payment of such
amounts shall be made in one lump sum to Participants
within one year following the Participant's Termination
Date. In the event a Participant's employment with the
Company shall have terminated for any other reason, the
payment of such amounts shall be made on what would
have been the Participant's normal retirement date
under the then existing pension plan of the Company or
a Subsidiary which had been applicable to him, unless
the Committee shall, in its sole discretion, determine
to commence payments earlier. The Committee may, in its
sole discretion, with the written consent of the
Participant, if living, or if the Participant be not
then living, with the written consent of each of his
Beneficiaries, or if none of them shall be then living,
with the written consent of the Participant's executors
or administrators, pay the amount payable in
installments or such other manner as it may determine.
(b) Each person upon becoming a Participant shall file with
the Secretary of the Company a notice in writing
designating one or more Beneficiaries to whom payment
otherwise due the Participant shall be made in the
event of his death. In case of a failure to designate a
Beneficiary, or if all designated Beneficiaries shall
have died before said payment has been made then it
shall be made to the Participant's executors or
administrators.
91
<PAGE>
EXHIBIT
10(iii)(a)
Page 15 of 15
Amendment of Management Incentive Unit Plan
of
Ingersoll-Rand Company
On June 3, 1987, the Board of Directors of the Company
adopted the following resolution:
RESOLVED, that the Amendment enacted by the
Board of Directors on February 4,
1987, to Article IX of the MIU Plan of
Ingersoll-Rand Company be, and hereby
is rescinded effective immediately.
92 <PAGE>
EXHIBIT
10(iii)(b)
DESCRIPTION OF COMPENSATION PLAN
FOR RETIRED DIRECTORS OF
INGERSOLL-RAND COMPANY
There is no formal document setting forth this Plan.
However, as contained in a resolution of the Board of Directors
and as set forth in the Company's 1981 Proxy Statement, the Plan
provides that commencing in November, 1980, a director who is not
a participant in any of the Company's other retirement plans and
who retires as a director at age 72 with five or more years of
service, or who is required to resign as a director for health or
other specific business reasons after age 65 with ten or more
years of service, will receive annually, during his lifetime, a
fee equal to the annual retainer in effect as of the date of his
retirement or a pro rata amount if his service is less than ten
years.
93
<PAGE>
EXHIBIT
10(iii)(c)
Page 1 of 6
TO: EXECUTIVE VICE PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1994
The bonus plan applying to you for 1994 is outlined herein.
Your bonus potential for 1994 will be divided into two parts.
% of salary will be based on Group Operating results and % of
salary will be based on the bonus awarded to the Chairman's
Office.
GROUP OPERATIONS CONTRACT (applies to % of salary)
1. Should your Operations Groups attain worldwide operating
income of $ , you will receive a bonus of % of
% of your annual salary rate in effect on December 31,
1994.
2. For each $ by which your worldwide operating
income exceeds $ up to $ , you will
receive % of % of your salary. For each $
over $ , you will receive % of % of your
salary.
3. You will receive a bonus for accounts receivable and
inventory turnover (sales divided by the five point
average of total accounts receivable and inventory)
determined in accordance with the following: For
attaining your PGP for accounts receivable and inventory
turnover of , you will receive % of % of your
salary. For each .03 increase in A/R and inventory
turnover, you will receive % of % of your salary.
4. You may receive an additional discretionary award of up to
% of % of your salary. The award will be based upon
your individual achievements and the accomplishments of
your Groups. Any award also will be dependent upon the
Company's overall performance.
94<PAGE>
EXHIBIT
10(iii)(c)
Page 2 of 6
BONUS CONTRACT FOR 1994 - EXECUTIVE VICE PRESIDENT
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of % of your salary. The
maximum bonus award on paragraph (3) will be limited to
% of % of your salary. The maximum bonus award on
paragraph (4) will be limited to % of % of your
salary.
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1)( through (5) will be increased in
accordance with the following schedule:
BONUS EARNED PAR. 1-5
E.P.S. ACHIEVED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
CORPORATE CONTRACT (applies to % of salary)
7. You also will receive a bonus based upon the percentage
bonus awarded to the Chairman's office which will apply to
% of your salary. For example, if the bonus awarded to
the Chairman's office is % of salary, your bonus award
under this paragraph (7) would be % of % of salary.
8. The maximum bonus award for paragraphs (1) through (7)
will be limited to % of your total annual salary rate
in effect on December 31, 1994.
9. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations
to plan in other income and expenses in your financial
income statements, and/or corrections in historical data
during 1994 may necessitate pro rata adjustments in the
above goals and/or actual operating results. Any such
changes will be advised to you in a timely manner.
95 <PAGE>
EXHIBIT
10(iii)(c)
Page 3 of 6
BONUS CONTRACT FOR 1994 - EXECUTIVE VICE PRESIDENT
10. The results will be tabulated by the Corporate Controller's
Office and reflected on Operating Income and Accounts
Receivable and Inventory Reports. For those divisions
having LIFO expense, the impact of LIFO will be included in
both the income and inventory portion of the calculation.
11. It is the present intention of the Company to decide the
amount of bonus for 1994 in February 1995. If the above
objectives are not attained, any bonus award will be made
at the sole discretion of the Company.
12. An illustration is attached of the Operations Group
Contract bonus calculation assuming you achieve your PGP
for Operating Income, exceed your Accounts Receivable and
Inventory PGP and receive a discretionary award for your
accomplishments under paragraph (4).
13. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
96
<PAGE>
EXHIBIT
10(iii)(c)
Page 4 of 6
TO: GROUP PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1994
The bonus plan applying to you for 1994 is outlined below:
1. Should your operating group attain worldwide operating
income of $ , you will receive a bonus of % of
your annual salary rate in effect on December 31, 1994.
2. For each $ by which your worldwide operating
income exceeds $ you will receive % of your
salary.
3. You will receive a bonus for accounts receivable and
inventory turnover (sales divided by the five point
average of total accounts receivable and inventory)
determined in accordance with the following: For
attaining your PGP for accounts receivable and inventory
turnover of ______, you will receive ______% of your
salary. For each .03 increase in A/R and inventory
turnover, you will receive % of your salary.
4. You may receive an additional discretionary award of up to
% of your salary. The award will be based upon your
individual achievements and the accomplishments of your
Group. Your performance related to reengineering of
business processes will be a major factor in determining
the amount of bonus awarded under this paragraph. Any
award also will be dependent upon the Company's overall
performance.
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of your salary. The maximum
bonus award on paragraph (3) will be % of salary. The
maximum bonus award on paragraph (4) will be % of
salary. The maximum award on the sum of paragraphs (1)
through (4) will be limited to % of salary.
97<PAGE>
EXHIBIT
10(iii)(c)
Page 5 of 6
BONUS CONTRACT FOR 1994 - GROUP PRESIDENT
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1) through (5) will be increased in accordance
with the following schedule:
EARNINGS PER
SHARE BONUS % EARNED PAR.1-5
ATTAINED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
7. The maximum bonus award for paragraphs (1) through (6)
will be limited to % of your annual salary rate in
effect on December 31, 1994.
8. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations to
plan in other income and expenses in your financial income
statements, and/or corrections in historical data during
1994 may necessitate pro rata adjustments in the above
goals and/or actual operating results. Any such changes
will be advised as soon as possible.
9. The results will be tabulated by the Corporate Controller's
Office and reflected on Operating Income and Accounts
Receivable and Inventory Reports. For those divisions
having LIFO expense, the impact of LIFO will be included in
both the income and inventory portion of the calculation.
10. It is the present intention of the Company to decide the
amount of bonus for 1994 in February 1995. If the above
objectives are not attained, any bonus award made will be
at the sole discretion of the Company.
98
<PAGE>
EXHIBIT
10(iii)(c)
Page 6 of 6
BONUS CONTRACT FOR 1994 - GROUP PRESIDENT
11. An illustration is attached of the bonus calculation
assuming you achieve your PGP for Operating Income, exceed
your Accounts Receivable and Inventory PGP and receive a
discretionary award for your accomplishments under
paragraph (4).
12. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
99
<PAGE>
EXHIBIT
10(iii)(d)
Page 1 of 1
DESCRIPTION OF BONUS ARRANGEMENT
FOR CHAIRMAN, PRESIDENT AND STAFF
OFFICERS OF INGERSOLL-RAND COMPANY
There is no formal document setting forth this arrangement.
However, as set forth in the Company's 1983 Proxy Statement,
subject to the approval of the Board of Directors which approves
the amount of each award, the Compensation and Benefits Committee
has approved bonus arrangements for the Chairman, President and
other Company officers responsible for staff functions. These
officers may receive bonuses attributable to 1984 dependent upon
the Company's attainment of predetermined earnings per share
goals. The amount of such bonus is discretionary and is subject
to general guidelines as to maximum percentages. Discretionary
bonuses may also be paid in the event that corporate goals are
not met.
100
<PAGE>
EXHIBIT
10(iii)(e)
Page 1 of 13
AGREEMENT
AGREEMENT made as of July 19, 1983, between
INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"),
and (the "Employee"). Unless otherwise
indicated, terms used herein and defined in Schedule A hereto
shall have the meanings assigned to them in said Schedule.
The Company and the Employee agree as follows:
1. OPERATION OF AGREEMENT.
This Agreement shall be effective immediately upon its
execution and shall continue thereafter from year to year unless
terminated as of any anniversary of the date hereof by either
party upon written notice to the other party given at least 60
days, but not more than 90 days, prior to such anniversary date.
None of the provisions of this Agreement, however, shall become
operative unless and until a Change of Control Event has occurred
and, following such a Change of Control Event, this Agreement
shall terminate only upon the expiration of the Employment Term
(as defined below) or as otherwise expressly provided herein,
notwithstanding the first sentence of this paragraph 1.
2. EMPLOYMENT TERM.
The term of employment of the Employee pursuant to this
Agreement (the "Employment Term") shall begin on the date of any
Change of Control Event (the "Effective Date") and shall end on
the earlier of the fifth anniversary of the Effective Date or the
death or Permanent Disability of the Employee.
3. EMPLOYEE'S POSITION AND RESPONSIBILITIES.
The Employee will continue to serve the Company during
the Employment Term as the chief executive officer of the
Company.
101
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EXHIBIT
10(iii)(e)
Page 2 of 13
During the Employment Term the Employee shall devote
his entire business time and attention exclusively to the
business and affairs of the Company and shall use his best
efforts to promote the interests of the Company. The
participation of the Employee in outside directorships and civic
activities not otherwise inconsistent with Company policy shall
not be deemed a violation of this paragraph 3.
4. COMPENSATION AND OTHER BENEFITS.
The Company and the Employee agree that, upon the
occurrence of any Change of Control Event, the Employee shall
receive a basic annual salary, bonus and fringe benefits as
follows:
(a) Basic Annual Salary and Bonus. The Employee's
basic annual salary shall be at a rate not less than the
annual salary being paid to the Employee immediately prior
to the Effective Date, with such increases (but not
decreases) as may be contemplated by any salary adjustment
programs of the Company in effect immediately prior to the
Effective Date and applicable to the Employee and such
further increases as shall be determined from time to time
by the Board of Directors. In addition, the Employee shall
be entitled to receive bonus and other similar management
incentive compensation payments on terms and at levels no
less favorable than the terms and levels of any bonus or
similar management incentive compensation plan or program
applicable to the Employee immediately prior to the
Effective Date, or, if no such plan or program exists at
that time, then in an annual amount not less than the
average of the bonus and other similar management incentive
compensation payments received by (or owing to) the Employee
for the five full fiscal years immediately preceding the
Effective Date.
(b) Fringe Benefits; Business Expenses. The Employee
shall be entitled to participate in any benefit plans and
programs, including but not limited to pension (and
supplemental pension), profit-sharing, stock option, and
insurance plans (including life insurance, medical and
disability income insurance and accident and personal
liability insurance) which were applicable to him
immediately prior to the Effective Date, on terms no less
102
<PAGE>
EXHIBIT
10(iii)(e)
Page 3 of 13
favorable than those in effect immediately prior to the
Effective Date, and at no less than the same benefit levels
then in effect (or shall be entitled to their equivalent),
and to receive all other fringe benefits (or their
equivalent) from time to time in effect for the benefit of
any executive, management or administrative group for which
the employment position then held by the Employee entitles
the Employee to participate. The Company shall provide for
the payment of or reimburse the Employee for all travel and
other out-of-pocket expenses reasonably incurred by him in
the performance of his duties hereunder.
(c) Letter of Credit. If so requested by the Employee
at any time following the Effective Date and a Significant
Transfer, the Company shall obtain promptly, and in any
event within 60 days following such request, an irrevocable
standby letter of credit (the "Letter of Credit") in favor
of the Employee from a commercial bank or trust company in
the United States with capital, surplus and undivided
profits of at least $50,000,000. Such Letter of Credit
shall be in the amount equivalent to the undiscounted amount
of all benefits that may become payable to the Employee
pursuant to paragraph 5(f), determined on the basis of the
Employee's actuarial life expectancy as of the date of the
Employee's request, and shall provide that amounts shall be
paid to the Employee by such bank or trust company upon
certification by the Employee that such amounts are due and
payable hereunder and have not been paid by the Company.
The Company agrees that it will cause the Letter of Credit
to be maintained in full force and effect at all times until
the earlier of (i) the fifteenth anniversary of the
Effective Date, and (ii) the date on which all payments by
the Company that may be required pursuant to paragraph 5(f)
have been made. The Employee acknowledges that nothing
herein is intended to preclude the Company from contesting
the right of the Employee to retain payments received
pursuant to the Letter of Credit. In the event of a final,
nonappealable determination by a court having jurisdiction
that the Employee is not entitled to retain any payment
received pursuant to the Letter of Credit, the Employee
shall promptly reimburse the Company in an amount equal to
such payment and, in the event the Employee fails to so
reimburse the Company, an amount equal to such payment may
be credited by the Company against payments thereafter made
by the Company to the Employee pursuant to paragraph 5(f).
103
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EXHIBIT
10(iii)(e)
Page 4 of 13
(d) Management Incentive Award Plan. The Company and
the Employee further agree that immediately upon the
occurrence of any Change of Control Event, all amounts
theretofore credited to the Employee under the Company's
Management Incentive Award Plan, as amended (the "Incentive
Plan"), shall become fully vested and all such amounts
thereafter credited shall become fully vested immediately
upon such Crediting.
5. PAYMENTS AND BENEFITS UPON TERMINATION.
The Employee shall be entitled to the following
payments and benefits upon Termination:
(a) Salary and Bonus. The Company shall remain liable
for, and shall continue to pay (on the respective payment
dates that the following otherwise would have been payable
except for Termination), for a period of three years
following Termination (or, if Termination occurs more than
24 months after the Effective Date, three years less the
amount of time that elapsed between the expiration of such
24 month period and the date of Termination): (i) the base
annual salary in effect on the date of Termination and an
annual amount equal to the average of the bonuses and
similar management incentive compensation payments received
by (or owing to) the Employee for the five full fiscal years
immediately preceding the Effective Date; minus (ii) any
amount received pursuant to paragraph 5(f) or the Pension
Plans (as defined in paragraph 5(f)) in respect of the
period for which a payment is being made pursuant to clause
(i).
(b) Lump Sum Payment Option. In lieu of the payments
pursuant to paragraph 5(a), the Employee may elect by
written notice to the Company (given at any time prior to
the Effective Date) to receive a lump sum settlement amount,
such amount to be paid by the Company on the thirtieth day
following Termination, equal to the excess of (i) the
discounted value of the base annual salary and bonus or
similar management incentive compensation payments the
Employee would have received under the provisions of
paragraph 5(a) over (ii) the discounted value of any amounts
which the Employee is entitled to receive pursuant to
paragraph 5(f) or the Pension Plans in respect of the
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periods for which payment is made under paragraph 5(b)(i),
determined by discounting such amounts at a rate equal to
the lesser of the rate (on the date of Termination) at which
the Federal Reserve Bank of New York extends short-term
adjustment credits to depository institutions in accordance
with Section 201.3 of Regulation A under the Federal Reserve
Act (or any successor provision) or 10% per annum.
(c) Employee Benefit Plans. The Company shall
continue, for a period equal to the greater of one year
following the date of Termination or the period specified in
the applicable employee benefit plan, to cover the Employee
under those employee benefit plans (including, but not
limited to, pension, life, health and disability coverage,
but not including any severance pay plan or program other
than that provided pursuant to this Agreement) which were
applicable to him on the date of Termination at the same
benefit levels then in effect (or shall provide their
equivalent).
(d) Employee Stock Options and SARs. The Company
shall pay to the Employee, in cash on the thirtieth day
following the date of Termination, an amount equal to the
aggregate market value (measured as of the close of trading
on the date of Termination) of 100% of the Employee's then
outstanding and unpaid stock awards under the Company's
Incentive Stock Plan of 1980 and any substantially similar
plans of the Company hereafter adopted (at which time such
stock awards shall be cancelled and of no further force or
effect). In addition, all options to purchase shares of
Common Stock of the Company ("Common Stock") and all stock
appreciation rights held by the Employee immediately prior
to Termination shall become exercisable at any time on and
after the date of Termination, whether or not otherwise
exercisable in accordance with the terms of the employee
benefit plans pursuant to which such options and stock
appreciation rights were granted.
(e) Savings and Stock Investment Plan. The Company
shall pay to the Employee, in cash as soon as practicable
following the determination thereof, an amount equal to the
value (measured as of the date of Termination) of all
contributions to the Company's Savings and Stock Investment
Plan (and earnings and appreciation attributable thereto)
that theretofore were made by the Company on behalf of the
Employee and are forfeited as a result of the Termination.
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(f) Retirement Benefits. Commencing on the last day
of the calendar month in which Termination occurs, the
Employee shall be entitled to receive, without reduction for
early payment, an amount per month equal to the excess of
(i) such pension benefits as he would have received
commencing on the last day of the calendar month in which
the Employee attained age 65 under the Pension Plan for
Employees of Ingersoll-Rand Company and the supplemental
pension arrangements approved by the Board of Directors of
the Company at a meeting held on November 5, 1975
(collectively, the "Pension Plans"), as in effect
immediately prior to the Effective Date, after crediting the
Employee with five additional Years of Credited Service
(within the meaning of the Pension Plans) or, if less, the
number of full years remaining prior to the Employee's 65th
birthday, over (ii) the benefits to which the Employee is
entitled for such month pursuant to the Pension Plans.
(g) Valuation of Common Stock Equivalents. The
Employee's Common Stock Equivalents under the Incentive Plan
shall, for purposes of payments pursuant thereto, be valued
at the highest of (i) the closing sale price of the Common
Stock on the New York Stock Exchange on the Effective Date,
(ii) the closing sale price of the Common Stock on the New
York Stock Exchange on the date of Termination and (iii) the
highest closing sale price of the Common Stock on the New
York Stock Exchange during the 30 trading days immediately
preceding the acquisition of more than 50% of the
outstanding Common Stock by any person or group (including
affiliates of such person or group). If, as of any
valuation date, the Common Stock is not traded on the New
York Stock Exchange, valuations shall be based on the
closing sale price of the Common Stock on the principal
national securities exchange on which the Common Stock is
traded or, if the Common Stock is not traded on any national
securities exchange, the closing bid price of the Common
Stock in the over-the-counter market.
(h) Waiver. At any time, the Employee may, by written
notice to the Company, waive either or both of (i) the right
to require the Company to obtain the Letter of Credit
pursuant to paragraph 4(c) and (ii) the right to elect a
lump sum settlement pursuant to paragraph 5(b). Any such
waiver shall be irrevocable and shall relieve the Company of
any obligation to obtain such Letter of Credit or to make
such lump sum settlement, as the case may be.
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(i) Mitigation. Subject to paragraph 4(c), all
payments or benefits required by the terms of this paragraph
5 shall be made or provided without offset, deduction, or
mitigation on account of income the Employee may receive
from other employment or otherwise.
(j) Death of the Employee. In the event of the
Employee's death subsequent to Termination, all payments
called for hereunder shall be paid to the Employee's
designated beneficiary or beneficiaries, or to his estate if
he has not designated a beneficiary or beneficiaries.
6. ACCELERATION.
All payments due or required to be made to the Employee
under this Agreement shall become immediately due and payable
without any offset, deduction or mitigation on account of any
income the Employee may receive from other employment or
otherwise (but subject to paragraph 4(c)), and without further
notice or demand, upon the occurrence of any of the following
events of default: (i) the failure of the Company to make any
such payment when due or as accelerated, which failure continues
for five days after the due date thereof; or (ii) (A) the filing
of a petition by or against the Company for adjudication as a
bankrupt under the Bankruptcy Reform Act, as now or hereafter
amended or supplemented, or for reorganization within the meaning
of Chapter 11 of Title 11 of the United States Code, or the
filing of any petition for similar relief, (B) the commencement
of any action or proceeding for the appointment of a receiver or
a trustee of all or substantially all the property of the
Company, (C) the taking of possession of any property of the
Company by any governmental or judicial officer or agency
pursuant to statutory authority for the dissolution,
rehabilitation, reorganization, or liquidation of the Company,
(D) the dissolution or the commencement of any action or
proceeding, whether voluntary or involuntary, for the dissolution
or liquidation of the Company, or (E) the making by the Company
of any assignment for the benefit of creditors; provided that the
Company shall have ninety days within which to effect the
dismissal of any involuntary proceeding of a type referred to
above that is commenced against it. In the event of any
acceleration in accordance with this paragraph 6, the Employee
shall thereupon be released, relieved and discharged of any and
all future obligations under this Agreement other than those
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provided in paragraph 8 herein. If any provision of this
Agreement causes any payment or benefit to become subject to
Federal income tax prior to the date on which such payment or
benefit is payable to the Employee, then any such payment or
benefit becoming so taxable shall be paid to the Employee
promptly following receipt of a notice of proposed deficiency
from the Internal Revenue Service that tax is due on such unpaid
payment or benefit.
7. VESTED BENEFITS.
Except to the extent expressly provided herein, no
provision of this Agreement shall affect or limit any interests
or rights vested in the Employee under any other agreement or
arrangement with the Employee or under any pension,
profit-sharing, insurance or other benefit plans of the Company
which may be in effect and in which the Employee may be
participating at any time.
8. CONFIDENTIALITY.
The Employee agrees to hold in confidence any and all
confidential information known to him concerning the Company and
its businesses so long as such information is not otherwise
publicly disclosed.
9. NON-COMPETITION.
During the Employment Term, the Employee will not,
without the prior written consent of the Company, accept
employment as an officer, employee, agent or consultant of a
business that is directly competitive within any metropolitan
area to the business of the Company. Nothing contained herein,
however, shall prohibit the Employee from investing in any
securities of the Company without limitation as to value or
amount, or of any other entity in amounts not exceeding five
percent of any single class of such securities outstanding.
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10. MISCELLANEOUS.
(a) Legal Expenses. The Company shall pay all costs
and expenses, including attorneys' fees, of the Company and,
at least quarterly, the Employee, in connection with any
legal proceedings, whether or not instituted by the Company,
relating to the interpretation or enforcement of this
Agreement. In the event that the provisions of this
paragraph shall be determined to be invalid or unenforceable
in any respect, such declaration shall not affect the
remaining provisions of this Agreement, which shall continue
in full force and effect.
(b) Notices. Any notice or other communication
provided for in this Agreement or contemplated hereby shall
be sufficiently given if given in writing and delivered by
certified mail, return receipt requested, and addressed, in
the case of the Company, to the Company at:
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07675
Attention: Chairman of the Board of Directors
and, in the case of the Employee, to the Employee at:
Either party may designate a different address by giving
notice of change of address in the manner provided above.
(c) Waiver. No waiver or modification in whole or in
part of this Agreement, or any term or condition hereof,
shall be effective against any party unless in writing and
duly signed by the party sought to be bound. Any waiver of
any breach of any provision hereof or any right or power by
any party on one occasion shall not be construed as a waiver
of, or a bar to, the exercise of such right or power on any
other occasion or as a waiver of any subsequent breach.
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(d) Binding Effect; Successors. This Agreement shall
be binding upon and shall inure to the benefit of the
Company and the Employee and their respective heirs, legal
representatives, successors and assigns. If the Company
shall be merged into or consolidated with another entity,
the provisions of this Agreement shall be binding upon and
inure to the benefit of the entity surviving such merger or
resulting from such consolidation. The Company will require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. The provisions of this paragraph shall continue to
apply to each subsequent employer of the Employee hereunder
in the event of any subsequent merger, consolidation or
transfer of assets of such subsequent employer.
(e) Controlling Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New Jersey applicable to contracts made and to be performed
therein.
IN WITNESS WHEREOF, the Company and the Employee have
executed this Agreement as of the day and year first above
written.
INGERSOLL-RAND COMPANY
By _______________________
_______________________
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Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context
requires a different meaning, the following terms have the
meanings indicated:
"Change of Control Event" means any one of the
following: (a) a change is proposed by the stockholders of the
Company as to the number of members, or incumbent membership, of
the Company's Board of Directors such that the incumbent members
of said Board of Directors immediately prior to such change would
no longer constitute at least two-thirds of the Board of
Directors after such change and such proposal is enacted; or the
Board of Directors as constituted immediately prior to any action
by the Company's stockholders with respect to such proposal
determines that such proposal, if enacted, would constitute a
change in control of the Company and such proposal is enacted;
(b) any determination is made by the Board of Directors of the
Company that there has been a change in the control of the
Company because a person (as such term is used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the Exchange
Act)), together with its affiliates (as such term is defined in
Rule 12b-2 of the General Rules and Regulations under the
Exchange Act), has become, at any date hereafter, the beneficial
owner (as such term is defined in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act), directly or indirectly,
of 5% or more of the voting power of the Company's then
outstanding securities; (c) any person (other than any employee
stock ownership trust or similar entity created by the Company
for the benefit of its employees), together with its affiliates,
has become, at any date hereafter, the beneficial owner, directly
or indirectly, of 20% or more of the voting power of the
Company's then outstanding securities entitled generally to vote
for the election of the Company's directors; or (d) the approval
by the stockholders of the Company of the merger or consolidation
of the Company with any other corporation, unless the incumbent
members of the Board of Directors of the Company as constituted
immediately prior to such merger or consolidation shall
constitute at least a majority of the directors of the surviving
corporation of such merger or consolidation and any parent (as
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such term is defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act) of such corporation. Any
determination of the occurrence of any Change of Control Event
made in good faith by the Board of Directors of the Company, on
the basis of information available at the time to it, shall be
conclusive and binding on the Employee for all purposes of this
Agreement.
"Cause" means willful misconduct on the part of the
Employee that is materially detrimental to the Company as
determined in good faith by the Company's Board of Directors.
"Good Reason" means (a) any assignment to the Employee
of any duties other than those contemplated by, or any limitation
of the responsibilities of the Employee in any respect not
contemplated by, paragraph 3 and the continuance thereof for a
period of thirty days after written notice from the Employee, (b)
any failure to pay, or any reduction of, the Employee's
compensation or other benefits provided for in paragraph 4(a) or
4(b), (c) the relocation of the principal place of the Employee's
employment to a location that is more than 35 miles further from
the Employee's residence than such principal place of employment
immediately prior to the Effective Date, or the imposition of
travel requirements on the Employee not substantially consistent
with such travel requirements existing immediately prior to the
Effective Date, (d) the failure of the Company to obtain the
assumption of, and the agreement to perform, this Agreement by
any successor as contemplated in paragraph 11(d), (e) the failure
of the Company to perform any of its obligations under paragraph
4(c), or (f) the failure of the Company to perform any of its
other obligations under this Agreement and the continuation of
such failure for a period of thirty days after written notice
from the Employee.
"Permanent Disability", as applied to the Employee,
means that (a) he has been totally incapacitated by bodily injury
or disease so as to be prevented thereby from engaging in any
occupation or employment for remuneration or profit, (b) such
total incapacity shall have continued for a period of six
consecutive months and (c) such total incapacity will, in the
opinion of a qualified physician, be permanent and continuous
during the remainder of the Employee's life.
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"Significant Transfer" means the sale, lease, transfer
or other disposition during any two consecutive fiscal years by
the Company (including subsidiaries thereof), in one or more
transactions (excluding transactions in the ordinary course of
business), of assets having an aggregate net book value in excess
of 15% of the Company's shareowners' equity as of the
commencement of such two-year period.
"Termination" means the termination of the Employment
Term following the occurrence of any Change of Control Event,
upon ten days' prior written notice, by the Employee for Good
Reason or by the Company without Cause; provided, that such term
shall not include any termination of the Employment Term as a
result of the death or Permanent Disability of the Employee.
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AGREEMENT
AGREEMENT made as of July 19, 1983, between
INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"),
and (the "Employee"). Unless otherwise
indicated, terms used herein and defined in Schedule A hereto
shall have the meanings assigned to them in said Schedule.
The Company and the Employee agree as follows:
1. OPERATION OF AGREEMENT.
This Agreement shall be effective immediately upon its
execution and shall continue thereafter from year to year unless
terminated as of any anniversary of the date hereof by either
party upon written notice to the other party given at least 60
days, but not more than 90 days, prior to such anniversary date.
None of the provisions of this Agreement shall become operative
unless and until a Change of Control Event has occurred and,
following such a Change of Control Event, this Agreement shall
terminate only upon the expiration of the Employment Term (as
defined below) or as otherwise expressly provided herein,
notwithstanding the first sentence of this paragraph 1.
2. EMPLOYMENT TERM.
The term of employment of the Employee pursuant to this
Agreement (the "Employment Term") shall begin on the date of any
Change of Control Event (the "Effective Date") and shall end on
the earlier of the fifth anniversary of the Effective Date or the
death or Permanent Disability of the Employee.
3. EMPLOYEE'S POSITION AND RESPONSIBILITIES.
The Employee will continue to serve the Company during
the Employment Term in the same capacity as he serves the Company
immediately prior thereto, or in such other comparable executive,
administrative or management capacities, requiring substantially
equivalent expertise and responsibility, as the Board of
Directors or chief executive officer of the Company shall
determine and deem suitable and in the best interests of the
Company.
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During the Employment Term the Employee shall devote
his entire business time and attention exclusively to the
business and affairs of the Company and shall use his best
efforts to promote the interests of the Company. The
participation of the Employee in outside directorships and civic
activities not otherwise inconsistent with Company policy shall
not be deemed a violation of this paragraph 3.
4. COMPENSATION AND OTHER BENEFITS.
The Company and the Employee agree that, upon the
occurrence of any Change of Control Event, the Employee shall
receive a basic annual salary, bonus and fringe benefits as
follows:
(a) Basic Annual Salary and Bonus. The Employee's
basic annual salary shall be at a rate not less than the
annual salary being paid to the Employee immediately prior
to The Effective Date, with such increases (but not
decreases) as may be contemplated by any salary adjustment
programs of the Company in effect immediately prior to the
Effective Date and applicable to the Employee and such
further increases as shall be determined from time to time
by the Board of Directors. In addition, the Employee shall
be entitled to receive bonus and other similar management
incentive compensation payments on terms and at levels no
less favorable than the terms and levels of any bonus or
similar management incentive compensation plan or program
applicable to the Employee immediately prior to the
Effective Date, or, if no such plan or program exists at
that time, then in an annual amount not less than the
average of the bonus and other similar management incentive
compensation payments received by (or owing to) the Employee
for the five full fiscal years immediately preceding the
Effective Date.
(b) Fringe Benefits; Business Expenses. The Employee
shall be entitled to participate in any benefit plans and
programs, including but not limited to pension (and
supplemental pension), profit-sharing, stock option, and
insurance plans (including life insurance, medical and
disability income insurance and accident and personal
liability insurance) which were applicable to him
immediately prior to the Effective Date, on terms no less
favorable than those in effect immediately prior to the
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Effective Date, and at no less than the same benefit levels
then in effect (or shall be entitled to their equivalent),
and to receive all other fringe benefits (or their
equivalent) from time to time in effect for the benefit of
any executive, management or administrative group for which
the employment position then held by the Employee entitles
the Employee to participate. The Company shall provide for
the payment of or reimburse the Employee for all travel and
other out-of-pocket expenses reasonably incurred by him in
the performance of his duties hereunder.
(c) Letter of Credit. If so requested by the Employee
at any time following the Effective Date and a Significant
Transfer, the Company shall obtain promptly, and in any
event within 60 days following such request, an irrevocable
standby letter of credit (the "Letter of Credit") in favor
of the Employee from a commercial bank or trust company in
the United States with capital, surplus and undivided
profits of at least $50,000,000. Such Letter of Credit
shall be in the amount equivalent to the undiscounted amount
of all benefits that may become payable to the Employee
pursuant to paragraph 5(f), determined on the basis of the
Employee's actuarial life expectancy as of the date of the
Employee's request, and shall provide that amounts shall be
paid to the Employee by such bank or trust company upon
certification by the Employee that such amounts are due and
payable hereunder and have not been paid by the Company.
The Company agrees that it will cause the Letter of Credit
to be maintained in full force and effect at all times until
the earlier of (i) the fifteenth anniversary of the
Effective Date, and (ii) the date on which all payments by
the Company that may be required pursuant to paragraph 5(f)
have been made. The Employee acknowledges that nothing
herein is intended to preclude the Company from contesting
the right of the Employee to retain payments received
pursuant to the Letter of Credit. In the event of a final,
nonappealable determination by a court having jurisdiction
that the Employee is not entitled to retain any payment
received pursuant to the Letter of Credit, the Employee
shall promptly reimburse the Company in an amount equal to
such payment and, in the event the Employee fails to so
reimburse the Company, an amount equal to such payment may
be credited by the Company against payments thereafter made
by the Company to the Employee pursuant to paragraph 5(f).
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(d) Management Incentive Award Plan. The Company and
the Employee further agree that immediately upon the
occurrence of any Change of Control Event, all amounts
theretofore credited to the Employee under the Company's
Management Incentive Award Plan, as amended (the "Incentive
Plan"), shall become fully vested and all such amounts
thereafter credited shall become fully vested immediately
upon such crediting.
5. PAYMENTS AND BENEFITS UPON TERMINATION.
Upon any Termination of the Employment Term (other than
by the Company for Cause or as a result of the death or Permanent
Disability of the Employee), the Employee's Common Stock
Equivalents under the Incentive Plan shall, for purposes of
payments pursuant thereto, be valued at the highest of (i) the
closing sale price of the Common Stock on the New York Stock
Exchange on the Effective Date, (ii) the closing sale price of
the Common Stock on the New York Stock Exchange on the date of
Termination and (iii) the highest closing sale price of the
Common Stock on the New York Stock Exchange during the 30 trading
days immediately preceding the acquisition of more than 50% of
the outstanding Common Stock by any person or group (including
affiliates of such person or group). If, as of any valuation
date, the Common Stock is not traded on the New York Stock
Exchange, valuations shall be based on the closing sale price of
the Common Stock on the principal national securities exchange on
which the Common Stock is traded or, if the Common Stock is not
traded on any national securities exchange, the closing bid price
of the Common Stock in the over-the-counter market.
The Employee shall be entitled to the following
payments and benefits upon Termination:
(a) Salary and Bonus. The Company shall remain liable
for, and shall continue to pay (on the respective payment
dates that the following otherwise would have been payable
except for Termination), for a period of three years
following Termination (or, if Termination occurs more than
24 months after the Effective Date, three years less the
amount of time that elapsed between the expiration of such
24 month period and the date of Termination): (i) the base
annual salary in effect on the date of Termination and an
annual amount equal to the average of the bonuses and
similar management incentive compensation payments received
by (or owing to) the Employee for the five full fiscal
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years immediately preceding the Effective Date; minus (ii)
any amount received pursuant to paragraph 5(f) or the
Pension Plans (as defined in paragraph 5(f)) in respect of
the period for which a payment is being made pursuant to
clause (i).
(b) Lump Sum Payment Option. In lieu of the payments
pursuant to paragraph 5(a), the Employee may elect by
written notice to the Company (given at any time prior to
notice of termination of the Employment Term by the Company
or the occurrence of any event entitling the Employee to
terminate the Employment Term for Good Reason) to receive a
lump sum settlement amount, such amount to be paid by the
Company on the thirtieth day following Termination, equal to
the excess of (i) the discounted value of the base annual
salary and bonus or similar management incentive
compensation payments the Employee would have received under
the provisions of paragraph 5(a) over (ii) the discounted
value of any amounts which the Employee is entitled to
receive pursuant to paragraph 5(f) or the Pension Plans in
respect of the periods for which payment is made under
paragraph 5(b)(i), determined by discounting such net
payments at a rate equal to the lesser of the rate (on the
date of Termination) at which the Federal Reserve Bank of
New York extends short-term adjustment credits to depository
institutions in accordance with Section 201.3 of Regulation
A under the Federal Reserve Act (or any successor provision)
or 10% per annum.
(c) Employee Benefit Plans. The Company shall
continue, for a period equal to the greater of one year
following the date of Termination or the period specified in
the applicable employee benefit plan, to cover the Employee
under those employee benefit plans (including, but not
limited to, pension, life, health and disability coverage,
but not including any severance pay plan or program other
than that provided pursuant to this Agreement) which were
applicable to him on the date of Termination at the same
benefit levels then in effect (or shall provide their
equivalent).
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(d) Employee Stock Options and SARs. The Company
shall pay to the Employee, in cash on the thirtieth day
following the date of Termination, an amount equal to the
aggregate market value (measured as of the close of trading
on the date of Termination) of 100% of the Employee's then
outstanding and unpaid stock awards under the Company's
Incentive Stock Plan of 1980 and any substantially similar
plans of the Company hereafter adopted (at which time such
stock awards shall be cancelled and of no further force or
effect). In addition, all options to purchase shares of
Common Stock of the Company ("Common Stock") and all stock
appreciation rights held by the Employee immediately prior
to Termination shall become exercisable at any time on and
after the date of Termination, whether or not otherwise
exercisable in accordance with the terms of the employee
benefit plans pursuant to which such options and stock
appreciation rights were granted.
(e) Savings and Stock Investment Plan. The Company
shall pay to the Employee, in cash as soon as practicable
following the determination thereof, an amount equal to the
value (measured as of the date of Termination) of all
contributions to the Company's Savings and Stock Investment
Plan (and earnings and appreciation attributable thereto)
that theretofore were made by the Company on behalf of the
Employee and are forfeited as a result of the Termination.
(f) Retirement Benefits. Commencing on the last day
of the calendar month in which the Employee attains age 55,
the Employee shall be entitled to receive, without reduction
for early payment, an amount per month equal to the excess
of (i) such pension benefits as he would have received
commencing on the last day of the calendar month in which
the Employee attained age 65 under the Pension Plan for
Employees of Ingersoll-Rand Company and the supplemental
pension arrangements approved by the Board of Directors of
the Company at a meeting held on November 5, 1975
(collectively, the "Pension Plans"), as in effect
immediately prior to the Effective Date, after crediting the
Employee with five additional Years of Credited Service
(within the meaning of the Pension Plans) or, if less, the
number of full years remaining prior to the Employee's 65th
birthday, over (ii) the benefits to which the Employee is
entitled for such month pursuant to the Pension Plans.
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(g) Waiver. At any time, the Employee may, by a
written notice to the Company, waive either or both of (i)
the right to require the Company to obtain the Letter of
Credit pursuant to paragraph 4(c) and (ii) the right to
elect a lump sum settlement pursuant to paragraph 5(b). Any
such waiver shall be irrevocable and shall relieve the
Company of any obligation to obtain such Letter of Credit or
to make such lump sum settlement, as the case may be.
(h) Mitigation. Subject to paragraph 4(c), all
payments or benefits required by the terms of this paragraph
5 shall be made or provided without offset, deduction, or
mitigation on account of income the Employee may receive
from other employment or otherwise.
(i) Death of the Employee. In the event of the
Employee's death subsequent to Termination, all payments
called for hereunder shall be paid to the Employee's
designated beneficiary or beneficiaries, or to his estate if
he has not designated a beneficiary or beneficiaries.
6. ACCELERATION.
All payments due or required to be made to the Employee
under this Agreement shall become immediately due and payable
without any offset, deduction or mitigation on account of any
income the Employee may receive from other employment or
otherwise (but subject to paragraph 4(c)), and without further
notice or demand, upon the occurrence of any of the following
events of default: (i) the failure of the Company to make any
such payment when due or as accelerated, which failure continues
for five days after the due date thereof; or (ii) (A) the filing
of a petition by or against the Company for adjudication as a
bankrupt under the Bankruptcy Reform Act, as now or hereafter
amended or supplemented, or for reorganization within the meaning
of Chapter 11 of Title 11 of the United States Code, or the
filing of any petition for similar relief, (B) the commencement
of any action or proceeding for the appointment of a receiver or
a trustee of all or substantially all the property of the
Company, (C) the taking of possession of any property of the
Company by any governmental or judicial officer or agency
pursuant to statutory authority for the dissolution,
rehabilitation, reorganization, or liquidation of the Company,
(D) the dissolution or the commencement of any action or
proceeding, whether voluntary or involuntary, for the dissolution
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or liquidation of the Company, or (E) the making by the Company
of any assignment for the benefit of creditors; provided that the
Company shall have ninety days within which to effect the
dismissal of any involuntary proceeding of a type referred to
above that is commenced against it. In the event of any
acceleration in accordance with this paragraph 6, the Employee
shall thereupon be released, relieved and discharged of any and
all future obligations under this Agreement other than those
provided in paragraph 8 herein. If any provision of this
Agreement causes any payment or benefit to become subject to
Federal income tax prior to the date on which such payment or
benefit is payable to the Employee, then any such payment or
benefit becoming so taxable shall be paid to the Employee
promptly following receipt of a notice of proposed deficiency
from the Internal Revenue Service that tax is due on such unpaid
payment or benefit.
7. VESTED BENEFITS.
Except to the extent expressly provided herein, no
provision of this Agreement shall affect or limit any interests
or rights vested in the Employee under any other agreement or
arrangement with the Employee or under any pension,
profit-sharing, insurance or other benefit plans of the Company
which may be in effect and in which the Employee may be
participating at any time.
8. CONFIDENTIALITY.
The Employee agrees to hold in confidence any and all
confidential information known to him concerning the Company and
its businesses so long as such information is not otherwise
publicly disclosed.
9. NON-COMPETITION.
During the Employment Term, the Employee will not,
without the prior written consent of the Company, accept
employment as an officer, employee, agent or consultant of a
business that is directly competitive within any metropolitan
area to the business of the Company. Nothing contained herein,
however, shall prohibit the Employee from investing in any
securities of the Company without limitation as to value or
amount, or of any other entity in amounts not exceeding five
percent of any single class of such securities outstanding.
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10. MISCELLANEOUS.
(a) Legal Expenses. The Company shall pay all costs
and expenses, including attorneys' fees, of the Company and,
at least quarterly, the Employee, in connection with any
legal proceedings, whether or not instituted by the Company,
relating to the interpretation or enforcement of this
Agreement. In the event that the provisions of this
paragraph shall be determined to be invalid or unenforceable
in any respect, such declaration shall not affect the
remaining provisions of this Agreement, which shall continue
in full force and effect.
(b) Notices. Any notice or other communication
provided for in this Agreement or contemplated hereby shall
be sufficiently given if given in writing and delivered by
certified mail, return receipt requested, and addressed, in
the case of the Company, to the Company at:
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07675
Attention: Chairman of the Board of Directors
and, in the case of the Employee, to the Employee at:
Either party may designate a different address by giving
notice of change of address in the manner provided above.
(c) Waiver. No waiver or modification in whole or in
part of this Agreement, or any term or condition hereof,
shall be effective against any party unless in writing and
duly signed by the party sought to be bound. Any waiver of
any breach of any provision hereof or any right or power by
any party on one occasion shall not be construed as a waiver
of, or a bar to, the exercise of such right or power on any
other occasion or as a waiver of any subsequent breach.
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(d) Binding Effect; Successors. This Agreement shall
be binding upon and shall inure to the benefit of the
Company and the Employee and their respective heirs, legal
representatives, successors and assigns. If the Company
shall be merged into or consolidated with another entity,
the provisions of this Agreement shall be binding upon and
inure to the benefit of the entity surviving such merger or
resulting from such consolidation. The Company will require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. The provisions of this paragraph shall continue to
apply to each subsequent employer of the Employee hereunder
in the event of any subsequent merger, consolidation or
transfer of assets of such subsequent employer.
(e) Controlling Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New Jersey applicable to contracts made and to be performed
therein.
IN WITNESS WHEREOF, the Company and the Employee have
executed this Agreement as of the day and year first above
written.
INGERSOLL-RAND COMPANY
By /S/ Thomas A. Holmes
Thomas A. Holmes
Chairman of the Board
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Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context
requires a different meaning, the following terms have the
meanings indicated:
"Change of Control Event" means any one of the
following: (a) a change is proposed by the stockholders of the
Company as to the number of members, or incumbent membership, of
the Company's Board of Directors such that the incumbent members
of said Board of Directors immediately prior to such change would
no longer constitute at least two-thirds of the Board of
Directors after such change and such proposal is enacted; or the
Board of Directors as constituted immediately prior to any action
by the Company's stockholders with respect to such proposal
determines that such proposal, if enacted, would constitute a
change in control of the Company and such proposal is enacted;
(b) any determination is made by the Board of Directors of the
Company that there has been a change in the control of the
Company because a person (as such term is used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the Exchange
Act)), together with its affiliates (as such term is defined in
Rule 12b-2 of the General Rules and Regulations under the
Exchange Act), has become, at any date hereafter, the beneficial
owner (as such term is defined in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act), directly or indirectly,
of 5% or more of the voting power of the Company's then
outstanding securities; (c) any person (other than any employee
stock ownership trust or similar entity created by the Company
for the benefit of its employees), together with its affiliates,
has become, at any date hereafter, the beneficial owner, directly
or indirectly, of 20% or more of the voting power of the
Company's then outstanding securities entitled generally to vote
for the election of the Company's directors; or (d) the approval
by the stockholders of the Company of the merger or consolidation
of the Company with any other corporation, unless the incumbent
members of the Board of Directors of the Company as constituted
immediately prior to such merger or consolidation shall
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constitute at least a majority of the directors of the surviving
corporation of such merger or consolidation and any parent (as
such term is defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act) of such corporation. Any
determination of the occurrence of any Change of Control Event
made in good faith by the Board of Directors of the Company, on
the basis of information available at the time to it, shall be
conclusive and binding on the Employee for all purposes of this
Agreement.
"Cause" means willful misconduct on the part of the
Employee that is materially detrimental to the Company as
determined in good faith by the Company's Board of Directors.
"Good Reason" means (a) any assignment to the Employee
of any duties other than those contemplated by, or any limitation
of the responsibilities of the Employee in any respect not
contemplated by, paragraph 3 and the continuance thereof for a
period of thirty days after written notice from the Employee, (b)
any failure to pay, or any reduction of, the Employee's
compensation or other benefits provided for in paragraph 4(a) or
4(b), (c) the relocation of the principal place of the Employee's
employment to a location that is more than 35 miles further from
the Employee's residence than such principal place of employment
immediately prior to the Effective Date, or the imposition of
travel requirements on the Employee not substantially consistent
with such travel requirements existing immediately prior to the
Effective Date, (d) the failure of the Company to obtain the
assumption of, and the agreement to perform, this Agreement by
any successor as contemplated in paragraph 11(d), (e) the failure
of the Company to perform any of its obligations under paragraph
4(c), or (f) the failure of the Company to perform any of its
other obligations under this Agreement and the continuation of
such failure for a period of thirty days after written notice
from the Employee.
"Permanent Disability", as applied to the Employee,
means that (a) he has been totally incapacitated by bodily injury
or disease so as to be prevented thereby from engaging in any
occupation or employment for remuneration or profit, (b) such
total incapacity shall have continued for a period of six
consecutive months and (c) such total incapacity will, in the
opinion of a qualified physician, be permanent and continuous
during the remainder of the Employee's life.
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"Significant Transfer" means the sale, lease, transfer
or other disposition during any two consecutive fiscal years by
the Company (including subsidiaries thereof), in one or more
transactions (excluding transactions in the ordinary course of
business), of assets having an aggregate net book value in excess
of 15% of the Company's shareowners' equity as of the
commencement of such two-year period.
"Termination" means the termination of the Employment
Term following the occurrence of any Change of Control Event,
upon ten days' prior written notice, by the Employee for Good
Reason or by the Company without Cause; provided, that such term
shall not include any termination of the Employment Term as a
result of the death or Permanent Disability of the Employee.
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INGERSOLL-RAND COMPANY
RESTATED EXECUTIVE SUPPLEMENTARY RETIREMENT AGREEMENT
THIS AGREEMENT, effective as of the 2nd day of April,
1985, is by and between the Ingersoll-Rand Company of Woodcliff
Lake, New Jersey, hereinafter called the Company, and
, hereinafter called the Employee (certain
other definitions are defined in Schedule A, incorporated herein
by reference).
WHEREAS, the Company values the efforts, abilities and
accomplishments of the Employee as an important member of
management and recognizes that his future services are vital to
its continued growth and profits, and the Company in order to
retain the services of the Employee is willing to provide
benefits for him or for his designated beneficiary as set out
below,
WHEREAS, the Employee was heretofore eligible to
purchase life insurance coverage equal to times his
current salary and average incentive compensation for the most
recent five years under the Company's existing life insurance
plan, and as of January 1, 1985, his eligibility thereunder was
changed to two times said salary and incentive compensation base,
NOW, THEREFORE, it is mutually agreed that:
1. Subject to paragraph 5 hereof, the Company shall,
unless the Employee's employment has been terminated for "Cause",
pay the Employee (or in the event of the Employee's death, to his
beneficiary) the sum of in 120 equal monthly
installments. Such payments shall commence as of the first day
of the month following the month when the Employee attains age
65, or if later, upon termination of his employment.
2. If the Employee dies prior to commencement of
payments hereunder, the Company shall pay the sum of in
120 equal monthly installments to the beneficiary of the
Employee. The death benefit paid pursuant to this paragraph 2
shall commence as of the first day of the month following the
Employee's date of death.
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3. If the Employee becomes "Disabled" while employed
by the Company prior to commencement of payments hereunder, the
Company shall pay the sum of in 120 equal monthly
installments to the Employee (or in the event of the Employee's
death, to his beneficiary). Such payments shall terminate if the
Employee recovers from such disability, and following such
recovery, any eligibility for benefits which he might then or
subsequently have under paragraph 1 or 2 of this Agreement shall
be subject to the limitation contained in paragraph 4 below.
The disability benefit paid pursuant to this paragraph 3 shall
commence as of the first day of the month in which the Employee
becomes Disabled.
4. In no event shall the Employee, if he becomes
eligible for a benefit under paragraph 3, receive any benefit
under paragraphs 1 or 2 of the Agreement while a benefit is being
paid under paragraph 3. In no event shall the total payments
made by the Company to the Employee (and his beneficiary) under
paragraphs 1, 2, and 3 of this Agreement exceed the sum of .
5. In the event that an Employee who voluntarily
terminated employment with the Company (other than for "Good
Reason") engages in "Competition" with the Company within three
years after such termination of employment, no further benefits
shall be payable hereunder.
6. The Employee may designate a beneficiary in writing
to receive the benefits payable pursuant to this Agreement. Such
beneficiary may be changed by the Employee from time to time by
written notice delivered by the Employee to the Company. If no
designated beneficiary survives the Employee, any payments
pursuant to this Agreement made subsequent to the Employee's
death shall be made to the Employee's estate.
7. Neither the Employee nor any designated beneficiary
shall have any right to sell, assign, transfer or otherwise
convey the right to receive any payments hereunder.
8. Any payments under this Agreement shall be
independent of, and in addition to, those under any other plan,
program or agreement which may be in effect between the parties
hereto, or any other compensation payable to the Employee by the
Company. This Agreement shall not be construed as a contract of
employment nor does it restrict the right of the Company to
discharge the Employee or the right of the Employee to terminate
employment.
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9. The Company shall be under no obligation whatsoever
to purchase or maintain any contract, policy, or other asset to
provide the benefits under this Agreement. Furthermore, any
contract, policy or other asset which the Company may utilize to
assure itself of the funds to provide the benefits hereunder
shall not serve in any way as security to the Employee for the
Company's performance under this Agreement. The rights accruing
to the Employee or his designated beneficiary shall be solely
those of an unsecured creditor of the Company. The law of the
State of New Jersey shall govern this Agreement.
10. The Company agrees that it will not merge,
consolidate, or combine with any other business entity unless and
until the succeeding or continuing corporation or business entity
expressly assumes and confirms in writing the obligations of the
Company to the Employee under this Agreement.
11. This restated Agreement supersedes and restates
the Executive Supplemental Retirement Agreement of same date and
may not be amended except by a written agreement signed by the
Company and the Employee.
12. Where appropriate in this Agreement, words used in
the singular shall include the plural and words used in the
masculine shall include the feminine.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement effective as of the day and year first hereinabove
written.
______________________
Employee
Ingersoll-Rand Company
______________________
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Schedule A
Certain Definitions
As used in this Agreement, the following terms have the
meanings indicated:
"Cause" shall be limited to (a) action by the Employee
involving willful criminal misconduct, or (b) the Employee being
convicted of a felony, in each case having a material adverse
effect on the Company.
"Competition" shall mean performance, without the prior
written consent of the Company, of services as an officer,
employee, agent or consultant in a business that is directly
competitive with any business of the Company with respect to
which the Employee had responsibility while he was employed by
the Company.
"Disabled" as applied to the Employee, means that (a)
he has been totally incapacitated by bodily injury or disease so
as to be prevented thereby from engaging in any occupation or
employment for remuneration or profit, (b) such total incapacity
shall have continued for a period of six consecutive months and
(c) such total incapacity will, in the opinion of a qualified
physician, be permanent and continuous during the remainder of
the Employee's life.
"Good Reason" shall mean any of the following (without
the Employee's express prior written consent):
(i) The assignment to the Employee by the Company of
duties inconsistent with the Employee's positions immediately
prior to such assignment, duties, responsibilities, titles or
offices or any removal of the Employee from or any failure to
re-elect the Employee to any of such positions, except in
connection with the termination of the Employee's employment for
Cause, Disability, or as a result of the Employee's death or by
the Employee other than for Good Reason;
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(ii) A reduction by the Company of the Employee's base
salary as in effect at the date hereof or as the same may have
been increased prior to such reduction;
(iii) A failure by the Company to continue any bonus
plans in which the Employee may be entitled to participate during
employment (the "Bonus Plans") (provided that such plans may be
modified from time to time but shall be deemed terminated if they
do not remain substantially in the forms in effect when such
plans are adopted) or plans providing the Employee with
substantially similar benefits ("Substitute Plans"), or a failure
by the Company to continue the Employee as a participant in the
Bonus Plans or the Substitute Plans on at least the same basis as
the Employee participates at the dates of adoption of the Bonus
Plans or Substitute Plans, respectively;
(iv) A relocation of the Company's principal executive
offices to a location that is more than 35 miles farther from the
Employee's residence at the date hereof or the Company's
requiring the Employee to be based anywhere other than the
location at which the Employee at the date hereof performs the
Employee's duties, except for required travel on the Company's
business to an extent substantially consistent with the
Employee's business travel obligations at the date hereof or any
adverse change in the office assignment or secretarial and other
support accorded to the Employee at the date hereof;
(v) A failure by the Company to continue in effect any
benefit or compensation plan or stock option plan (including any
pension, profit sharing, bonus, life insurance, health,
accidental death or dismemberment or disability plan) in which
the Employee is participating at the date hereof (or in the case
of plans adopted after the date hereof and providing a type of
benefit not provided by the Company at the date hereof, at the
respective dates of adoption of such plans) or plans providing
the Employee with substantially similar benefits or the taking of
any action by the Company which would adversely affect the
Employee's participation in or reduce the Employee's benefits
under any of such plans;
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(vi) The taking of any action of the Company which
would deprive the Employee of any material fringe benefit enjoyed
by the Employee at the date hereof (or in the case of a fringe
benefit not provided by the Company on date hereof, at the
respective dates of adoption of such plans first providing such
fringe benefits) or the failure by the Company to provide the
Employee with the number of paid vacation days to which the
Employee is entitled in accordance with the Company's practices
at the date hereof;
(vii) The failure by the Company to obtain the
specific assumption of this Agreement by any successor or
assignee of the Company or any person acquiring substantially all
of the Company's assets.
ADDENDUM TO THE RESTATED EXECUTIVE SUPPLEMENTAL
RETIREMENT AGREEMENT (the "Agreement")
DATED EFFECTIVE AS OF APRIL 2, 1985
BETWEEN INGERSOLL-RAND COMPANY (the "Company")
AND (the "Employee")
The Company hereby agrees that should Employee die prior to
May 30, 1997, any death benefit payments owing to Employee's
beneficiary pursuant to paragraphs 1, 2, or 3, of the above
referenced Agreement shall be increased by (the
"Additional Death Benefit"). The Additional Death Benefit shall
be paid to Employee's designated beneficiary (i) in equal monthly
installments over the same 120 monthly periods in which death
benefits are to be paid pursuant to paragraph 2 of the Agreement,
and (ii) in equal monthly installments over the same monthly
periods remaining for installment payments where death benefits
are to be paid under either paragraph 1 or 3 of the Agreement.
Dated: Effective June 1, 1987 Ingersoll-Rand Company
______________________
______________________
Employee
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INSURANCE AGREEMENT
This INSURANCE AGREEMENT entered into as of the _______ day
of __________, 1988 by and between INGERSOLL-RAND COMPANY, a New
Jersey corporation ("I-R"), with executive offices at 200
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675 and
_________________, residing at _______ (the "Executive").
WHEREAS, the Executive is employed by I-R in a senior
executive position; and
WHEREAS, I-R and the Executive desire to participate jointly
in providing certain benefits to be payable upon the death of the
Executive and to make provision for the allocation or the
benefits provided by a life insurance Policy being purchased in
connection therewith; and
WHEREAS, I-R desires to commit to supplement under certain
circumstances the benefits to be provided the Executive by the
insurance policy being purchased pursuant hereto;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, it is hereby agreed as follows:
1. Policy. I-R and the Executive will take all reasonable
steps to cause the issuance by the insurance company named on
Exhibit 1 hereto (the "Insurance Company") of the policy referred
to on Exhibit 1 (the "Policy"). Except as otherwise contemplated
hereby, the parties will cooperate to ensure that the Policy
remains in full force and effect.
2. Ownership of Policy. I-R shall be the sole owner of
the Policy and it may exercise all the rights of ownership with
respect thereto, except as otherwise provided herein.
3. Executive's Policy Death Benefit and Supplemental Death
Benefit.
(a) The proceeds of the Policy payable upon the death of
the Executive (the "Policy Death Benefit") shall be divided
between I-R and the beneficiaries designated by the Executive.
In this connection, the Executive shall have the right to
designate or change the direct and contingent beneficiaries of
the Policy Death Benefit to the extent of a variable amount
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determined on the basis set forth on Exhibit 1 hereto (the
"Executive's Policy Death Benefit").
(b) The beneficiaries named by the Executive under Section
3(a) may also be entitled to an amount in excess of the
Executive's Policy Death Benefit, which amount shall be payable
directly from I-R (and not from the proceeds of the Policy) to
said beneficiaries upon the death of the Executive (the
"Executive Supplemental Death Benefit"). The Executive
Supplemental Death Benefit, if any, shall be a variable amount
determined on the basis as set forth in Exhibit 1.
4. I-R's Policy Death Benefit. I-R shall be the
beneficiary of the Policy Death Benefit which is in excess of the
Executive's Policy Death Benefit (the "I-R Policy Death
Benefit"). Neither the Executive nor the Executive's
beneficiaries shall have any right to the I-R Policy Death
benefit whether or not an Executive Supplemental Death Benefit is
payable to the Executive's beneficiaries.
5. Cash Value; Borrowings. All cash value accruing on the
Policy shall be owned by I-R, which shall have exclusive access
in its discretion to such cash value through loans from the
Insurance Company secured by the Policy. In the event any such
loans are outstanding on the date of death of the Executive, the
reduction in the Policy Death Benefit caused by the existence of
such loans will only reduce the I-R Policy Death Benefit. No
reduction in the Executive's Policy Death Benefit will be caused
by the existence of Policy loans and the aggregate principal
amount of the loans at any time outstanding shall not cause the
Policy Death Benefit to be reduced to an amount below the
Executive's Policy Death Benefit.
6. Dividends. Policy dividends shall be used to purchase
paid-up additions, unless I-R, in its discretion, elects to
exercise another option. Any additional paid-up insurance shall
be considered as part of the Policy for purposes of this
Agreement.
7. Additional Insurance. In the event that I-R determines
to purchase additional insurance on the life of the Executive for
purposes of meeting its obligations hereunder, the Executive
agrees to cooperate with I-R in connection with applying for, and
obtaining, the issuance of an additional policy or policies.
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8. Premiums.
(a) The Executive shall contribute to the cost of providing
Executive's Policy Death Benefit at the rate of $.50 per month
multiplied by a fraction, the numerator of which shall equal his
Annual Earnings (as hereinafter defined) and the denominator of
which shall be $1,000. Such contribution shall be made to I-R on
a monthly or other basis satisfactory to I-R.
(b) I-R shall be responsible for remitting the premiums
(including the Executive's contribution) to the Insurance Company
as required by terms of the Policy. In this connection, I-R may
elect to utilize the dividends payable under the Policy as a
reduction in the premium to be paid to the Insurance Company or
may elect any other option available under the Policy to reduce
the premiums required to be paid. The Executive's contribution
shall not be affected, however, by any such election.
(c) For all purposes of this Agreement, including Exhibit
1, the term "Annual Earnings" shall refer to the greater of (i)
the meaning as such term has in I-R's Group Life Insurance
Program as in effect on the date hereof or (ii) the meaning as
such term has in I-R's Group Life Insurance Program as in effect
on the date the Executive's Annual Earnings are being determined.
9. Participation in I-R Group Life Insurance Program. The
Executive shall continue to participate in the I-R Group Life
Insurance Program to the extent, and at the level set forth on
Exhibit 1 hereto. The Executive shall not alter such
participation without the written consent of I-R.
10. Termination of Agreement. This Agreement shall
terminate on the first to occur of any of the following events:
(a) termination upon the mutual written consent of the
parties;
(b) termination of the employment of the Executive for any
reason other than (i) Disability (as hereinafter defined) or (ii)
retirement under the provisions of I-R's Pension Plan Number One;
(c) at the election of the Executive, in the event of the
bankruptcy, receivership or dissolution of I-R; or
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(d) the election of the aggrieved party if either I-R or
the Executive fails for any reason to make the premium payments
or perform any other obligation required to be performed by this
Agreement.
11. Disposition of Policy on Termination of Agreement.
(a) Upon termination of this Agreement, I-R shall be
entitled to continue to own the Policy, subject to Section 11(b)
below. As owner, I-R may elect to continue to make the premium
payments or may elect to surrender or convert the Policy into a
paid-up policy, or exercise any other right to which it is
entitled as the sole owner of the Policy.
(b) Notwithstanding the provisions of Section 11(a), the
Executive shall have the right, for a period of thirty days after
termination of this Agreement, to acquire that portion of the
Policy which has a death benefit equal to the Executive's then
current Annual Earnings by paying to I-R an amount equal to (i)
the greater of (A) the sum of the aggregate premiums paid by I-R
to the date of such termination in respect of the portion of the
Policy to be transferred, or (B) the then current cash surrender
value of the portion of the Policy to be transferred, less (ii)
the amount of any outstanding loan on the portion of the Policy
to be transferred.
12. Disability. In the event the Executive's employment is
terminated due to Disability, this Agreement shall remain in
effect, provided that the Executive continues to fulfill his
obligations hereunder, including, without limitation, the payment
of premiums as provided in Section 8. For purposes of this
Agreement, the term "Disability" shall have the same meaning as
such term has under I-R's Long Term Disability Plan.
13. Amendment. This Agreement shall not be modified or
amended except by the written agreement of both parties. This
Agreement shall be binding upon the heirs, administrators or
executors and the successors and assigns of each party to this
Agreement.
14. Insurance Company Not a Party.
(a) The Insurance Company shall not be deemed to be a party
to this Agreement for any purpose nor in any way responsible for
its validity.
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(b) The Insurance Company shall be fully discharged from
any and all liability under the terms of the Policy upon payment
or other performance of its obligations in accordance with the
terms of the Policy.
15. Effect on Other Agreements. The benefits payable under
this Agreement shall be independent of, and in addition to, any
benefits payable under any other agreement that may exist from
time to time between the parties hereto, or any compensation
payable by I-R to the Executive, whether as salary, bonus or
otherwise.
This Agreement shall not be deemed to constitute a contract
of employment between the parties hereto, nor shall any provision
hereto restrict the right of I-R to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
16. Notices. Any notice required or permitted under this
Agreement shall be deemed sufficiently given if delivered or
mailed postpaid by certified first class mail, return receipt
requested, at the address of the party to whom such notice is
being given set forth above, or at such other address provided by
said party to the other.
17. Applicable Law. This Agreement shall be subject to and
shall be construed under the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
INGERSOLL-RAND COMPANY
By: ________________________
________________________
Executive
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EXHIBIT 1
POLICY: Northwestern Mutual Life Insurance Company
Policy No. ____________________
A. Executive's Death Benefits
(1) Executive's Policy Death Benefit
The Executive's Policy Death Benefit, as of any date,
shall equal the lesser of:
(a) the Executive's Annual Earnings, as of such date;
(b) the amount determined by multiplying the
Executive's Annual Earnings (as of such date) by a
fraction:
(i) the numerator of which is $6.00, and
(ii) the denominator of which is the lesser of
(A) the Insurance Company's premium charge per
$l,000 of death benefit for a one-year term
policy based on the Executive's age, or (B)
the minimum cost per $l,000 of death benefit
under the provisions of Internal Revenue
Service Revenue Ruling 55-247, 1955-2 CB 228
(i.e. P.S. 58), taking the Executive's age
into account; or
(c) the Policy Death Benefit less the aggregate amount
of premiums paid through such date by I-R (not
including premium contributions by the Executive).
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(2) Executive Supplemental Death Benefit
There shall be an Executive Supplemental Death Benefit
only if the Executive's Policy Death Benefit is less
than his Annual Earnings and is therefore determined
under Section 1(b) or 1(c) above. In such event, the
amount of the Executive's Supplemental Death Benefit
shall equal (a) the amount by which the Executive's
Annual Earnings as of the date of his death less (b)
the Executive's Policy Death Benefit as of such date,
such amount to be divided by (c) .95 minus the Maximum
Tax Rate (as hereinafter defined). The term "Maximum
Tax Rate" means the highest rate (expressed as a
decimal) at which ordinary income is subject to
individual income tax pursuant to the United States
Internal Revenue Code, for the year in which the death
of the Executive occurs.
B. Executive's Participation in I-R Group Life Insurance
Program
The Executive agrees, to participate in the I-R Group Life
Insurance Program to the extent that he is entitled to a
death benefit under such Program equal to twice his Annual
Earnings.
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Name/address of executive
Re: Group Life Insurance Program
This will confirm the agreement by Ingersoll-Rand Company
(the "Company") to compensate you for certain additional costs to
be incurred by you as a result of modifications to the Company's
group life insurance program (the "Group Program") which became
effective January 1, 1987. Specifically, to the extent your
Annual Earnings (as defined below) as of the date of your
retirement exceeds your Annual Earnings as of December 31, 1986,
the Group Program now requires you to contribute for
post-retirement coverage at a rate in excess of the $.50 per
month per $1,000 rate previously required. In addition, as a
result of changes in federal tax law, you will now be subject to
imputed income to the extent of a portion of your post-retirement
insurance coverage.
In order to compensate you on an after-tax basis for the
additional costs to be incurred by you after retirement under the
Group Program as currently in effect, and for the costs to you of
the imputation of income referred to above, the Company hereby
agrees to reimburse you as outlined below:
1. For purposes of calculating the reimbursement for
additional premium contributions, the following terms
are defined as indicated:
(a) "Annual Earnings", as of any date, has the same
meaning as such term has under the Company's Group
Term Life Insurance Program as in effect on such
date.
(b) "Excess Cost" means, for any year, (i) the actual
amount contributed by you for post-retirement life
insurance coverage under the Group Program for
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such year, less (ii) an amount equal to (A) $.50
multiplied by the number of months during such
year that you contributed to post-retirement
coverage under the Group Program, such product to
be further multiplied by (B) a fraction, the
numerator of which shall be your Annual Earnings,
and the denominator of which shall be $1,000.
(c) "Imputed Income" means the amount determined by
multiplying (i) the Table I rate under the
provisions of Internal Revenue Service Regulation
Section 79-3(d)(2) by (ii) a fraction (A) the numerator
of which shall be your Annual Earnings as of
December 31, 1986 less $50,000, and (B) the
denominator of which shall be $1,000, and
subtracting from such amount the amount
contributed by you for post-retirement life
insurance coverage as referred to in paragraph
1(b)(i) above.
(d) "Maximum Tax Rate" means the highest rate
(expressed as a decimal) at which ordinary income
is subject to individual income tax by the United
States Federal government pursuant to the Internal
Revenue Code, for the year in which any
reimbursement is to be paid.
2. The amount of reimbursement to which you shall be
entitled with respect to the additional costs referred
to above for each year after your retirement, until and
including the year of your death, shall equal (a) the
Excess Cost for such year, divided by (b) .95 minus the
Maximum Tax Rate.
3. The amount of reimbursement to which you shall be
entitled for the imputation of income referred to above
shall equal (a) your Imputed Income multiplied by (b)
the Maximum Tax Rate, such product to be divided by (c)
.95 minus the Maximum Tax Rate.
Reimbursement payments shall be made on or before January 31
of each year following any year for which a reimbursement shall
be required.
Very truly yours,
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INGERSOLL-RAND COMPANY
Incentive Stock Plan of 1990
Section 1. Purposes: The purposes of the Plan are (a) to
provide additional incentive for such Key Employees of the
Company and its Subsidiaries, as may be designated for
participation in the Plan by authorizing the payment of bonus or
incentive compensation in shares of Common Stock and by
encouraging such Key Employees to invest in shares of Common
Stock, thereby furthering their identity of interest with the
interests of the Company's shareholders, increasing their stake
in the future growth and prosperity of the Company and
stimulating and sustaining constructive and imaginative thinking;
and (b) to enable the Company, by offering comparable incentives,
to induce the employment and continued employment of Key
Employees and to compete with other organizations in attracting
and retaining the services of competent executives.
Section 2. Definitions: Unless otherwise required by the
context, the following terms, when used in the Plan, shall have
the meanings set forth in this Section 2:
Act: The Securities Exchange Act of 1934, as amended.
Affiliate: Used to indicate a relationship with a
specified person, a person that directly, or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, such a
specified person.
Associate: Used to indicate a relationship with a
specified person, (a) any corporation, partnership, or other
organization of which such specified person is an officer or
partner, (b) any trust or other estate in which such
specified person has a substantial beneficial interest or as
to which such specified person serves as trustee or in a
similar fiduciary capacity, (c) any relative or spouse of
such specified person, or any relative of such spouse who
has the same home as such specified person, or who is a
director or officer of the Company or any of its parents or
subsidiaries, and (d) any person who is a director, officer,
or partner of such specified person or of any corporation
(other than the Company or any wholly-owned subsidiary of
the Company), partnership or other entity which is an
Affiliate of such specified person.
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Beneficial Owner: As such term is defined by Rule 13d-3
under the Act (or any successor provision at the time in
effect); provided, however, that any individual,
corporation, partnership, group, association, or other
person or entity which has the right to acquire any of the
Company's outstanding securities entitled to vote generally
in the election of directors at any time in the future,
whether such right is contingent or absolute, pursuant to
any agreement, arrangement, or understanding or upon
exercise of conversion rights, warrants or options, or
otherwise, shall be deemed the Beneficial Owner of such
securities.
Board of Directors or Board: The Board of Directors of
the Company.
Change in Control of the Company: The occurrence of
either of the following:
(a) any individual, corporation, partnership, group,
association or other person or entity, together with its
Affiliates and Associates (other than a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company), is or becomes the Beneficial Owner of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of
directors, unless a majority of the Continuing Directors
determines in their sole discretion that, for purposes of
the Plan, a Change in Control of the Company has not
occurred; or
(b) the Continuing Directors shall at any time fail to
constitute a majority of the members of the Board.
Change in Control Fair Market Value of the Common
Stock: The highest closing price of one share of Common
Stock as reported on the New York Stock Exchange-Composite
Tape. If the Common Stock is not listed or admitted to
trading on the New York Stock Exchange, the Change in
Control Fair Market Value of the Common Stock shall be the
closing price of one share of Common Stock on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is
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not listed or admitted to trading on any national securities
exchange, the last quoted sale price, or if not so quoted,
the average of the high bid and low asked prices in the
over-the-counter market of the Common Stock, as reported by
the National Association of Securities Dealers, Inc.
Automated Quotations system or such other system then in
use, or, if on any such date the Common Stock is not quoted
by any such organization, the average of the closing bid and
asked prices of the Common Stock as furnished by a
professional market maker making a market in the Common
Stock selected by the Board. If on any such date no market
maker is making a market in the Common Stock, the Change in
Control Fair Market Value shall be determined in good faith
by the Continuing Directors.
Committee: Such committee or committees as shall be
appointed by the Board of Directors to administer the Plan
pursuant to the provisions of Section 11.
Common Stock: The Common Stock of the Company, par
value $2 per share, or such other class of shares or other
securities as may be applicable pursuant to the provisions
of paragraph (a) of Section 9.
Common Stock Equivalents: Common Stock Equivalents
shall provide the holder with such of the rights and
benefits of the actual owner of shares of Common Stock as
the Board of Directors may determine, including the right to
receive dividends and the right to receive the amount of
appreciation in value, if any, on such shares of Common
Stock from the date the grant of such Common Stock
Equivalents became effective until they become payable to
the holder.
Company: Ingersoll-Rand Company, a New Jersey
corporation.
Continuing Director: A director who either was a member
of the Board on April 26, 1990 or who became a member of the
Board subsequent to such date and whose election, or
nomination for election by the Company's shareholders, was
Duly Approved by the Continuing Directors on the Board at
the time of such nomination or election, either by a
specific vote or by approval of the proxy statement issued
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by the Company on behalf of the Board in which such person
is named as nominee for director, without due objection to
such nomination.
Disability: Such term as defined under the pension,
retirement or appropriate benefit plan or plans of the
Company or a Subsidiary applicable to the Key Employee.
Dividend Equivalents: A right to receive immediately or
on a deferred basis, whether or not subject to forfeiture,
an amount equivalent to all or part of dividends paid or
payable on a share of Common Stock subject to a Stock
Incentive.
Duly Approved by the Continuing Directors: An action
approved by the vote of at least a majority of the
Continuing Directors then on the Board, except, if the votes
of such Continuing Directors in favor of such action would
be insufficient to constitute an act of the Board if a vote
by all of its members were to have been taken, then such
term shall mean an action approved by the unanimous vote of
the Continuing Directors then on the Board so long as there
are at least three Continuing Directors on the Board at the
time of such unanimous vote.
Fair Market Value: As applied to any date, and except
as otherwise provided in paragraph (e) of Section 7, the
mean between the high and low sales prices of a share of
Common Stock on such date as reported on the New York Stock
Exchange-Composite Tape, or, if no such sales were made on
such date, on the next preceding date on which there were
such sales of Common Stock as reported on the Composite
Tape; provided, however, that if such method of determining
Fair Market Value shall not be consistent with regulations
of government agencies at the time applicable to the
determination of Fair Market Value in respect of a Stock
Incentive, Fair Market Value in the case of such Stock
Incentive shall be determined in accordance with such
regulations and shall mean the value as so determined.
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Incentive Compensation: Bonuses, extra and other
compensation payable in addition to a salary or other base
amount, whether contingent or not, whether discretionary or
required to be paid pursuant to an agreement, resolution,
arrangement, plan or practice and whether payable currently
or on a deferred basis, in cash, Common Stock or other
property, awarded by the Company or a Subsidiary, whether
prior or subsequent to the date of approval and adoption of
the Plan by the shareholders of the Company.
Key Employee: An employee of the Company or of a
Subsidiary, including an officer or director who is an
employee, who in the opinion of the Committee can contribute
significantly to the growth and successful operations of the
Company or a Subsidiary. The recommendation of the grant of
a Stock Incentive to an employee by the Committee shall be
deemed a determination by the Committee that such employee
is a Key Employee.
Management Incentive Unit: A unit credited to the
account of a participant under the Management Incentive Unit
Plan of the Company approved by the shareholders of the
Company on April 22, 1958, as amended.
Option: An option to purchase shares of Common Stock.
Performance Unit: A unit representing a cash sum or one
or more shares of Common Stock subject to a Stock Award the
payment, issuance, transfer or retention of which is
contingent, in whole or in part, upon attainment of a
specified performance objective or objectives, including,
without limitation, objectives determined by reference to or
changes in (a) book value or earnings per share of Common
Stock, or (b) sales and revenues, income, profits and
losses, return on capital employed, or net worth of the
Company or of any one or more of its groups, divisions,
Subsidiaries or departments (on a consolidated, partially
consolidated or unconsolidated basis), or (c) any
combination of the foregoing factors.
Plan: The Incentive Stock Plan of 1990 herein set forth
as the same may from time to time be amended.
Restricted Shares: Shares of Common Stock issued or
transferred subject to restrictions as authorized by
paragraph (d) of Section 5 or paragraph (a) of Section 12.
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Retirement: Such term as defined under the pension or
retirement plan or plans of the Company or a Subsidiary
applicable to the Key Employee, pursuant to which the Key
Employee is receiving or will, upon such retirement, be
entitled to receive retirement benefits.
Stock Appreciation Right: A right to receive a number
of shares of Common Stock, or, at the election of the
Company, cash, in either event based on the increase in the
Fair Market Value of the number of shares of Common Stock
subject to such right, as set forth in Section 7.
Stock Award: An issuance or transfer of shares of
Common Stock at the time a Stock Incentive is granted or as
soon thereafter as practicable, or an undertaking to issue
or transfer such shares in the future, including, without
limitation, such an issuance, transfer or undertaking with
respect to Performance Units.
Stock Incentive: A Stock Incentive granted under the
Plan in one of the forms provided for in Section 3.
Subsidiary: A corporation or other form of business
association of which shares (or other ownership interests)
having 50% or more of the voting power are owned or
controlled, directly or indirectly, by the Company.
Section 3. Grants of Stock Incentives:
(a) Subject to the provisions of the Plan, the Board of
Directors may at any time, or from time to time, grant Stock
Incentives under the Plan to, and only to, Key Employees;
provided, however, that no Stock Incentive shall be granted to a
Key Employee who at the time of such grant is a member of the
Board of Directors except by or upon the recommendation of the
Committee, or by a majority of disinterested members of the Board
as provided in paragraph (b) of Section 11.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, in accordance with Section 5, or
(ii) an Option, in accordance with Section 6, or
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(iii) a Stock Appreciation Right, in accordance with
Section 7, or
(iv) any combination of the foregoing.
Section 4. Stock Subject to the Plan:
(a) Subject to the provisions of paragraph (c) of this
Section 4 and of paragraph (a) of Section 9, the aggregate number
of shares of Common Stock which may be issued or transferred
pursuant to Stock Incentives granted under the Plan shall not
exceed 3,000,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and
shares of Common Stock held in the treasury, whether acquired by
the Company specifically for use under the Plan or otherwise, may
be used, as the Board of Directors may from time to time
determine, for purposes of the Plan; provided, however, that any
shares acquired or held by the Company for the purposes of the
Plan shall, unless and until transferred to a Key Employee in
accordance with the terms and conditions of a Stock Incentive, be
and at all times remain treasury shares of the Company
irrespective of whether such shares are entered in a special
account for purposes of the Plan, and shall be available for any
corporate purpose.
(c) If any shares of Common Stock subject to a Stock
Incentive shall not be issued or transferred and shall cease to
be issuable or transferable because of the termination, in whole
or in part, of such Stock Incentive, or subject to the provisions
of paragraph (i) of Section 6 and paragraph (d) of Section 7, for
any other reason, or if any such shares shall, after issuance or
transfer, be reacquired by the Company or a Subsidiary because of
an employee's failure to comply with the terms and conditions of
a Stock Incentive, the shares not so issued or transferred, or
the shares so reacquired by the Company or a Subsidiary, shall no
longer be charged against the limitation provided for in
paragraph (a) of this Section 4 and may again be made subject to
Stock Incentives.
Section 5. Stock Awards: Stock Incentives in the form of
Stock Awards shall be subject to the following provisions:
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(a) A Stock Award shall be granted only (i) in payment of
Incentive Compensation that has been earned or (ii) as Incentive
Compensation to be earned, including, without limitation,
Incentive Compensation awarded concurrently with or prior to the
grant of the Stock Award and Incentive Compensation awarded
whether subsequent or prior to the approval and adoption of the
Plan by the shareholders of the Company.
(b) For the purposes of the Plan, in determining the value
of a Stock Award, all shares of Common Stock subject to such
Stock Award shall be valued at not less than 100% of the Fair
Market Value of such shares on the date such Stock Award is
granted, regardless of whether or when such shares are issued or
transferred to the Key Employee and whether or not such shares
are subject to restrictions which affect their value.
(c) Shares of Common Stock subject to a Stock Award may be
issued or transferred to a Key Employee at the time the Stock
Award is granted, or at any time subsequent thereto, or in
installments from time to time, as the Board of Directors shall
determine. In the event that any such issuance or transfer shall
not be made to the Key Employee at the time the Stock Award is
granted, the Board of Directors may provide for the payment or
crediting to such Key Employee of Dividend Equivalents. Any
amount payable in shares of Common Stock under the terms of a
Stock Award may, in the discretion of the Company, be paid in
cash on each date on which delivery of shares would otherwise
have been made, in an amount equal to the Fair Market Value on
such date of the shares which would otherwise have been
delivered.
(d) A Stock Award shall contain such terms and conditions as
the Board shall determine with respect to payment or forfeiture
of all or any part of the Stock Award upon termination of
employment or the occurrence of other circumstances.
(e) A Stock Award shall be subject to such other terms and
conditions, including, without limitation, restriction on sale or
other disposition of the Stock Award or of the shares issued or
transferred pursuant to such Stock Award, as the Board of
Directors shall determine; provided, however, that upon the
issuance or transfer of shares pursuant to a Stock Award, the
recipient shall, with respect to such shares, be and become a
shareholder of the Company fully entitled to receive dividends,
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to vote and to exercise all other rights of a shareholder except
to the extent otherwise provided in the Stock Award. Each Stock
Award shall be evidenced by a written instrument in such form as
the Board of Directors or the Committee shall determine, provided
the Stock Award is consistent with the Plan and incorporates it
by reference.
Section 6. Options: Stock Incentives in the form of Options
shall be subject to the following provisions:
(a) The price per share at which shares subject to an Option
may be purchased shall be determined by the Board of Directors,
but in no instance shall be less than the Fair Market Value of a
share of Common Stock on the date such Option is granted.
(b) Each Option shall expire at such time as the Board may
determine on the date such Option shall be granted, but no later
than ten years from the date such Option is granted. The Board
may, at any time prior to the expiration of the Option, extend
its term for a period ending not later than ten years from the
date such Option is granted and any such extension shall not be
deemed the grant of a new or additional Option for any purpose
under the Plan.
(c) The Option may be exercised solely by the person to whom
granted except as hereinafter provided in the case of such
person's death or Disability. During the lifetime of the
optionee, the Option and any rights and privileges pertaining
thereto shall not be transferred, assigned, pledged or
hypothecated in any way, whether by operation of law or
otherwise, and shall not be subject to execution, attachment or
similar process.
(d) Each optionee must complete twelve months of continuous
employment with the Company or Subsidiary, or both, before any
part of the Option may be exercised by him.
(e) After the completion of the required period of
employment, the Option may be exercised, in whole or in part, and
from time to time during the balance of the term of the Option,
subject to the terms and conditions specified in the Option or by
the Board of Directors.
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(f) Unless otherwise determined by the Board, each Option
shall terminate if and when the optionee shall terminate
employment with the Company and its Subsidiaries, except that if
the optionee shall die or become subject to a Disability while in
the employ of the Company or of a Subsidiary, then the Option
shall be exercisable within such period as shall be set forth in
the Option, by the optionee or by such person or persons as shall
have acquired the optionee's rights under the Option by will or
by the laws of descent and distribution, or by the optionee's
guardian, conservator or similar legal representative, but not
later than three years after the date of death or Disability. In
the event of the Retirement of the optionee, if the optionee
shall have completed at least twelve months of continuous
employment (or such shorter period as the Board may determine)
then the Option shall be exercisable within such period as shall
be set forth in the Option but not later than three years after
the date of Retirement (or such longer period as the Board may
determine).
(g) Shares purchased under the Option shall be paid for in
full at the time of the exercise of the Option as to such shares
upon such terms as the Board of Directors may approve, including
cash, secured or unsecured indebtedness, by exchange for other
property, including shares of Common Stock, or otherwise.
(h) The Board of Directors may at any time and from time to
time provide for the payment to an optionee of Dividend
Equivalents.
(i) The Option agreements or Option grants authorized by the
Plan may contain such other provisions as the Board of Directors
shall deem advisable. Without limiting the foregoing, if so
authorized by the Board of Directors and subject to such terms
and conditions as are specified in the Option or by the Board of
Directors, the Company may, with the consent of the holder of the
Option, and at any time or from time to time, cancel all or a
portion of the Option then subject to exercise and discharge its
obligation in respect of the Option either by payment to the
holder of an amount of money equal to the excess, if any, of the
Fair Market Value, at such time or times, of the shares subject
to the portion of the Option so cancelled over the aggregate
purchase price of such shares, or by the issuance or transfer to
the holder of shares of Common Stock with the Fair Market Value,
at such time or times equal to any such excess, or by a
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combination of cash and shares. The number of shares of Common
Stock subject to the Option, or portion thereof, so cancelled
shall, in the event that a payment of money or transfer of shares
is made by the Company in respect of such cancellation, be
charged against the maximum limitation set forth in paragraph (a)
of Section 4 of the Plan.
(j) Options may be granted under the Plan from time to time
in substitution for stock options held by employees of other
corporations who are about to become employees of the Company or
a Subsidiary as the result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary, or the
acquisition by the Company or a Subsidiary of the assets of the
employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation as the result of
which it becomes a Subsidiary. The terms and conditions of the
substitute options so granted may vary from the terms and
conditions set forth in this Section 6 to such extent as the
Board of Directors at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
Section 7. Stock Appreciation Rights:
(a) Stock Appreciation Rights may be granted in connection
with any Option granted under the Plan, either at the time of the
grant of such Option or at any time thereafter during the term of
the Option, or may be granted independently of the grant of an
Option.
(b) If granted in connection with an Option, Stock
Appreciation Rights shall entitle the holder of the related
Option, upon surrender of the Option, or any portion thereof, to
exercise the Stock Appreciation Rights, to the extent
unexercised, and to receive a number of shares of Common Stock,
or cash, determined pursuant to paragraph (c)(iii) of this
Section 7. Such Option shall, to the extent so surrendered,
thereupon cease to be exercisable. If granted independently of an
Option, Stock Appreciation Rights shall entitle the holder of the
Stock Appreciation Rights to receive a number of shares of Common
Stock, or cash, determined pursuant to paragraph (c)(iii) of this
Section 7.
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(c) Stock Appreciation Rights shall be subject to the
following terms and conditions and to such other terms and
conditions not inconsistent with the Plan as shall from time to
time be approved by the Board of Directors:
(i) If granted in connection with an Option, Stock
Appreciation Rights shall be exercisable at such time or
times and to the extent, but only to the extent, that the
Option to which they relate shall be exercisable, except
that, at the time of granting such Stock Appreciation Right,
the Board may provide that the period during which such
Stock Appreciation Right may be exercised shall expire prior
to the expiration of the period during which the related
Option may be exercised. If granted independently of an
Option, Stock Appreciation Rights shall be exercisable at
such time or times as shall be determined by the Board of
Directors at the time of the grant of the Stock Appreciation
Rights but, unless otherwise determined by the Board of
Directors, in no event later than the date the employment of
the holder of the Stock Appreciation Rights shall have
terminated other than by reason of death, Disability or
Retirement. In the event of termination of employment by
reason of death or Disability, Stock Appreciation Rights
shall be exercisable for such period as the Board may
specify at the time of granting of the Stock Appreciation
Rights, but in no event later than three years after such
termination of employment by the holder of the Stock
Appreciation Rights or by the beneficiary designated
pursuant to paragraph (1) of Section 12, and in the case of
Retirement, no later than three years after the date of such
Retirement. Unless otherwise determined by the Board, each
Stock Appreciation Right shall terminate if and when the
holder thereof shall terminate employment with the Company
and its Subsidiaries for reasons other than the death,
Disability or Retirement of such holder.
(ii) Stock Appreciation Rights shall in no event be
exercisable unless and until the holder of the Stock
Appreciation Rights shall have completed at least twelve
months of continuous service with the Company or a
Subsidiary, or both, immediately following the date upon
which the Stock Appreciation Rights shall have been granted.
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(iii) Upon exercise of Stock Appreciation Rights, the
holder thereof shall be entitled to receive a number of
shares equal in Fair Market Value on the date of exercise to
the amount by which the Fair Market Value of one share of
Common Stock on the date of such exercise shall exceed the
Fair Market Value of a share of Common Stock on the date of
grant of such Stock Appreciation Rights multiplied by the
number of shares in respect of which the Stock Appreciation
Rights shall have been exercised. The Company may settle all
or any part of its obligation arising out of an exercise of
Stock Appreciation Rights by the payment of cash equal to
the aggregate value of shares of Common Stock (or a fraction
of a share) that it would otherwise be obligated to deliver
under the preceding sentence of this paragraph (c)(iii) of
Section 7.
(d) To the extent that Stock Appreciation Rights shall be
exercised, an Option in connection with which such Stock
Appreciation Rights shall have been granted shall be deemed to
have been exercised for the purpose of the maximum limitation set
forth in the Plan under which such Option shall have been
granted. In the case of Stock Appreciation Rights granted
independently of an Option, the number of shares of Common Stock
in respect of which such Stock Appreciation Rights shall be
exercised shall be charged against the maximum limitation set
forth in paragraph (a) of Section 4.
(e) Stock Appreciation Rights may be granted by the Board in
substitution for Management Incentive Units, with the consent of
the holder of such Management Incentive Units, but only if the
holder of such Management Incentive Units shall have been in the
employ of the Company or a Subsidiary, or both, for a period of
not less than five years from the date of the award of such
Management Incentive Units. Notwithstanding anything in Section 2
of the Plan or elsewhere in the Plan to the contrary, in the
event that Stock Appreciation Rights shall be granted in
substitution for Management Incentive Units, the Fair Market
Value of a share of Common Stock on the date that such Management
Incentive Units were credited to the account of the participant
shall be deemed the Fair Market Value of such shares on the date
of grant of Stock Appreciation Rights for the purpose of
paragraph (c)(iii) of this Section 7.
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(f) If so directed by the Board at any time and from time to
time, the grant of Stock Appreciation Rights may provide for
payment of Dividend Equivalents to the holder of the Stock
Appreciation Rights.
(g) Stock Appreciation Rights may provide that, upon
exercise of such Stock Appreciation Rights, the shares or cash,
as the case may be, which the holder of such Stock Appreciation
Rights shall be entitled to receive, shall be distributed or paid
in such installments and over such number of years as the Board
may direct, with distribution or payment of each such installment
contingent upon continued services of the employee to the Company
or a Subsidiary, or both (except for death, Disability,
Retirement or termination of employment by the Company or with
its consent), to the time for distribution or payment of such
installment.
Section 8. Dividend Equivalents: A grant of Dividend
Equivalents shall be made subject to such terms and conditions as
the Board of Directors may determine, and may be awarded only in
connection with a Stock Incentive granted under Section 5, 6 or
7. Dividend Equivalents may be awarded either at the time of
grant of a Stock Incentive or at any time thereafter during the
term of the Stock Incentive. Dividend Equivalents may be payable
or credited either in cash, shares of Common Stock, or in Common
Stock Equivalents. If credited in Common Stock or in Common Stock
Equivalents, they shall be credited at the Fair Market Value of a
share of Common Stock on the day of such crediting. The Committee
may provide that any amounts representing dividends earned by
Common Stock Equivalents may either be paid currently or credited
in cash or in Common Stock or that they may be represented by
further Common Stock Equivalents, or any combination thereof. The
Board of Directors may provide that when Common Stock Equivalents
shall become payable to the holder, they may be paid in cash or
in shares of Common Stock, or a combination of both. To the
extent that any payment to the holder with respect to Dividend
Equivalents is made in shares of Common Stock, the number of
shares of Common Stock used for such payment shall be charged
against the maximum limitation set forth in paragraph (a) of
Section 4.
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Section 9. Adjustment and Change in Control Provisions:
(a) In the event that any recapitalization,
reclassification, split-up or consolidation of shares of Common
Stock shall be effected, or the outstanding shares of Common
Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets,
exchanged for a different number or class of shares of stock or
other securities of the Company or for shares of the stock or
other securities of any other corporation, or a public offer by
the Company or an employee benefit plan sponsored by the Company
is made to purchase all or a substantial number of the
outstanding shares of Common Stock for cash or other securities,
or new, different or additional shares of other securities of the
Company or of another corporation are received by the holders of
Common Stock or any distribution is made to the holders of Common
Stock other than a cash dividend, (i) the number and class of
shares or other securities that may be issued or transferred
pursuant to Stock Incentives, (ii) the number and class of shares
or other securities which have not been issued or transferred
under outstanding Stock Incentives, (iii) the purchase price to
be paid per share under outstanding Options and other Stock
Incentives, (iv) the Fair Market Value of a share of Common Stock
on the date of grant of outstanding Stock Appreciation Rights,
(v) the dates or events upon which Options and Stock Appreciation
Rights may be exercised, which may, in appropriate instances, be
related to specific dates or events under any of the aforesaid
actions, and (vi) the price to be paid per share by the Company
or a Subsidiary for shares or other securities issued or
transferred pursuant to Stock Incentives which are subject to a
right of the Company or a Subsidiary to reacquire such share or
other securities, shall in each case be equitably adjusted. In
addition, the Board may, in its discretion, make the adjustments
described above in this paragraph (a) of Section 9 in the event
the Company pays a cash dividend in respect of the Common Stock
other than a regular quarterly dividend.
(b) Notwithstanding any other provision of the Plan to the
contrary (and notwithstanding any requirement that a holder of
Stock Awards, Options and Stock Appreciation Rights complete a
period of employment in order to be entitled to the benefits
thereof), in the event of a Change in Control of the Company the
holders of Stock Awards, Options and Stock Appreciation Rights
outstanding as of the date of the occurrence of the Change in
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Control of the Company shall have the right to surrender such
Stock Awards, Options and Stock Appreciation Rights within the
60-day period following the occurrence of the Change of Control
of the Company and to receive cash as consideration for such
surrender on the following basis:
(i) A holder of a Stock Award being surrendered shall
be entitled to the amount equal to the highest Change in
Control Fair Market Value of one share of Common Stock
during the 60 days preceding the date on which the Change in
Control occurs, multiplied by the number of shares in
respect of which the Stock Award shall have been
surrendered. (1)
(ii) A holder of an Option being surrendered shall be
entitled to the amount by which the highest Change in
Control Fair Market Value of one share of Common Stock
during the 60 days preceding the date on which the Change in
Control occurs exceeds the exercise price of one share of
Common Stock subject to such Option multiplied by the number
of shares in respect of which the Option shall have been
surrendered.
(iii) The holder of Stock Appreciation Rights being
surrendered shall be entitled to the amount by which the
highest Change in Control Fair Market Value of one share of
Common Stock during the 60 days preceding the date on which
the Change in Control occurs exceeds the Fair Market Value
of one share of Common Stock on the date of grant of such
Stock Appreciation Rights multiplied by the number of shares
in respect of which the Stock Appreciation Rights shall have
been surrendered. Stock Appreciation Rights granted in
connection with the grant of Options may be surrendered only
if surrendered together with the surrender of the related
Options and the holder thereof shall be entitled to the
payment described in this subparagraph (iii) only.
(1) Amended by Board of Directors May 1 1991.
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(iv) All payments to be made pursuant to this paragraph
(b) of Section 9 shall be made within 10 days of the
delivery of written notice of such surrender by the holder
to the Company except that payments to individuals subject
to Section 16 of the Act with respect to Stock Awards,
Options and Stock Appreciation Rights granted less than six
months prior to the occurrence of the Change in Control of
the Company shall be made within 10 days after the
expiration of such six month period.
Section 10. Term: The Plan shall be deemed adopted and shall
become effective on the date it is approved by the shareholders
of the Company. No Stock Incentives shall be granted under the
Plan after April 30, 1995.
Section 11. Administration:
(a) The Plan shall be administered by a Committee which
shall consist of not less than three directors of the Company
designated by the Board of Directors; provided, however, that no
director shall be designated as or continue to be a member of the
Committee, unless he shall at the time of designation and service
be a "disinterested person" within the meaning of Rule 16b-3
under the Act (or any successor provision at the time in effect).
In no event shall a member of the Committee be eligible to be
granted a Stock Incentive while serving on the Committee. Grants
of Stock Incentives may be recommended or made either with or
without consultation with employees, but, anything in the Plan to
the contrary notwithstanding, the Committee shall have full
authority to act in the matter of selection of all Key Employees
who are members of the Board of Directors and in recommending
Stock Incentives to be granted to them.
(b) The Board of Directors may delegate to the Committee any
or all its authority under the Plan, including the authority to
award Stock Incentives, except its authority to amend or
discontinue the Plan. Any powers conferred on the Committee by
this Section 11 or by any other provision of the Plan shall, to
the extent such authority shall not have been so delegated by the
Board of Directors, be exercised by the Board; provided, however,
that with respect to the participation in the Plan by any
director, unless his participation shall have been recommended by
the Committee, a majority of the members of the Board and a
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majority of its members acting in the matter shall, at the time
so acting, be "disinterested persons" within the meaning of Rule
16b-3 under the Act (or any successor provision at the time in
effect).
(c) The Committee may establish such rules and regulations,
not inconsistent with the provisions of the Plan, as it deems
necessary to determine eligibility to participate in the Plan and
for the proper administration of the Plan, and may amend or
revoke any rule or regulation so established. The Committee may
make such determinations and interpretations under or in
connection with the Plan as it deems necessary or advisable. All
such rules, regulations, determinations and interpretations shall
be binding and conclusive upon the Company, its Subsidiaries, its
shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon
all other persons claiming under or through any of them.
(d) Any action required or permitted to be taken by the
Committee under the Plan shall require the affirmative vote of a
majority of all the members of the Committee. The Committee may
act by written determination instead of by affirmative vote at a
meeting, provided that any written determination shall be signed
by all of the members of the Committee, and any such written
determination shall be as fully effective as a unanimous vote at
a meeting.
(e) Members of the Board of Directors and members of the
Committee acting under the Plan shall be fully protected in
relying in good faith upon the advice of counsel and shall incur
no liability except for gross negligence or willful misconduct in
the performance of their duties.
Section 12. General Provisions:
(a) With respect to any shares of Common Stock issued or
transferred under any provision of the Plan, such shares may be
issued or transferred subject to such conditions, in addition to
those specifically provided in the Plan, as the Board of
Directors or Committee may direct and, without limiting the
generality of the foregoing, provision may be made in the grant
of Stock Incentives that shares issued or transferred upon their
grant or exercise shall be Restricted Shares subject to
forfeiture upon failure to comply with conditions and
restrictions imposed in the grant of such Stock Incentives.
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(b) The Board of Directors may fix a uniform date, within
any specified period, either before or after the date so fixed,
as of which any exercise of an Option or Stock Appreciation
Rights shall be deemed to be effective.
(c) The Board of Directors may, in its discretion, in the
event of termination of employment with the consent of the
Company or death, Retirement or Disability, of the holder of a
Stock Incentive reduce the period of employment required before
such Stock Incentive may be exercised.
(d) In the event of the termination of employment of an
optionee or of a holder of Stock Appreciation Rights with the
consent of the Company, other than by death, Retirement or
Disability, the Board of Directors may extend the period during
which such Option or Stock Appreciation Rights may be exercised
after the date of termination of employment but not beyond the
expiration date of the term of the Option or Stock Appreciation
Right.
(e) Whether an authorized leave of absence or an absence for
military or government service shall constitute termination of
employment or interruption of required additional continuous
employment for the purpose of the Plan shall be determined by the
Board of Directors.
(f) Nothing in the Plan nor in any instrument executed
pursuant thereto shall confer upon any employee any right to
continue in the employ of the Company or any Subsidiary or shall
affect the right of the Company or of a Subsidiary to terminate
the employment of any employee with or without cause.
(g) No shares of Common Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal
requirements applicable to the issuance or transfer of such
shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance or transfer,
the person acquiring the shares shall, if requested by the
Company, give assurances satisfactory to counsel to the Company
that the shares are being acquired for investment and not with a
view to resale or distribution thereof and assurances in respect
of such other matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal
requirements.
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(h) No employee (individually or as a member of a group),
and no beneficiary or other person claiming under or through the
employee, shall have any right, title or interest in or to any
shares of Common Stock allocated or reserved for the purposes of
the Plan or subject to any Stock Incentive except as to such
shares of Common Stock, if any, as shall have been issued or
transferred to him.
(i) The Company or a Subsidiary may, with the approval of
the Board of Directors, enter into an agreement or other
commitment to grant a Stock Incentive in the future to a person
who is or will be a Key Employee at the time of grant, and,
notwithstanding any other provision of the Plan, any such
agreement or commitment shall not be deemed the grant of a Stock
Incentive until the date on which the Board of Directors takes
action to implement such agreement or commitment.
(j) In the case of a grant of a Stock Incentive to any
employee of a Subsidiary, such grant may, if the Board of
Directors so directs, be implemented by the Company issuing or
transferring the shares, if any, covered by the Stock Incentive
to the Subsidiary, for such lawful consideration as the Board of
Directors may specify, upon the condition or understanding that
the Subsidiary will transfer the shares to the employee in
accordance with the terms of the Stock Incentive specified by the
Board of Directors pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Stock Incentive
may be issued by and in the name of the Subsidiary and shall be
deemed granted on the date it is approved by the Board of
Directors, on the date it is delivered by the Subsidiary, or on
such other date between such two dates, as the Board of Directors
shall specify.
(k) The Company or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes which
the Company or Subsidiary determined it is required to withhold
in connection with any Stock Incentive.
(l) No Stock Incentive and no rights under the Plan,
contingent or otherwise, shall be assignable or subject to any
encumbrance, pledge or charge of any nature except that, under
such rules and regulations as the Board may establish, a
beneficiary may be designated in respect of a Stock Incentive in
the event of the death of the holder of such Stock Incentive and
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except that if such beneficiary shall be the executor or
administrator of the estate of the holder of such Stock
Incentive, any rights in respect of such Stock Incentive may be
transferred to the person or persons or entity (including a
trust) entitled thereto under the will of the holder of such
Stock Incentive or, in the case of intestacy, under the laws
relating to intestacy. A Stock Incentive shall be exercisable
during a Key Employee's lifetime only by the Key Employee or by
the Key Employee's guardian, conservator or similar legal
representative.
(m) Nothing in the Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of,
any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any
class or group of employees, which the Company or any Subsidiary
now has or may hereafter lawfully put into effect, including
without limitation, any retirement, pension, insurance, stock
purchase, incentive compensation or bonus plan.
(n) The place of administration of the Plan shall
conclusively be deemed to be within the State of New Jersey and
the validity, construction, interpretation and administration of
the Plan and of any rules and regulations or determinations or
decisions made thereunder, and the rights of any and all persons
having or claiming to have any interest therein or thereunder,
shall be governed by, and determined exclusively and solely in
accordance with, the laws of the State of New Jersey. Without
limiting the generality of the foregoing, the period within which
any action must be commenced arising under or in connection with
the Plan, or any payment or award made or purportedly made under
or in connection therewith, shall be governed by the laws of the
State of New Jersey, irrespective of the place where the act or
omission complained of took place and of the residence of any
party to such action and irrespective of the place where the
action may be brought.
Section 13. Amendment or Discontinuance of Plan:
(a) The Plan may be amended by the Board of Directors at any
time; provided, however, that without the approval of the
shareholders of the Company, no amendment shall be made which (i)
increases the aggregate number of shares of Common Stock that may
be issued or transferred pursuant to Stock Incentives as provided
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in paragraph (a) of Section 4, (ii) amends the provisions of
paragraph (a) of Section 11 with respect to eligibility and
disinterest of the members of the Committee or of paragraph (b)
of Section 11 with respect to eligibility and disinterest of a
majority of the members of the Board of Directors, (iii) permits
any person who is not determined to be a Key Employee at the time
to be granted a Stock Incentive, (iv) amends Section 10 to extend
the term of the Plan, or (v) amends this Section 13.
(b) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue the Plan.
(c) No amendment or discontinuance of the Plan by the Board
of Directors or the shareholders of the Company shall adversely
affect any Stock Incentive theretofore granted without the
consent of the holder thereof.
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RESTATED
INGERSOLL-RAND COMPANY
SUPPLEMENTAL PENSION PLAN
INTRODUCTION
Ingersoll-Rand Company (the "Company") maintains one or more
pension plans (the "Qualified Pension Plans") for salaried
employees employed by the Company, and certain subsidiaries and
affiliates of the Company (the "Employees"), under which benefits
are subject to plan qualification limits imposed by the Internal
Revenue Code of 1986, as amended (the "Code").
The Company recognizes that in certain circumstances it is
desirable to provide pension benefits to Employees which are
supplemental to those provided by the Qualified Pension Plans.
The circumstances in which supplemental benefits will be paid
are:
o when the limitation on benefits payable under the
Company's Qualified Pension Plans as specified in
Section 415 of the Code (the "Section 415 Limits")
reduces the benefit otherwise payable under the
Qualified Pension Plans; and
o when, effective for years after 1988, the limitation on
the amount of compensation that may be taken into
accounting in determining benefits under the Company's
Qualified Pension Plans, as specified in Section
401(a)(17) of the Code (the "Section 401 (a)(17)
Limit"), reduces the benefit otherwise payable under
the Qualified Pension Plans.
Accordingly, the Company maintains this Supplemental Pension Plan
to provide a vehicle under which supplemental benefits can be
paid to salaried employees employed by the Company and certain
subsidiaries and affiliates of the Company. The provisions
of this Supplemental Pension Plan shall be applicable to all
persons who retire or otherwise terminate employment on or after
January 1, 1992 and shall supersede the provisions of the
Company's Supplemental Pension Plan maintained by the Company
prior to January 1, 1992.
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SECTION 1
SUPPLEMENTAL PLAN BENEFITS
1.1 Excess Pension Benefit. An Employee shall be entitled to a
benefit under this Supplemental Pension Plan if his benefit
determined under the provisions of the Qualified Pension
Plan in which he participates is less than such benefit
would have been if (i) the Section 415 Limits did not apply,
and (ii) the definition of Compensation specified under such
Qualified Pension Plan did not exclude compensation after
1988 in excess of the Section 401(a)(17) Limit.
If an Employee's benefit from the Qualified Pension Plan in
which he participates is reduced as a result of any of the
conditions described in the preceding paragraph, the benefit
to which the Employee shall be entitled under this
Supplemental Pension Plan shall be equal to the excess of
(a) over (b) where:
(a) is the benefit which would have been payable under the
terms of such Qualified Pension Plan, as a single life
annuity with benefits payable monthly, if (i) the
Section 415 Limits did not apply, and (ii) the
definition of Compensation specified under such
Qualified Pension Plan did not exclude compensation
after 1988 in excess of the Section 401 (a)(17) Limit;
and
(b) is the benefit actually payable as a single life
annuity to the Employee under the terms of such
Qualified Pension Plan.
For purposes of this Section 1.1, the single life annuity
payable under the terms of the Qualified Pension Plan shall
be determined as of the Employee's Determination Date. The
Determination Date shall be (a) in the case of separation
from service by reason of retirement, the Employee's
retirement date, and (b) in the case of separation from
service other than by reason of retirement (such as death or
disability), the first date on which the Employee becomes
eligible to begin receiving payment of benefits under the
Qualified Pension Plan.
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SECTION 2
VESTING
2.1 Vesting. An Employee shall be vested in the benefit provided
under Section 1.1 of this Supplemental Pension Plan in
accordance with the vesting provisions of the Qualified
Pension Plan.
SECTION 3
DISTRIBUTIONS
3.1 Payment of Benefits. Benefits payable under this
Supplemental Pension Plan shall be made in the event of
retirement, disability or any other termination of
employment. Benefits shall be payable solely in the form of
a lump sum. The lump sum amount, determined as of an
Employee's Determination Date, shall be the Actuarial
Equivalent value of the single life annuity determined under
Section 1.1 hereof, using the discount factor set by the
PBGC on the January 1 preceding the Determination Date. Such
benefit shall be paid on the Payment Date, together with
interest accrued thereon from the Determination Date, (a) if
the assets are held in trust, then at the interest rate of
the trust, or (b) if the assets are not held in trust, at
the then current earnings rate of the Fixed Income Fund of
the Ingersoll-Rand Company Savings and Stock Investment
Plan. An Employee's Payment Date shall be the later of (a)
the first business day of the year following the
Determination Date, or (b) the first day of the sixth month
following the Determination Date.
3.2 Payments to Beneficiaries. In the event that an Employee
dies prior to the Payment Date but on or after the
Determination Date, payment shall be made to the beneficiary
designated by the Employee under this Supplemental Pension
Plan. An Employee may designate a beneficiary, or change the
designated beneficiary, without obtaining consent of a
spouse, provided that such designation or change shall be
effective only upon receipt of written notification by the
Compensation and Nominating Committee, as defined in Section
4.3 (the "Committee"). In the event of failure to designate
a beneficiary under this Supplemental Pension Plan, an
Employee's beneficiary under this Plan shall be the same as
the beneficiary under the Ingersoll-Rand Company Savings and
Stock
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3.3 Withholding. The Company shall be entitled to withhold from
the payment due under this Supplemental Pension Plan any and
all taxes of any nature required by any government to be
withheld from such payment.
3.4 Loans. No loans to Employees shall be permitted under this
Supplemental Pension Plan.
SECTION 4
MISCELLANEOUS
4.1 Amendment and Termination. This Supplemental Pension Plan
may, at any time and from time to time, be amended or
terminated, without consent of any Employee or beneficiary,
(a) by the Board of Directors of the Company or (b) in the
case of amendments which do not materially modify the
provisions hereof, the Committee, provided, however, that no
such amendment or termination shall reduce any benefits
accrued under the terms of this Supplemental Pension Plan
prior to the date of termination or amendment.
Notwithstanding the foregoing, in the event the Company's
Board of Directors (or any trustee involved in maintaining
any reserves established by the Company for purposes of
satisfying its obligations hereunder) determines that a
"change of control" of the Company has occurred, any
subsequent amendment modifying or terminating the Plan shall
have no force or effect. For purposes of this paragraph, a
"change of control" shall have the meaning designated in the
Ingersoll-Rand Benefit Trust Agreement, dated as of
September 1, 1988, as amended, between the Company and The
Bank of New York, as trustee, established by the Company for
purposes of satisfying certain obligations to executive
employees of the Company.
4.2 No Contract of Employment. The establishment of this
Supplemental Pension Plan or any modification thereof shall
not give any Employee or other person the right to remain in
the service of the Company or any of its subsidiaries, and
all Employees and other persons shall remain subject to
discharge to the same extent as if the Supplemental Pension
Plan had never been adopted.
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4.3 Compensation and Nominating Committee. This Supplemental
Pension Plan shall be administered by the Compensation and
Nominating Committee appointed by the Company's Board of
Directors, or any successor committee appointed by the
Company's Board of Directors (the "Committee"). The
Committee shall make all determinations as to the right of
any person to a benefit. Any denial by the Committee of the
claim for benefits under this Supplemental Pension Plan by
an Employee or beneficiary shall be stated in writing by the
Committee and delivered or mailed to the Employee or
beneficiary. Such notice shall set forth the specific
reasons for the Committee's decision. In addition, the
Committee shall afford a reasonable opportunity to any
Employee or beneficiary whose claim for benefits has been
denied for a review of the decision denying the claim.
4.4 Entire Agreement; Successors. This Supplemental Pension
Plan, including any subsequently adopted amendments, shall
constitute the entire agreement or contract between the
Company and any Employee regarding this Supplemental Pension
Plan. There are no covenants, promises, agreements,
conditions or understandings, either oral or written,
between the Company and any Employee relating to the subject
matter hereof, other than those set forth herein. This
Supplemental Pension Plan and any amendment shall be binding
on the Company and the Employee and their respective heirs,
administrators, trustees, successors, and assigns, including
but not limited to, any successors to the Company by merger,
consolidation or otherwise by operation of law, and on all
designated beneficiaries of the Employee.
4.5 Severability. If any provision of this Supplemental Pension
Plan shall to any extent be invalid or unenforceable, the
remainder of the Supplemental Pension Plan shall not be
affected thereby, and each provision of the Supplemental
Pension Plan shall be valid and enforced to the fullest
extent permitted by law.
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4.6 Application of Plan Provisions. All relevant provisions of
the Qualified Pension Plans shall apply to the extent
applicable to the contractual obligations of the Company
under this Supplemental Pension Plan. With respect to any
Employee, the applicable provisions shall be those of the
Qualified Pension Plan in which the Employee participates.
Benefits provided under the Supplemental Pension Plan are
independent of, and in addition to, any payments made to
Employees under any other plan, program, or agreement
between the Company and Employees in the Supplemental
Pension Plan, or any other compensation payable to the
Employee by the Company, or by any subsidiary, or affiliate
of the Company.
The laws of the state of New Jersey shall govern this
Supplemental Pension Plan.
4.7 Participant as General Creditor. The Company shall have the
right to establish a reserve or make any investment for the
purposes of satisfying its obligation hereunder for payment
of benefits at its discretion, provided, however, that no
Employee eligible to participate in this Supplemental
Pension Plan shall have any interest in such investment or
reserve. To the extent that any person acquires a right to
receive benefits under this Supplemental Pension Plan, such
rights shall be no greater than the right of any unsecured
general creditor of the Company.
4.8 Nonassignability. The right of any Employee or any
beneficiary in any benefit hereunder shall not be subject to
attachment or other legal process for the debts of such
Employee or beneficiary; nor shall any such benefit be
subject to anticipation, alienation, sale, transfer,
assignment or encumbrance.
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INGERSOLL-RAND COMPANY
SUPPLEMENTAL SAVINGS AND STOCK INVESTMENT PLAN
INTRODUCTION
Ingersoll-Rand Company (the "Company") maintains the
Ingersoll-Rand Company Savings and Stock Investment Plan (the
"Qualified Savings Plan") for employees employed by the Company
and certain subsidiaries and affiliates of the Company (the
"Employees"), under which benefits are subject to various
limitations imposed by Sections 401 and 415 of the Internal
Revenue Code of 1986, as amended (the "Code").
The purpose of this Ingersoll-Rand Company Supplemental Savings
and Stock Investment Plan (the "Supplemental Savings Plan") is to
provide a vehicle under which Employees can be paid benefits
which are supplemental to benefits payable under the Qualified
Savings Plan that are limited by operation of Sections 401 and
415 of the Code (or successor provisions).
It is intended that this Supplemental Savings Plan be treated as
"a plan which is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees"
within the meaning of the Employee Retirement Income Security Act
of 1974, as amended.
Unless otherwise indicated herein, capitalized terms shall have
the same meanings as they have under the Qualified Savings Plan.
This Supplemental Savings Plan shall be effective as of
January 1, 1989.
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SECTION 1
ELIGIBILITY
1.1 Eligibility. An Employee shall become eligible to
participate under this Supplemental Savings Plan for a
calendar year as of the date on which his total Company
Matching Contributions for such year under the Qualified
Savings Plan are less than such total Company Matching
Contributions would have been if the definition of
Compensation specified in the Qualified Savings Plan did not
exclude compensation in excess of the limitation provided
under Section 401(a)(17) of the Code; provided, however,
that an Employee shall be eligible to participate for a year
only if such Employee makes total Basic Before-Tax
Contributions and Basic After-Tax Contributions for the year
in the aggregate equal to the maximum amount permitted under
the Qualified Savings Plan.
SECTION 2
ACCOUNTS/SUPPLEMENTAL BENEFITS
2.1 Accounts. The Company shall establish on its books an
Account for each Employee who has become eligible to
participate in this Supplemental Savings Plan (each an
"Employee Account"). Such Employee Accounts shall be
credited with Supplemental Company Contributions in
accordance with Sections 2.2 and 2.3 hereof.
2.2 Supplemental Company Contributions. An Employee shall be
entitled to receive a Supplemental Company Contribution
(credited as provided in Section 2.3) for any year in which
the Employee's Compensation for the year exceeds the
limitation provided under Section 401(a)(17) of the Code.
The amount of Supplemental Company Contributions credited to
the Employee Account of an Employee who is eligible to
receive a benefit for a year shall equal (a) the Company
Matching Contributions for such year, calculated as if the
limitation described above did not apply (and assuming that
the Employee has made Basic Before-Tax Contributions and
Basic After-Tax Contributions under the Qualified Savings
Plan in the aggregate equal to the maximum amount permitted
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under such Plan), less (b) the Company Matching
Contributions made with respect to the Employee under the
Qualified Savings Plan.
2.3 Common Stock Equivalents.
(a) For purposes hereof, the following terms shall have the
Meanings set forth below:
(i) "Common Stock" means shares of the common stock of
the Company.
(ii) "Common Stock Equivalent" means the right to
receive dividends in respect of the Common Stock and the
right to receive the Fair Market Value of the Common Stock.
(iii) "Fair Market Value of the Common Stock" means the
mean between the high and low sales prices of one share of
Common Stock as reported on the New York Stock
Exchange-Composite Tape. If the Common Stock is not listed
or admitted to trading on the New York Stock Exchange, the
Fair Market Value of the Common Stock shall be the mean
between the high and low sales prices of one share of Common
Stock on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or, if
the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price, or
if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market of the Common Stock,
as reported by the National Association of Securities
Dealers, Inc. Automated Quotations system or such other
system then in use, or, if on any such date the Common Stock
is not quoted by any such organization, the average of the
closing bid and asked prices of the Common Stock as
furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors of the
Company. If on any such date no market maker is making a
market in the Common Stock, the Fair Market Value of the
Common Stock shall be determined in good faith by the Board
of Directors of the Company.
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(b) All Supplemental Company Contributions shall be made by
crediting to the Employee Account of each Employee eligible
to participate in this Supplemental Savings Plan such number
of Common Stock Equivalents (and fractions thereof) as will
equal (i) the amount of Supplemental Company Contributions
to which such Employee is entitled pursuant to Section 2.2,
divided by (ii) the Fair Market Value of the Common Stock on
the date such Supplemental Company Contribution is made.
Crediting of Common Stock Equivalents shall occur on the
last business day of each month to the Employee Accounts of
eligible Employees.
(c) On the date of payment of each cash dividend in respect
of the Common Stock, each Employee Account shall be credited
with additional Common Stock Equivalents equal to (i) the
cash dividends which would be payable in respect of such
number of shares of Common Stock as equals the number of
Common Stock Equivalents then credited to such Employee
Account (prior to the crediting of such additional Common
Stock Equivalents) divided by (ii) the Fair Market Value of
the Common Stock on such date.
(d) In the event of any stock dividend on the Common Stock
or any split-up or combination of shares of the Common
Stock, appropriate adjustment shall be made by the Committee
(hereinafter defined) in the aggregate number of Common
Stock Equivalents credited to each Employee Account.
SECTION 3
VESTING
3.1 Vesting. Except as provided in Section 6 hereof, an
Employee shall vest in his Employee Account at the same time
that the Employee becomes vested in his Company Account
under the Qualified Savings Plan. An Employee shall forfeit
the non vested portion of his Employee Account upon his
termination of employment with the Company to the extent
provided in the Qualified Savings Plan.
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SECTION 4
DISTRIBUTIONS
4.1 Time of Distribution. The amounts payable to an Employee
hereunder shall be payable in a lump sum on the Employee's
Payment Date. An Employee's Payment Date shall be the later
of (a) the first business day of the calendar year following
the date the Employee's employment with the Company
terminates by reason of death, disability, retirement or
otherwise, or (b) the first business day of the sixth
calendar month following the date the Employee's employment
with the Company terminates by reason of death, disability,
retirement or otherwise.
Any such payment shall be made to the Employee, or to his
beneficiary under this Supplemental Savings Plan if he is
not then living. The Employee's beneficiary under this
Supplemental Savings Plan shall be the beneficiary under the
Qualified Savings Plan unless the Employee designates
another beneficiary in writing, and such written designation
has been received by the Committee. An Employee may change
the designated beneficiary under this Supplemental Savings
Plan at any time, by providing such designation in writing
to the Committee (as hereinafter defined).
4.2 Valuation Date. For purposes hereof, the Valuation Date
shall be the Valuation Date (as defined in the Qualified
Savings Plan) coincident with or next following the
termination of the Employee's employment with the Company by
reason of death, disability, retirement or otherwise,
provided, however, that the Employee may by written election
provided to the Committee prior to such date of termination
designate the Valuation Date to be the date which is the
fifth business day preceding the Payment Date.
4.3 Form of Benefits. Benefits payable under this Supplemental
Savings Plan shall be in the form of a cash lump-sum equal
to the product of (a) the number of Common Stock Equivalents
credited to such Employee's Account as of the date of such
Employee's termination of employment, multiplied by (b) the
Fair Market Value of the Common Stock on the Valuation Date.
The amount payable pursuant to this Section 4.3 shall accrue
interest at the prime rate announced from time to time by
Chase Manhattan Bank, N.A. until payment is made.
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4.4 Payment of Benefits. The benefits payable under this
Supplemental Savings Plan shall be paid to an Employee by
the Company, provided, however, that if the Company shall
have made a contribution to a trust established under
Section 5 hereof of all or a portion of the amount credited
to such Employee's Account under this Supplemental Savings
Plan (a) the amount paid to the Employee by the Company
hereunder shall be reduced by the amount distributed to such
Employee from such trust and (b) the amount distributed to
such Employee from such trust shall be limited by the amount
to which such Employee is entitled Pursuant to Section 4.3
hereof.
SECTION 5
TRUST FUND/INVESTMENT
5.1 Establishment of Trust. Except as provided in Section 6.1
hereof, the Company shall have no obligation to fund the
Employee Accounts hereunder. The Company may, however, in
its sole discretion, enter into a trust agreement and
establish a trust fund to assist it in meeting its
obligations under this Supplemental Savings Plan. The trust
agreement shall provide that all amounts contributed to the
trust, together with earnings thereon, shall be invested and
reinvested as provided therein.
5.2 Rights of Creditors. The assets held by the trust shall be
subject to the claims of general creditors of the Company in
the event of the Company's insolvency. The rights of an
Employee to the assets of such trust fund shall not be
superior to those of an unsecured creditor of the Company.
5.3 Disbursement of Funds. All contributions to the trust fund
shall be held and disbursed in accordance with the
provisions of the related trust agreement. No portion of
the trust fund may be returned to the Company other than in
accordance with the terms of the related trust agreement.
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5.4 Company Obligation. Notwithstanding any provisions of any
such trust agreement to the contrary, the Company shall
remain obligated to pay benefits under this Supplemental
Savings Plan. Nothing in this Supplemental Savings Plan or
any such trust agreement shall relieve the Company of its
liabilities to pay benefits under this Supplemental Savings
Plan except to the extent that such liabilities are met by
the distribution of trust assets.
SECTION 6
CHANGE OF CONTROL
6.1 Contributions to Trust. In the event the Company's Board of
Directors determines that a "change of control" of the
Company has occurred, the Company shall be obligated to
establish a trust and to contribute to the trust an amount
equal to the balance credited to each Employee's Account
established hereunder, such Accounts to be valued as of the
last day of the calendar month immediately preceding the
date the Board of Directors determines that a "change in
control" has occurred.
6.2 Amendments. Following a "change of control" of the Company,
any amendment modifying or terminating this Supplemental
Savings Plan shall have no force or effect.
6.3 Definition. For purposes hereof, a "change of control"
shall have the meaning designated in the Ingersoll-Rand
Benefit Trust Agreement, dated as of September 1, 1988, as
amended, between the Company and The Bank of New York, as
trustee, established by the Company for purposes of
satisfying certain obligations to executive employees of the
Company.
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SECTION 7
MISCELLANEOUS
7.1 Amendment and Termination. Except as provided in Section
6.2 hereof, this Supplemental Savings Plan may, at any time
and from time to time, be amended or terminated without the
consent of any Employee or beneficiary, (a) by the Board of
Directors of the Company, or (b) in the case of amendments
which do not materially modify the provisions hereof, the
Committee, provided, however, that no such amendment or
termination shall reduce any benefits accrued under the
terms of this Supplemental Savings Plan prior to the date of
termination or amendment.
7.2 No Contract of Employment. The establishment of this
Supplemental Savings Plan or any modification thereof shall
not give any Employee or other person the right to remain in
the service of the Company or any of its subsidiaries, and
all Employees and other persons shall remain subject to
discharge to the same extent as if the Supplemental Savings
Plan had never been adopted.
7.3 Limitation of Rights. Nothing in this Supplemental Savings
Plan shall be construed to give any Employee any rights
whatsoever with respect to shares of Common Stock.
7.4 Withholding. The Company shall be entitled to withhold from
any payment due under this Supplemental Savings Plan any and
all taxes of any nature required by any government to be
withheld from such payment.
7.5 Loans. No loans to Employees shall be permitted under this
Supplemental Savings Plan.
7.6 Compensation and Nominating Committee. This Supplemental
Savings Plan shall be administered by the Compensation and
Nominating Committee (or any successor committee) of the
Board of Directors of the Company (the "Committee"). The
Committee shall make all determinations as to the right of
any person to a benefit. Any denial by the Committee of the
claim for benefits under this Supplemental Savings Plan by
an Employee or beneficiary shall be stated in writing by the
Committee and delivered or mailed to the Employee or
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beneficiary. Such notice shall set forth the specific
reasons for the Committee's decision. In addition, the
Committee shall afford a reasonable opportunity to any
Employee or beneficiary whose claim for benefits has been
denied for a review of the decision denying the claim.
7.7 Entire Agreement; Successors. This Supplemental Savings
Plan, including any subsequently adopted amendments, shall
constitute the entire agreement or contract between the
Company and any Employee regarding this Supplemental Savings
Plan. There are no covenants, promises, agreements,
conditions or understandings, either oral or written,
between the Company and any Employee relating to the subject
matter hereof, other than those set forth herein. This
Supplemental Savings Plan and any amendment hereof shall be
binding on the Company and the Employees and their
respective heirs, administrators, trustees, successors and
assigns, including but not limited to, any successors of the
Company by merger, consolidation or otherwise by operation
of law, and on all designated beneficiaries of the Employee.
7.8 Severability. If any provision of this Supplemental Savings
Plan shall, to any extent, be invalid or unenforceable, the
remainder of this Supplemental Savings Plan shall not be
affected thereby, and each provision of this Supplemental
Savings Plan shall be valid and enforceable to the fullest
extent permitted by law.
7.9 Application of Plan Provisions. All relevant provisions of
the Qualified Savings Plan shall apply to the extent
applicable to the obligations of the Company under this
Supplemental Savings Plan. Benefits provided under this
Supplemental Savings Plan are independent of, and in
addition to, any payments made to Employees under any other
plan, program, or agreement between the Company and
Employees eligible to participate in this Supplemental
Savings Plan, or any other compensation payable to any
Employee by the Company or by any subsidiary or affiliate of
the Company.
7.10 Governing Law. The laws of the State of New Jersey shall
govern this Supplemental Savings Plan.
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7.11 Participant as General Creditor. Benefits under the
Supplemental Savings Plan shall be payable by the Company
out of its general funds. The Company shall have the right
to establish a reserve or make any investment for the
purposes of satisfying its obligation hereunder for payment
of benefits at its discretion, provided, however, that no
Employee eligible to participate in this Supplemental
Savings Plan shall have any interest in such investment or
reserve. To the extent that any person acquires a right to
receive benefits under this Supplemental Savings Plan, such
rights shall be no greater than the right of any unsecured
general creditor of the Company.
7.12 Nonassignability. To the extent permitted by law, the right
of any Employee or any beneficiary in any benefit hereunder
shall not be subject to attachment or other legal process
for the debts of such Employee or beneficiary; nor shall any
such benefit be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
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INGERSOLL-RAND COMPANY
SUPPLEMENTAL RETIREMENT ACCOUNT PLAN
INTRODUCTION
Ingersoll-Rand Company (the "Company") maintains the
Ingersoll-Rand Retirement Account Plan (the "Qualified Retirement
Account Plan") for employees employed by the Company and certain
subsidiaries and affiliates of the Company (the "Employees"),
under which benefits are subject to various limitations imposed
by Sections 401 and 415 of the Internal Revenue Code of 1986, as
amended (the "Code").
The purpose of this Ingersoll-Rand Company Supplemental
Retirement Account Plan (the "Supplemental Retirement Account
Plan") is to provide a vehicle under which Employees can be paid
benefits which are supplemental to benefits payable under the
Qualified Retirement Account Plan and are limited by operation of
Sections 401 and 415 of the Code (or successor provisions).
It is intended that this Supplemental Retirement Account Plan be
treated as "a plan which is unfunded and is maintained by an
employer primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended.
Unless otherwise indicated herein, capitalized terms shall have
the same meanings as they have under the Qualified Retirement
Account Plan.
This Supplemental Retirement Account Plan shall be effective as
of January 1, 1989.
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SECTION I
ELIGIBILITY
1.1 Eligibility. An Employee shall become eligible to
participate under this Supplemental Retirement Account Plan
for a calendar year as of the date on which the aggregate
amount of his Company Contributions and Company Matching
Contributions, if any, for such year under the Qualified
Retirement Account Plan are less than the aggregate amount
which such Company Contributions and Company Matching
Contributions would have been if the definition of
Compensation specified in the Qualified Retirement Account
Plan did not exclude compensation in excess of the
limitation provided under Section 401(a)(17) of the Code;
provided, however, that no Employee shall be eligible under
this Supplemental Retirement Account Plan if such Employee
is a Grandfathered Participant under the Qualified
Retirement Account Plan.
SECTION 2
ACCOUNTS/SUPPLEMENTAL BENEFITS/INTEREST
2.1 Accounts. The Company shall establish on its books an
Account for each Employee who has become eligible to
participate in this Supplemental Retirement Account Plan
(each an "Employee Account"). Such Employee Accounts shall
be credited with Supplemental Company Contributions and
Supplemental Company Matching Contributions in accordance
with Sections 2.2 and 2.3 hereof.
2.2 Supplemental Company Contributions. An Employee shall be
entitled to receive a Supplemental Company Contribution for
any year in which the Employee's Compensation for the year
exceeds the limitation provided under Section 401(a)(17) of
the Code. The amount of Supplemental Company Contributions
credited to the Employee Account of an Employee who is
eligible to receive such a benefit for any year shall equal
(a) the Company Contributions for such year, calculated as
if the limitation described above did not apply, less (b)
the Company Contributions made with respect to the Employee
under the Qualified Retirement Account Plan.
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2.3 Supplemental Company Matching Contributions. An Employee
entitled for any year to a Supplemental Company Contribution
who is also eligible for Company Matching Contributions
under the Qualified Retirement Account Plan (except for the
limitation provided under Section 401(a)(17) of the Code)
shall be entitled to receive a Company Matching Contribution
for such year. The amount of Supplemental Company Matching
Contributions credited to the Employee Account of an
Employee who is eligible to receive such a benefit for any
year shall equal (a) the Company Matching Contributions for
such year (calculated as if the limitation described above
did not apply), less (b) the Company Matching Contributions
made with respect to the Employee under the Qualified
Retirement Account Plan.
2.4 Interest. Unless and until the Company establishes a trust
pursuant to Section 3 or 6.1 hereof, the amounts credited to
each Employee Account shall be credited with interest at a
rate equal to the rate of return earned by the Fixed Income
Fund described in Section 5.1 of the Company's Savings and
Stock Investment Plan. To the extent the Company
contributes funds on behalf of an Employee to a trust
established under Section 3 or 6.1 hereof, his Employee
Account hereunder shall be transferred to an account within
such trust and shall be credited with the rate of return
earned by the funds so contributed. Any unfunded portion of
the Employee Account shall continue to be credited with
interest as provided above in this Section 2.4.
2.5 Timing of Contributions and Interest. All Company
Contributions, Company Matching Contributions and interest
to be credited to an Employee Account hereunder shall be
credited as of the last business day of each calendar month.
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SECTION 3
VESTING
3.1 Vesting. Except as provided in Section 6 hereof, an
Employee shall vest in his Employee Account at the same time
that the Employee becomes vested in his Company Contribution
Account and Company Matching Contribution Account under the
Qualified Retirement Account Plan. An Employee shall
forfeit the non vested portion of his Employee Account upon
his termination of employment with the Company to the extent
provided in the Qualified Retirement Account Plan.
SECTION 4
DISTRIBUTIONS
4.1 Time of Distribution. The amounts payable to an Employee
hereunder shall be payable in a lump sum on the Employee's
Payment Date. An Employee's Payment Date shall be the later
of (a) the first business day of the calendar year following
the date the Employee's employment with the Company
terminates by reason of death, disability, retirement or
otherwise, or (b) the first business day of the sixth
calendar month following the date the Employee's employment
with the Company terminates by reason of death, disability,
retirement or otherwise.
Any such payment shall be made to the Employee, or to his
beneficiary under this Supplemental Retirement Account Plan
if he is not then living. The Employee's beneficiary under
this Supplemental Retirement Account Plan shall be the
beneficiary under the Qualified Retirement Account Plan
unless the Employee designates another beneficiary in
writing, and such written designation has been received by
the Committee. An Employee may change the designated
beneficiary under this Supplemental Retirement Account Plan
at any time, by providing such designation is provided in
writing to the Committee (as hereinafter defined).
4.2 Form of Benefits. Benefits payable under this Supplemental
Retirement Account Plan shall be in the form of a cash
lump-sum equal to the sum of the amount credited to an
Employee's Account as of the Employee's Payment Date.
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SECTION 5
TRUST FUND/INVESTMENT
5.1 Establishment of Trust. Except as provided in Section 6.1
hereof, the Company shall have no obligation to fund the
Employee Accounts hereunder. The Company may, however, in
its sole discretion, enter into a trust agreement and
establish a trust fund to assist it in meeting its
obligations under this Supplemental Retirement Account Plan.
The trust agreement shall provide that all amounts
contributed to the trust, together with earnings thereon,
shall be invested and reinvested as provided therein.
5.2 Rights of Creditors. The assets held by the trust shall be
subject to the claims of general creditors of the Company in
the event of the Company's insolvency. The rights of an
Employee to the assets of such trust fund shall not be
superior to those of an unsecured creditor of the Company.
5.3 Disbursement of Funds. All contributions to the trust fund
shall be held and disbursed in accordance with the
provisions of the related trust agreement. No portion of
the trust fund may be returned to the Company other than in
accordance with the terms of the related trust agreement.
5.4 Company Obligation. Notwithstanding any provisions of any
such trust agreement to the contrary, the Company shall
remain obligated to pay benefits under this Supplemental
Retirement Account Plan. Nothing in this Supplemental
Retirement Account Plan or any such trust agreement shall
relieve the Company of its liabilities to pay benefits under
this Supplemental Retirement Account Plan except to the
extent that such liabilities are met by the distribution of
trust assets.
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SECTION 6
CHANGE OF CONTROL
6.1 Contributions to Trust. In the event the Company's Board of
Directors determines that a "change of control" of the
Company has occurred, the Company shall be obligated to
establish a trust in accordance with the provisions of
Section 3 hereof and to contribute to the trust an amount
equal to the balance of each Employee's Account.
6.2 Amendments. Following a "change of control" of the Company,
any amendment modifying or terminating this Supplemental
Retirement Account Plan shall have no force or effect.
6.3 Definition. For purposes hereof, a "change of control"
shall have the meaning designated in the Ingersoll-Rand
Benefit Trust Agreement, dated as of September 1, 1988, as
amended, between the Company and The Bank of New York, as
trustee, established by the Company for purposes of
satisfying certain obligations to executive employees of the
Company.
SECTION 7
MISCELLANEOUS
7.1 Amendment and Termination. Except as provided in Section
6.2 hereof, this Supplemental Retirement Account Plan may,
at any time and from time to time, be amended or terminated,
without the consent of any Employee or beneficiary, (a) by
the Board of Directors of the Company or (b) in the case of
amendments which do not materially modify the provisions
hereof, the Committee, provided, however, that no such
amendment or termination shall reduce any benefits accrued
under the terms of this Supplemental Retirement Account Plan
prior to the date of termination or amendment.
7.2 No Contract of Employment. The establishment of this
Supplemental Retirement Account Plan or any modification
thereof shall not give any Employee or other person the
right to remain in the service of the Company or any of its
subsidiaries, and all Employees and other persons shall
remain subject to discharge to the same extent as if this
Supplemental Retirement Account Plan had never been adopted.
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7.3 Withholding. The Company shall be entitled to withhold from
any payment due under this Supplemental Retirement Account
Plan any and all taxes of any nature required by any
government to be withheld from such payment.
7.4 Loans. No loans to Employees shall be permitted under this
Supplemental Retirement Account Plan.
7.5 Compensation and Nominating Committee. This Supplemental
Retirement Account Plan shall be administered by the
Compensation and Nominating Committee (or any successor
committee) of the Board of Directors of the Company (the
"Committee"). The Committee shall make all determinations
as to the right of any person to a benefit. Any denial by
the Committee of the claim for benefits under this
Supplemental Retirement Account Plan by an Employee or
beneficiary shall be stated in writing by the Committee and
delivered or mailed to the Employee or beneficiary. Such
notice shall set forth the specific reasons for the
Committee's decision. In addition, the Committee shall
afford a reasonable opportunity to any Employee or
beneficiary whose claim for benefits has been denied for a
review of the decision denying the claim.
7.6 Entire Agreement; Successors. This Supplemental Retirement
Account Plan, including any subsequently adopted amendments,
shall constitute the entire agreement or contract between
the Company and any Employee regarding this Supplemental
Retirement Account Plan. There are no covenants, promises,
agreements, conditions or understandings, either oral or
written, between the Company and any Employee relating to
the subject matter hereof, other than those set forth
herein. This Supplemental Retirement Account Plan and any
amendment hereof shall be binding on the Company and the
Employees and their respective heirs, administrators,
trustees, successors and assigns, including but not limited
to, any successors of the Company by merger, consolidation
or otherwise by operation of law, and on all designated
beneficiaries of the Employee.
7.7 Severability. If any provision of this Supplemental
Retirement Account Plan shall, to any extent, be invalid or
unenforceable, the remainder of this Supplemental Retirement
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Account Plan shall not be affected thereby, and each
provision of this Supplemental Retirement Account Plan shall
be valid and enforceable to the fullest extent permitted by
law.
7.8 Application of Plan Provisions. All relevant provisions of
the Qualified Retirement Account Plan shall apply to the
extent applicable to the obligations of the Company under
this Supplemental Retirement Account Plan. Benefits
provided under this Supplemental Retirement Account Plan are
independent of, and in addition to, any payments made to
Employees under any other plan, program, or agreement
between the Company and Employees eligible to participate in
this Supplemental Retirement Account Plan, or any other
compensation payable to any Employee by the Company or by
any subsidiary or affiliate of the Company.
7.9 Governing Law. The laws of the State of New Jersey shall
govern this Supplemental Retirement Account Plan.
7.10 Participant as General Creditor. Benefits under the
Supplemental Retirement Account Plan shall be payable by the
Company out of its general funds. The Company shall have
the right to establish a reserve or make any investment for
the purposes of satisfying its obligation hereunder for
payment of benefits at its discretion, provided, however,
that no Employee eligible to participate in this
Supplemental Retirement Account Plan shall have any interest
in such investment or reserve. To the extent that any
person acquires a right to receive benefits under this
Supplemental Retirement Account Plan, such rights shall be
no greater than the right of any unsecured general creditor
of the Company.
7.11 Nonassignability. To the extent permitted by law, the right
of any Employee or any beneficiary in any benefit hereunder
shall not be subject to attachment or other legal process
for the debts of such Employee or beneficiary; nor shall any
such benefit be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
206 <PAGE>
<TABLE>
EXHIBIT 11(i)
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
Years ended December 31,
1993 1992 1991 1990 1989
PRIMARY EARNINGS PER SHARE:
Earnings before effect of
accounting changes and
<S> <C> <C> <C> <C> <C>
extraordinary item.......... $ 163,524 $ 115,594 $ 150,589 $ 185,343 $ 202,225
Less dividends on
preference stock ......... -- -- -- 1,838 7,498
Earnings before effect of
accounting changes and
extraordinary item.......... 163,524 115,594 150,589 183,505 194,727
Effect of accounting changes:
- Postemployment benefits (21,000) -- -- -- --
- Postretirement benefits
other than pensions....... -- (332,000) -- -- --
- Income taxes.............. -- (18,000) -- -- --
Extraordinary item............ -- -- -- -- 8,526
Net earnings (loss) applicable
to common stock............. $ 142,524 $ (234,406) $ 150,589 $ 183,505 $ 203,253
Average number of common
shares outstanding.......... 104,991,535 104,340,622 103,634,178 103,351,708 102,842,942
Primary earnings per share:
Earnings before effect of
accounting changes and
extraordinary item.......... $ 1.56 $ 1.11 $1.45 $1.78 $1.89
Effect of accounting changes:
- Postemployment benefits (0.20) -- -- -- --
- Postretirement benefits
other than pensions..... -- (3.19) -- -- --
- Income taxes............ -- (0.17) -- -- --
Extraordinary item.......... -- -- -- -- 0.09
Primary earnings (loss) per
share....................... $ 1.36 $(2.25) $1.45 $1.78 $1.98
</TABLE>
207<PAGE>
EXHIBIT 11(i)
Page 2 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(Continued)
Notes: All common share and per share amounts have been adjusted
for the 2-for-1 stock split which was made in the form of a stock
dividend in 1992. On February 7, 1990, the board of directors
authorized the redemption of the Dutch Auction Rate Transferable
Securities preference stock. The company redeemed Series D-1
preference stock on March 14, 1990, and Series D-2 preference
stock on April 4, 1990. Shares issuable under outstanding stock
plans, applying the "Treasury Stock" method, have been excluded
from the computation of primary earnings per share since such
shares were less than 1% of common shares outstanding, as
follows: 1993 - 600,429; 1992 - 738,149; 1991 - 632,056; 1990 -
639,836; 1989 - 714,992.
208 <PAGE>
<TABLE>
EXHIBIT 11(ii)
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
Years ended December 31,
1993 1992 1991 1990 1989
FULLY DILUTED EARNINGS PER SHARE:
Net earnings before effect of
accounting changes and
<S> <C> <C> <C> <C> <C>
extraordinary item........... $ 163,524 $ 115,594 $ 150,589 $ 185,343 $ 202,225
Less dividends on preference
stock ..................... -- -- -- 1,838 7,498
Earnings before effect of
accounting changes and
extraordinary item........... 163,524 115,594 150,589 183,505 194,727
Effect of accounting changes:
- Postemployment benefits (21,000) -- -- -- --
- Postretirement benefits
other than pensions........ -- (332,000) -- -- --
- Income taxes............... -- (18,000) -- -- --
Extraordinary item............. -- -- -- -- 8,526
Net earnings (loss)............ $ 142,524 $ (234,406) $ 150,589 $ 183,505 $ 203,253
Average number of common
shares outstanding........... 104,991,535 104,340,622 103,634,178 103,351,708 102,842,942
Number of common shares
issuable assuming exercise
under incentive stock plans.. 600,429 738,149 632,056 639,836 714,992
Average number of outstanding
shares, as adjusted for
fully diluted earnings per
share calculations........... 105,591,964 105,078,771 104,266,234 103,991,544 103,557,934
209 <PAGE>
EXHIBIT 11(ii)
Page 2 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
(Continued)
Years ended December 31,
1993 1992 1991 1990 1989
Fully diluted earnings per share:
Earnings before effect of
accounting changes and
extraordinary item........... $ 1.55 $ 1.10 $1.44 $1.76 $1.88
Effect of accounting changes:
- Postemployment benefits (0.20) -- -- -- --
- Postretirement benefits
other than pensions...... -- (3.16) -- -- --
- Income taxes............. -- (0.17) -- -- --
Extraordinary item........... -- -- -- -- 0.08
Fully diluted earnings (loss) per
share........................ $ 1.35 $(2.23) $1.44 $1.76 $1.96
Notes: All common share and per share amounts have been adjusted for the 2-for-1 stock split which
was made in the form of a stock dividend in 1992. This calculation is presented in accordance with
the Securities Exchange Act of 1934, although it is not required disclosure under APB Opinion No.
15. Net earnings per share of common stock computed on a fully diluted basis are based on the
average number of common shares outstanding during each year after adjustment for individual
securities which may be dilutive. Securities entering into consideration in making this calculation
are common shares issuable under employee incentive stock plans. Employee stock options outstanding
have been included in the calculation of fully diluted earnings per share by applying the "Treasury
Stock" Method quarterly. Such calculations have been made using the higher of the average month-end
market prices or the market prices at the end of the quarter, in order to reflect the maximum
potential dilution. On February 7, 1990, the board of directors authorized the redemption of the
Dutch Auction Rate Transferable Securities preference stock. The company redeemed Series D-1
preference stock on March 14, 1990, and Series D-2 preference stock on April 4, 1990.
</TABLE>
210 <PAGE>
<TABLE>
INGERSOLL-RAND COMPANY EXHIBIT 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
(2) Years Ended December 31
Fixed charges: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Interest expense............................ $ 60,222 $ 64,698 $ 64,476 $ 71,663 $ 44,049
Amortization of debt discount and expense... 688 288 265 255 255
Rentals (one-third of rentals).............. 19,425 20,846 21,229 20,599 17,410
Capitalized interest........................ 3,103 3,460 4,640 4,197 4,336
Total fixed charges........................... $ 83,438 $ 89,292 $ 90,610 $ 96,714 $ 66,050
Net earnings (loss)........................... $142,524 $(234,406) $150,589 $185,343 $210,751
Add: Minority income (loss) of majority-
owned subsidiaries................... 13,572 (33,155) 1,938 2,232 1,304
Taxes on income........................ 90,000 67,400 84,600 99,800 100,374
Fixed charges.......................... 83,438 89,292 90,610 96,714 66,050
Effect of accounting changes........... 21,000 350,000 -- -- --
Less: Capitalized interest................... 3,103 3,460 4,640 4,197 4,336
Undistributed earnings (losses) from
less than 50% owned affiliates....... 39,933 16,603 13,523 3,327 6,036
Earnings available for fixed charges ......... $307,498 $ 219,068 $309,574 $376,565 $368,107
Ratio of earnings to fixed charges ........... 3.69(1) 2.45(3) 3.42(4) 3.89 5.57
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)................. $ 42,077 $ 17,865 $ 14,768 $ 4,187 $ 6,903
Less: Dividends paid .................... 2,144 1,262 1,245 860 867
Undistributed earnings (losses) from
less-than 50% owned affiliates............ $ 39,933 $ 16,603 $ 13,523 $ 3,327 $ 6,036
(1) The 1993 calculation includes the effect of the $5 million pretax charge relating to the
restructure of the company's underground mining machinery business. Excluding this amount, the
ratio would have been 3.75.
(2) The company's portion of the earnings and fixed charges of the Dresser-Rand Company (a joint
venture formed effective January 1, 1987 with Dresser Industries, Inc.) are included through
September 30, 1992. Effective October 1, 1992, the company's ownership interest in the
Dresser-Rand Company was reduced from 50% to 49%.
(3) The 1992 calculation includes (i) the effect of the $10 million pretax charge relating to the
restructure of the company's aerospace bearings business and (ii) the full effect of the $70
million pretax restructure of operations charge relating to the Ingersoll-Dresser Pump Company.
Excluding the 1992 restructure charges the ratio would have been 3.35.
(4) The 1991 ratio includes the $7.1 million net pretax benefit from a restructure of operations.
Excluding this amount the ratio would have been 3.34.
</TABLE>
211 <PAGE>
EXHIBIT 13
Page 1 of 64
INGERSOLL-RAND COMPANY
ANNUAL REPORT
TO
SHAREOWNERS
FOR
1993
212
<PAGE>
EXHIBIT 13
Page 2 of 64
Table of Contents
Financial Review and Management Analysis . . . . . . . 3-26
Consolidated Statement of Income . . . . . . . . . . . 27
Consolidated Balance Sheet . . . . . . . . . . . . . . 28-29
Consolidated Statement of Shareowners' Equity . . . . . 30-31
Consolidated Statement of Cash Flows . . . . . . . . . 32-33
Notes to Consolidated Financial Statements . . . . . . 34-62
Report of Management . . . . . . . . . . . . . . . . . 63
Report of Independent Accountants . . . . . . . . . . . 64
213
<PAGE>
EXHIBIT 13
Page 3 of 64
Ingersoll-Rand Company
Financial Review and Management Analysis
1993 Compared to 1992
1993 continued to be a year of challenges and accomplishments for
the company. We were challenged by striving to exceed the prior
year's results while faced with a continued recession in Europe
throughout the year. The turnaround in Europe, which we had
originally expected by the latter half of 1993 did not occur.
However, based on stronger domestic markets, principally in the
automotive, housing, industrial and selected construction
markets, together with continued benefits from company-wide cost-
containment programs, the company was able to meet its operating
goals in 1993.
The company's outlook for 1994 is for a steady improvement in
operating results based on continued improvement in our domestic
markets combined with a gradual recovery in our international
markets throughout the year. These expectations are supported by
our aggressive cost-containment programs, our continuing emphasis
on total quality management and a focus on reengineering our
business processes aimed at accelerating our efficiency gains.
The company notes two significant events for the year. The
first was the full year inclusion of Ingersoll-Dresser Pump
Company (IDP) in the company's results. IDP is a joint venture
between the company and Dresser Industries, Inc., formed
effective October 1, 1992. IDP's operating results in 1993,
which are discussed throughout this report, were adversely
affected by the European recession, but benefitted from the
restructuring plan, which was provided for in 1992 but
implemented for the most part during 1993.
Second, the company adopted, effective January 1, 1993,
Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No.
112 requires an accrual for the expected cost of benefits
provided by an employer to former or inactive employees after
employment but before retirement. These benefits typically are
associated with the continuation of medical and life insurance
benefits for employees on short- and long-term disability.
Previously, these benefits were expensed as incurred. The
company elected to adopt this standard in the fourth quarter of
214
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EXHIBIT 13
Page 4 of 64
1993, and recognized the postemployment benefit obligation as of
January 1, 1993. The effect of the adoption of SFAS No. 112 for
the company totalled $21.0 million ($0.20 per share), net of a
$13.5 million tax benefit. Aside from the effect of the
adjustment, the adoption of SFAS No. 112 was not material to the
company's 1993 financial results and accordingly, the results for
the first three quarters of 1993 have not been restated to
reflect this adoption.
A comparison of key financial data between 1993 and 1992
follows:
o Net sales for 1993 totalled $4.0 billion, 6.3 percent higher
than in 1992. Excluding the sales from the pump units
contributed to IDP by Dresser, sales would have decreased by
approximately two percent.
o Cost of goods sold in 1993 was 75.0 percent of sales, compared
to 76.2 percent in 1992. A partial liquidation of LIFO
(last-in, first-out) inventories lowered 1993 costs by $12.5
million ($7.6 million after-tax, or seven cents per share); a
similar liquidation in 1992 lowered costs by $5.8 million
($3.6 million after-tax, or three cents per share). Excluding
the benefit of the LIFO liquidations, the 1993 cost of goods
sold percentage relationship to sales would have been 75.3
percent versus 76.3 percent for 1992. This reduction
represented the benefit from the company's continuing programs
of aggressive cost-containment and improved volume from some
of our domestic markets.
o Administrative, selling and service engineering expenses were
17.6 percent of sales in 1993, compared to 17.1 percent for
1992. The increase was due to the combined effect of
including IDP's results for the full year of 1993 and
increases in salaries, administrative costs and expenses of a
general nature.
o The 1993 restructure of operations charge totalled $5.0
million and related to the company's decision to sell its
underground coal-mining machinery business during the second
quarter of the year. The sale of this business was finalized
in July 1993. The 1992 restructure charges totalled $80
million, $70 million of which related to the IDP venture and
was recorded in last year's fourth quarter. The remaining $10
million charge was recorded in the third quarter of 1992 and
related to the company's decision to realign its aerospace
bearings business.
215
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EXHIBIT 13
Page 5 of 64
o Interest expense for 1993 was $52.0 million, approximately
four percent lower than the $54.1 million reported for 1992.
The reduction was due to the combined effect of lower overall
outstanding debt and lower effective interest rates in 1993,
when compared to 1992.
o The "other income (expense), net" category is essentially the
sum of three activities: (i) foreign exchange, (ii) equity
interest in partially-owned equity companies, and (iii) other
miscellaneous income and expense items. In 1993, this
category totalled a net expense balance of $7.5 million, as
compared to only $0.7 million for the prior year. A review of
the components of this category show that:
- foreign exchange activity for 1993 totalled $6.6 million of
losses, as compared to $6.2 million of losses in 1992;
- earnings from equity interests in partially-owned equity
companies decreased by approximately $5 million in 1993,
when compared to the prior year, principally due to the 1992
sale of the company's interest in one of these equity
companies; and
- other net miscellaneous expense items were approximately
one-half of prior-year levels, but 1992 included a gain from
the sale of an equity interest in a company, which offset
last year's net miscellaneous expense items.
o Dresser-Rand Company is another partnership between the
company and Dresser Industries, Inc. It commenced operations
on January 1, 1987, and comprises the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's pretax profits from its interest in Dresser-Rand
for 1993 totalled $33.1 million, as compared to $27.6 million
in the prior year. The improvement in the operating results
of Dresser-Rand is attributed primarily to the benefits
obtained from cost-containment programs and the efficiencies
generated by maintaining volume levels at their manufacturing
locations.
216
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EXHIBIT 13
Page 6 of 64
o The Ingersoll-Dresser Pump Company minority interest
represents Dresser's interest in the operating results of IDP.
In 1993, the minority interest was a charge of $11.6 million,
and represented the portion of IDP's earnings that were
allocable to our joint venture partner. The 1992 benefit of
$35.0 million basically represented the portion of last year's
$70 million restructure charge for IDP, which was the
responsibility of our joint venture partner. IDP's 1992
fourth quarter results, excluding the restructure charge, were
essentially at the break-even level. Overall, the
restructuring efforts in IDP have been substantially completed
and the company expects to realize the majority of the
benefits from these actions in 1994 and beyond.
o The company's effective tax rate for 1993 was 35.5 percent,
which is a modest decrease over the 36.8 percent reported for
the prior year. The variance from the 35.0 percent statutory
rate was due primarily to the higher tax rates associated with
foreign earnings and the effect of state and local taxes.
o At December 31, 1993, employment totalled 35,143. This
represents a net decrease of 165 employees over last year's
level of 35,308. Acquisitions added a total of 2,610
employees, while divestitures, attrition and cost-reduction
programs reduced total employment by 2,775.
Liquidity and Capital Resources
Management continues to maximize efforts to utilize assets and
resources in an efficient manner. The following table contains
several key measures of the company's financial performance:
1993 1992 1991
Working capital (in millions) $878 $888 $904
Current ratio 1.9 1.8 2.2
Debt-to-total capital ratio 28/72 30/70 23/77
Average working capital
to net sales 22.0% 23.7% 22.8%
Average days outstanding
in receivables 64.1 61.1 61.1
Average months' supply
of inventory 4.4 4.6 4.9
217
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EXHIBIT 13
Page 7 of 64
Ingersoll-Rand, as a large multinational company, maintains
significant operations in foreign countries. The movement of the
U.S. dollar against foreign currencies has a day-to-day impact on
the company's financial position. This impact is not always
apparent since the company reports its consolidated results in
U.S. dollars. During 1993, many foreign currencies weakened
against the U.S. dollar for most of the year and the effect of
these foreign currency fluctuations was significant.
The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
o Cash and cash equivalents totalled $228.0 million at December
31, 1993, $11.2 million more than the prior year-end balance
of $216.8 million. In evaluating the net change in cash and
cash equivalents, cash flows from operating, investing and
financing activities, and the effect of exchange rate changes
should be considered. Cash flows from operating activities
totalled $164.9 million, investing activities used $60.7
million and financing activities used $86.1 million. Exchange
rate changes during 1993 decreased cash and cash equivalents
by approximately $6.9 million.
o Marketable securities totalled $6.2 million at the end of
1993, approximately $7.2 million less than the balance at
December 31, 1992. Foreign marketable securities decreased by
approximately $0.8 million during the year due to foreign
exchange rate fluctuations. The remaining reduction was due
to the maturity of the various securities and their
liquidation into cash and cash equivalents.
o Receivables totalled $797.5 million at December 31, 1993,
compared to $809.6 million at the prior year-end, for a net
decrease of $12.1 million. Currency translation decreased the
receivable balance during the year by $27.7 million, offset
partially by increased receivables, principally from IDP's
European operations. The average days outstanding in
receivables increased slightly from 1992's level because of
the higher mix of international receivables, due to the IDP
joint venture, which traditionally carry longer payment terms
than domestic receivables.
218
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EXHIBIT 13
Page 8 of 64
o Inventories amounted to $713.7 million at December 31, 1993,
$56.6 million lower than last year's level of $770.3 million.
This decrease was a result of the company's aggressive
inventory control programs, which reduced inventory levels by
approximately $36 million. Currency movements accounted for
an additional $18.8 million reduction in inventory for the
year. Acquisitions less dispositions accounted for the
remaining difference. During the last three years, the
company has been able to reduce its inventory by more than
$100 million (excluding the inventory from the contributed
pump units of Dresser). The company's emphasis on inventory
control was reflected in the reduction in the average months'
supply of inventory, which was 4.4 months at December 31,
1993, compared to 4.6 months at the prior year-end.
o Prepaid expenses totalled $39.8 million at the end of the
year, $15.7 million lower than the balance at December 31,
1992. Foreign exchange activity had the effect of reducing
the balance in this account by $0.8 million during the year.
The net decrease for the year was split between a general
decrease in the company's prepaid expenses and the disposition
of certain assets held for sale.
o Deferred income taxes (current) of $116.9 million at December
31, 1993, represent the deferred tax benefit of the difference
between the book and tax values of various current assets and
liabilities. A schedule of the components for this balance is
in Note 12 of the Notes to Consolidated Financial Statements.
The year-end balance represented an increase of approximately
$15 million from the December 31, 1992, level. Changes due to
foreign currency movements had an immaterial effect on the
year's activities.
o The investment in Dresser-Rand Company totalled $112.6 million
at December 31, 1993. This represented a net decrease of
approximately $7.1 million from 1992's balance of $119.7
million. The components of the change for 1993 consisted of
income for the current year of $33.1 million, a $37.7 million
change in the advance account between the entities and a $2.5
million reduction due to currency fluctuations.
219
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EXHIBIT 13
Page 9 of 64
o The investments in partially-owned equity companies at
December 31, 1993, totalled $158.6 million, $9.3 million
higher than the 1992 balance. The components of this change
consisted of income for the current year of $15.6 million,
dividends of $3.1 million, a net decrease in the amounts due
from these units of $7.6 million and currency movements of
$4.4 million.
o Net property, plant and equipment increased by approximately
$28 million in 1993 to a year-end balance of $875.1 million.
Fixed assets from acquisitions during 1993 added $25.9
million. Capital expenditures in 1993 totalled $132.0
million, a slight increase over the prior year's level.
Foreign exchange fluctuations decreased the net fixed asset
values in U.S. dollars by approximately $11.9 million. The
remaining net decrease was principally due to depreciation
expense.
o Intangible assets, net, totalled $105.9 million at December
31, 1993, as compared to $113.2 million at December 31, 1992,
for a net decrease of $7.3 million. Amortization (which was
charged to expense) accounted for a reduction of $5.9 million.
The remaining net change was attributable to currency
fluctuations and acquisitions during the year.
o Deferred income taxes (noncurrent) totalled $90.9 million at
December 31, 1993. This net deferred asset arose in 1992
primarily because of the tax effects related to the adoption
of SFAS No. 106 (Postretirement Benefits Other Than Pensions).
The 1993 balance was $13.9 million higher than the 1992
balance, primarily due to the company's adoption of SFAS No.
112 relating to postemployment benefits. A listing of the
components which comprised the balance at December 31, 1993,
can be found in Note 12 of the Notes to Consolidated Financial
Statements.
o Other assets totalled $130.0 million at year-end, an increase
of approximately $16.5 million from the December 31, 1992,
balance of $113.5 million. The change in the account balance
was primarily due to an increase in prepaid pensions. Foreign
exchange activity in 1993 had a minimal effect on the account
balance during the year.
220
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EXHIBIT 13
Page 10 of 64
o Accounts payable and accruals totalled $762.4 million at
December 31, 1993, a decrease of $60.7 million from last
year's balance of $823.1 million. The majority of the 1993
reduction related to expenditures made with respect to
restructure of operations reserves for IDP, which were
established in the fourth quarter of 1992 but not paid until
the current year. All other activity, including acquisitions,
caused an increase of approximately $20 million in this
category during the year, while foreign exchange activity
decreased this account by approximately $21 million.
o Loans payable were $206.9 million at the end of 1993, compared
to $201.3 million at December 31, 1992. Current maturities of
long-term debt, included in loans payable, were $82 million
and $17.2 million at December 31, 1993 and 1992, respectively.
Excluding the current maturities of long-term debt, short-term
borrowings decreased by approximately $49.5 million during
1993. This balance can be attributed to a decrease in foreign
short-term debt and a reduction in the total loans outstanding
during 1993 of $4.2 million due to foreign currency
fluctuations.
o Long-term debt, excluding current maturities, totalled $314.1
million at December 31, 1993, compared to $355.6 million at
December 31, 1992, a net decrease of $41.5 million. This net
decrease was the result of additions to long-term debt of
$101.8 million reduced by transfers to loans payable for
current maturities and a $0.6 million reduction from foreign
currency fluctuations. The additions to long-term debt
primarily represented, the February 3, 1993, issuance by the
company of $100 million of notes at 6 7/8% per annum, which
are not redeemable prior to maturity in 2003. The proceeds
from these notes were used to redeem $68 million of the
company's outstanding 8.05% Debentures Due 2004 and for
general corporate purposes.
o Postemployment benefits at December 31, 1993, totalled $515.8
million, an increase of $21.3 million over the December 31,
1992, balance. Postemployment benefits include medical and
life insurance postretirement benefits, long-term pension
accruals and other noncurrent postemployment accruals.
Postemployment benefits represent the company's noncurrent
liability in accordance with SFAS Nos. 87, 106 and 112. SFAS
No. 112 was adopted as of January 1, 1993. See Notes 13 and
14 of the Notes to Consolidated Financial Statements for
additional information.
221
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o Ingersoll-Dresser Pump Company minority interest, which
represents Dresser's interest in the IDP joint venture,
totalled $146.3 million and $146.2 million at December 31,
1993 and 1992, respectively. Earnings allocable to IDP's
minority interest totalled $11.6 million for 1993, which were
virtually offset by translation adjustments and final
valuation modifications.
o Other liabilities (noncurrent) at December 31, 1993, totalled
$24.9 million, which were $6.9 million higher than the balance
at December 31, 1992. The net increase for 1993 represented
changes to various accruals, which are not expected to be paid
out in the company's next business cycle. These accruals
generally cover environmental obligations, legal accruals, and
other contractual obligations.
Other information concerning the company's financial
resources, commitments and plans is as follows:
The average amount of short-term borrowings outstanding,
excluding current maturities of long-term debt, was $159.1
million in 1993, compared to $166.5 million in 1992. The
weighted average interest rate during 1993 was 7.8%, compared to
10.4% during the previous year. The decrease in the 1993 average
amount of short-term borrowings outstanding was attributable to
the company's foreign operations, which used short-term debt
financings as a hedge against currency movements.
The company had $400 million of domestic short-term credit
lines at December 31, 1993, and $412 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities exceed projected
requirements for 1994 and provide direct support for commercial
paper and indirect support for other financial instruments, such
as letters of credit and comfort letters.
At December 31, 1993, the debt-to-total capital ratio was
28/72, as compared to 30/70 at the prior year-end. The
improvement in the ratio at December 31, 1993, was primarily due
to the company's continuing program to reduce inventory and
control spending to generate cash to reduce the company's overall
debt obligations.
222
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In 1993, foreign currency adjustments decreased shareowners'
equity by approximately $31.7 million. The change was due to the
strengthening of the U.S. dollar against other currencies in
countries where the company has significant operations. Currency
fluctuations in the United Kingdom, Canada, France, Italy,
Germany, Japan and Spain accounted for virtually all of the
change. Inventories, accounts receivable, net property, plant
and equipment, accounts payable and loans payable were the
principal accounts affected.
In 1993, the company continued to sell an undivided fractional
ownership interest in designated pools of accounts and notes
receivables up to a maximum of $125 million. Similar agreements
have been in effect since 1987. These agreements expire in one-
and two-year periods based on the particular pool of receivables
sold. The company intends to renew these agreements at their
expiration dates with either the current institution or another
financial institution using the basic terms and conditions of the
existing agreement. At December 31, 1993 and 1992, $125 million
of such receivables remained uncollected.
Capital expenditures were $132 million in 1993 and 1992. The
company continues investing to improve manufacturing
productivity, reduce costs and provide environmental enhancements
and advanced technologies for existing facilities. The capital
expenditure program for 1994 is estimated at approximately $160
million, including carryover from projects approved in prior
periods. There are no planned projects that, either individually
or in the aggregate, represent a material commitment for the
company. Many of these projects are subject to review and
cancellation at the option of the company without incurring
substantial charges.
As a result of high inflationary periods in the 1970s,
experimental disclosure of supplementary information to measure
the effects of inflation on historical financial statements in
terms of the constant dollar and current costs was required.
While the company presented inflation-adjusted data, the
information presented was based on assumptions, estimates and
judgments, which were far from precise indicators of the effects
of inflation on the company. High inflationary trends have
dissipated in recent years and, after a review of the effects of
inflation, the company has determined that such information is
neither material nor meaningful at this time.
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Environmental Matters
The company is subject to extensive environmental laws and
regulations. We believe that the company, as well as industry in
general, will be faced with increasingly stringent laws and
regulations in the future. As a result, the company has been and
continues to be dedicated to an environmental program to reduce
the utilization and generation of hazardous materials during the
manufacturing process and to remediate identified environmental
concerns. As to the latter, the company currently is engaged in
site investigations and remedial activities to address
environmental cleanup from past operations at current and former
manufacturing facilities.
During 1993, the company spent approximately $10 million on
capital projects for pollution abatement and control and an
additional $8 million for environmental remediation expenditures,
including operation and maintenance of existing environmental
programs. It should be noted that these amounts are difficult to
estimate because environmental improvements are generally
intertwined with the overall improvement costs at a particular
plant, and the accurate estimate of which portion of an
improvement or a capital expenditure relates to an environmental
improvement is difficult to ascertain. The company believes that
these expenditure levels will continue and may increase over
time. Given the evolving nature of environmental laws,
regulations and technology, the ultimate cost of future
compliance is uncertain.
The company is a party to environmental lawsuits and claims.
It has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities, and is identified as a potentially
responsible party (PRP) for cleanup costs at approximately 29
federal Superfund and state remediation sites. For all sites
there are other PRPs and in most instances, the company's site
involvement is minimal. While all PRPs may be jointly and
severally liable to pay all site investigation and remediation
costs, to date, there is no indication the company will be
severally liable at any site. Additional lawsuits and claims
involving environmental matters are likely to arise from time to
time in the future.
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Although uncertainties regarding environmental technology,
state and federal laws and regulations and individual site
information make estimating the liability difficult, management
believes that the total liability for the cost of remediation and
environmental lawsuits and claims will not have a material effect
on the financial condition or the results of operations of the
company for any year.
Pending Transactions
On December 22, 1993, Ingersoll-Rand announced that it has agreed
to acquire a 12-percent interest in Nuovo Pignone from Ente
Nazionale Idrocarburi (ENI), the Italian government-owned energy
conglomerate. Nuovo Pignone is a manufacturer of turbines,
compressors, pumps, valves and fuel dispensing systems, primarily
for energy-related industries.
The agreement with ENI also calls for General Electric, which
leads the consortium, to acquire a 25-percent share and for
Dresser Industries to acquire a 12-percent share in Nuovo
Pignone. The consortium has invited several Italian banks to
acquire up to 20-percent ownership. The remainder of the company
will be owned by subsidiaries of ENI (20 percent) and public
shareholders (11 percent). The purchase price for the company's
interest totals approximately $73 million. The transaction is
subject to antitrust review and is expected to close in the first
half of 1994.
On February 22, 1994, Ingersoll-Rand announced that it signed
a letter of intent to acquire the sales and service arm of
ECOAIR, a subsidiary of MAN Gutehoffnungshutte AG (MAN GHH),
based in Oberhausen, Germany. In addition, Ingersoll-Rand will
form a 50/50 joint venture company with MAN GHH to develop and
manufacture rotary-screw airends -- a key component in certain
industrial air compressors. The joint venture, to be based in
Oberhausen, primarily will market airends to other worldwide
compressor-packaging manufacturers and also supply airends to
Ingersoll-Rand. The relevant activities for MAN GHH's screw
compressor airend business will be transferred to the new
company. The transactions, subject to certain regulatory
approvals, are expected to be finalized by mid-1994.
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1992 Compared to 1991
1992 was a year of accomplishments and challenges for the
company. The company succeeded in its efforts to form
Ingersoll-Dresser Pump Company (IDP), effective October 1, 1992.
The original intent to form this joint venture between the
company and Dresser Industries, Inc. (Dresser), was announced in
May 1991, but objections from the United States Department of
Justice were not dropped until September 1992. The company owns
51 percent of this partnership; therefore, since formation, IDP
has been included in the company's consolidated financial
statements with Dresser's minority interest in the net assets and
financial results of IDP being shown separately.
It was a challenging year, not only because of IDP and
changing economic scenarios during the year, but the company also
adopted, effective January 1, 1992, Statements of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes."
SFAS No. 106 requires an accrual for the expected cost of
providing postretirement benefits, such as health care and life
insurance benefits, during the years that the employees provide
service to the company. Previously, these benefits were expensed
as incurred. In adopting this standard in the fourth quarter of
1992, the company elected to fully recognize the accumulated
postretirement benefit obligation as of January 1, 1992, and
accordingly, the company restated its results for the first three
quarters of 1992. The effect of the adoption of SFAS No. 106 for
the company's worldwide pre-1992 obligation totalled $283.8
million ($2.73 per share), net of a $145.2 million tax benefit.
In addition, the company incurred an additional after-tax
charge of $48.2 million ($0.46 per share) representing the
company's share of the effect of the adoption of SFAS No. 106 by
Dresser-Rand Company. Therefore, the total after-tax charge to
the company for the adoption of SFAS No. 106 was $332.0 million
($3.19 per share).
SFAS No. 109 changes the method of accounting for income taxes
from the deferral method to the liability method. Under the
liability method, deferred income taxes are determined based on
enacted tax laws and rates which are applied to the differences
between the financial statement bases and tax bases of assets and
liabilities. The effect of adopting SFAS No. 109 at January 1,
1992, produced an $18.0 million ($0.17 per share) charge to the
company.
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Finally, the worldwide economic climate had varying effects on
the company's operations during the year. Overall, the domestic
construction, industrial and automotive markets were stronger in
1992 than in 1991. Their strength more than offset the weakness
in the European markets that developed in the latter part of
1992.
A comparison of key financial data between 1992 and 1991
follows:
o Net sales for 1992 totalled $3.8 billion, 5.5 percent higher
than in 1991. Excluding the fourth quarter sales from the
pump units contributed to IDP by Dresser, the net sales
increase would have been two percent.
o Cost of goods sold in 1992 was 76.2 percent of sales, compared
to 76.0 percent in 1991. A partial liquidation of LIFO
(last-in, first-out) inventories lowered 1992 costs by $5.8
million ($3.6 million after-tax, or three cents per share); a
similar liquidation in 1991 lowered costs by $19.3 million
($12.0 million after-tax, or 12 cents per share). However,
1992 includes the effect of SFAS No. 106 (Postretirement
Benefits Other Than Pensions), which added approximately $22.2
million of additional costs in 1992, which were not in 1991's
cost of goods sold. Excluding the benefit of the LIFO
liquidations and the 1992 effect of SFAS No. 106 from the cost
of goods sold figures for the appropriate years, 1992's
percentage relationship to sales would have been 75.7 percent
versus 76.5 percent for 1991. This reduction represented the
benefit from the company's continuing programs of aggressive
cost-containment and improved volume increases in our domestic
markets.
o Administrative, selling and service engineering expenses were
17.1 percent of sales in 1992, compared to 16.6 percent for
1991. However, 1992 included approximately $7.4 million of
additional charges for SFAS No. 106 and, without these
charges, the 1992 percentage relationship to sales would have
been 16.9 percent. This figure represented a slight increase
over 1991 due to the fourth quarter effect of IDP, and
increases in salaries, administrative costs and fees of a
general nature.
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o The 1992 restructure of operations charge was comprised of the
following:
- $70 million charge in the fourth quarter associated with the
IDP joint venture. This charge, for the reduction in work
force and excess facilities, will transform IDP into a
world-class competitor in the pump business. The charge was
shared evenly by the partners of IDP; therefore, the
minority interest elimination for the restructure was $35.0
million and the company's portion was $35.0 million ($25.7
million after-tax, or $0.25 per share).
- $10.0 million charge in the third quarter relating to the
company's decision to realign its aerospace bearings
business due to depressed conditions in the aerospace
industry.
In 1991, the company reported a net benefit of $7.1 million
from a first quarter restructure of operations, which included
the sale of Schlage Electronics.
o Interest expense for 1992 was $54.1 million, approximately
nine percent lower than the $59.3 million reported for 1991.
The reduction was due to lower effective interest rates in
1992, when compared to 1991. At the end of 1992, all
short-term debt was related to our foreign operations.
o Other income (expense) for 1992 was a net expense of $734,000
representing a favorable variance of over $18 million from
1991's net expense figure. The 1992 improvement was generated
from increased earnings from partially-owned equity companies,
a $15 million gain from the sale of an equity interest in a
company and a reduction in costs of a miscellaneous nature.
These income improvements were reduced by an $8.7 million
unfavorable change in foreign currency, which produced a $6.2
million pretax loss in 1992, as compared to a $2.5 million
pretax gain in the prior year.
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o Dresser-Rand Company is another partnership between the
company and Dresser Industries, Inc. It commenced operations
on January 1, 1987, and comprises the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
Effective October 1, 1992, Dresser increased its ownership
interest in this partnership to 51 percent from 50 percent.
Dresser-Rand, as previously mentioned, adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," effective January 1, 1992. The effect of this
accounting change reduced the company's investment in
Dresser-Rand by the pretax effect of approximately $73
million.
The company's pretax profits from its interest in Dresser-Rand
for 1992 totalled $27.6 million, compared to $40.0 million in
1991. Additional charges during 1992 for the postretirement
accounting change caused $7.2 million of the year-to-year
decrease, while shipment delays on some large orders and a
deterioration in operating efficiencies contributed to the
balance of the reduction.
o The Ingersoll-Dresser Pump Company minority interest
represents Dresser's interest in the operating results of IDP.
This item was a decrease in expense to the company because the
entire $70 million restructure of operations charge was a
reduction in the company's operating results, and this charge
was shared equally between the partners. Excluding the
restructure of operations charge from IDP's results for 1992,
the partnership generated a minor amount of earnings for its
first three months of operation. Overall, the company
believes that the full operating benefits of the new venture
will not be realized until late 1994.
o The company's effective tax rate for 1992 was 36.8 percent,
which is a slight increase over the 36.0 percent reported for
1991. The variance from the 34.0 percent statutory rate was
due primarily to the higher tax rates associated with foreign
earnings.
o At December 31, 1992, employment totalled 35,308. This
represents an increase of 4,191 employees over the 1991 level
of 31,117. Employees from the pump units contributed by
Dresser to IDP totalled 4,741 employees and 1992 acquisitions
accounted for another 156 employees. Attrition and cost
reduction programs offset these increases by 706 employees.
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The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
o Cash and cash equivalents totalled $216.8 million at December
31, 1992, $79.9 million more than the 1991 balance of $136.9
million. In evaluating the net change in cash and cash
equivalents, cash flows from operating, investing and
financing activities and the effect of exchange rate changes
should be considered. Cash flows from operating activities
totalled $169.7 million, investing activities used $106.1
million and financing activities provided $24.5 million.
Exchange rate changes during 1992 decreased cash and cash
equivalents by approximately $8.2 million. In addition, cash
and cash equivalents from the pump units contributed by
Dresser to IDP accounted for a $10.1 million decrease in the
cash used for investing activities.
o Marketable securities totalled $13.4 million at the end of
1992, approximately $12.1 million more than the balance at
December 31, 1991. Marketable securities from pump units
contributed by Dresser totalled $15.2 million. Foreign
marketable securities decreased by approximately $1.5 million
during the year due to foreign exchange rate fluctuations.
o Receivables totalled $809.6 million at December 31, 1992,
compared to $652.3 million at 1991's year-end. The net
increase for 1992 of $157.3 million included approximately
$130.5 million from the pump units contributed by Dresser to
IDP. The remaining increase was due to stronger fourth
quarter sales. Currency translation decreased the receivables
balance during the year by $39.5 million. The average days
outstanding in receivables remained at the 1991 year-end
level, but represented a more aggressive domestic collection
effort reduced somewhat by a higher mix of international
receivables, with longer payment terms than domestic
receivables.
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o Inventories amounted to $770.3 million at December 31, 1992,
which is $23.4 million higher than 1991's level of $746.9
million. This increase included approximately $100 million of
inventory contributed from Dresser's pump units. Excluding
this increase from the year-to-year comparison shows that the
company's aggressive inventory control programs actually
reduced the inventory level by approximately $37 million and
currency movements accounted for an additional $40 million
reduction in inventory for 1992. During the last three years,
the company has been able to reduce its inventory by more than
$100 million (excluding the inventory from the contributed
pump units of Dresser). The company's emphasis on inventory
control is apparent by the reduction in the average months'
supply of inventory, which was 4.6 months at December 31,
1992, compared to 4.9 months at the 1991 year-end.
o Prepaid expenses totalled $55.6 million at the end of 1992,
$6.6 million higher than the balance at December 31, 1991.
Foreign exchange activity had the effect of reducing the
balance in this account by $3.6 million during 1992. The net
increase for the year was split between a general increase in
the company's prepaid expense activity and from pump units
contributed by Dresser.
o Deferred income taxes (current) of $101.8 million at December
31, 1992, represent the deferred tax benefit between the book
and tax values of various current assets and liabilities. A
schedule of the components for this balance is in Note 12 of
the Notes to Consolidated Financial Statements. The year-end
balance represented an increase of approximately $6.2 million
from the December 31, 1991, level. Changes due to foreign
currency movements had an immaterial effect on the year's
activities.
o The investment in Dresser-Rand Company totalled $119.7 million
at December 31, 1992. This represented a net decrease of
approximately $22.3 million from 1991's balance of $142.0
million. The components of the change for 1992 consisted of
the $73.1 million reduction for the adoption of SFAS No. 106;
income for 1992 of $27.6 million; a $26.5 million change in
the advance account between the entities and a $3.3 million
reduction due to currency fluctuations.
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o The investments in partially-owned equity companies at
December 31, 1992, totalled $149.4 million, $6.0 million lower
than the 1991 balance. The components of this change
consisted of the following:
- $20.6 million increase from the company's equity earnings in
these units;
- $6.4 million increase in amounts due from these units to the
company;
- $34.7 million decrease from the sale of the company's
interest in one of these units;
- $1.4 million decrease for dividends from these units;
- $7.3 million increase for investments from the contributed
pump units of Dresser to IDP; and
- $4.2 million decrease for the effect of currency
fluctuations during the year.
o Net property, plant and equipment increased approximately
$64.0 million in 1992 to a year-end balance of $847.1 million.
The contributed pump units from Dresser increased net fixed
assets during the year by approximately $74.6 million (assets
of $225.2 million less accumulated depreciation of $150.6
million). Fixed assets from acquisitions during 1992 added
$3.5 million. Capital expenditures in 1992 totalled $131.7
million, a decrease of $9.3 million from 1991. Foreign
exchange fluctuations decreased the net fixed asset values in
U.S. dollars by approximately $28.1 million. The remaining
net decrease was due principally to depreciation expense.
o Intangible assets, net, totalled $113.2 million at December
31, 1992, as compared to $104.5 million at December 31, 1991,
for a net increase of $8.7 million. Increases of $6.1 million
during the year came from the contributed pump units of
Dresser and acquisitions, as well as an increase in the
pension intangible asset of $9.1 million. Reductions came
from $5.6 million of amortization with the remainder from the
effect of currency fluctuations.
o Deferred income taxes (noncurrent) totalled $77.0 million at
December 31, 1992. This net deferred asset arose in 1992,
primarily because of the tax effects related to the adoption
of SFAS No. 106. A listing of the components which comprised
the December 31, 1992, balance can be found in Note 12 of the
Notes to Consolidated Financial Statements.
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o Other assets totalled $113.5 million at year-end, an increase
of $1.0 million from the December 31, 1991, balance of $112.5
million. Assets from the contributed pump units accounted for
a major portion of this increase. Foreign exchange activity
in 1992 had minimal effect on the account balance during the
year.
o Accounts payable and accruals totalled $823.1 million at
December 31, 1992, an increase of $201.2 million over 1991's
balance of $621.9 million. Liabilities of the contributed
pump units from Dresser to IDP accounted for $126.1 million of
the increase, and the reserves established for the company's
restructure of operations charges during 1992 added another
$72 million. All other activity, including the accrual for
the current portion of postretirement benefits, caused another
$30.1 million increase in this account for 1992. Foreign
exchange activity during 1992 decreased accounts payable and
accruals by approximately $27 million.
o Loans payable were $201.3 million at the end of 1992, compared
to $118.3 million at December 31, 1991. Current maturities of
long-term debt, included in loans payable, were $17.2 million
at December 31, 1992, and $8.4 million at December 31, 1991.
Excluding the current maturities of long-term debt, short-term
borrowings increased by approximately $74.2 million during
1992. Loan balances from the contributed pump units of
Dresser accounted for $1.3 million of this increase. The
remainder of this balance can be attributed to increases in
foreign short-term debt of $93.0 million, offset by a
reduction in the value of the total amount of loans
outstanding during 1992 of $20.1 million due to foreign
currency fluctuations. The company uses foreign short-term
debt as a currency hedge, in addition to its traditional role
for financing accounts receivables and inventory.
o Long-term debt, excluding current maturities, totalled $355.6
million at December 31, 1992, compared to $375.8 million at
December 31, 1991, a net decrease of $20.2 million. This net
decrease was the result of additions to long-term debt of $2.8
million reduced by transfers to loans payable for current
maturities and a $1.8 million reduction from foreign currency
fluctuations.
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o Postemployment benefits totalled $494.5 million at December
31, 1992. Postemployment benefits represent the company's
noncurrent liability in accordance with SFAS Nos. 87 and 106.
Postemployment benefits include medical and life insurance
postretirement benefits and pensions. See Notes 13 and 14 of
the Notes to Consolidated Financial Statements for additional
information.
o Ingersoll-Dresser Pump Company minority interest totalled
$146.2 million at December 31, 1992, and represented Dresser's
interest in the IDP joint venture at year-end.
o Other liabilities (noncurrent) at December 31, 1992, totalled
$18.0 million, which was approximately $11 million lower than
the comparable balance at December 31, 1991. The net decrease
for 1992 represented the reduction caused by currency
fluctuations during the year and transfers to current
liabilities of previously established acquisition reserves.
On May 6, 1992, the board of directors of the company declared
a two-for-one split of the company's common stock. The stock
split was made in the form of a stock dividend, payable on June
1, 1992, to shareowners of record on May 19, 1992. All prior
year per share amounts have been restated to reflect the stock
split. Concurrent with the stock split announcement, the board
of directors also increased the regular quarterly cash dividend
to a record 17 1/2 cents per common share on a post-split basis.
Other information concerning the company's financial
resources, commitments and plans was as follows:
The average amount of short-term borrowings outstanding in
1992 was $177.7 million, compared to $239.3 million in 1991. The
weighted average interest rate during 1992 was 10.2%, compared to
10.4% during the previous year. The decrease in the 1992 average
amount of short-term borrowings outstanding was attributable to
the company's foreign operations, which use short-term debt
financings as a hedge against currency movements.
The company had domestic short-term credit lines at December
31, 1992, of $420 million and $280 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities provide direct support
for commercial paper and indirect support for other financial
instruments, such as letters of credit and comfort letters.
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At December 31, 1992, the debt-to-total capital ratio was
30/70, as compared to 23/77 at the prior year-end. The change in
the ratio at December 31, 1992, was primarily due to the
company's adoption of SFAS Nos. 106 and 109, which reduced the
company's equity by $350.0 million, effective January 1, 1992.
Excluding the effect of these one-time charges, the debt-to-total
capital ratio would have been 25/75.
In 1992, foreign currency adjustments decreased shareowners'
equity by approximately $53.3 million. The change is due to the
strengthening of the U.S. dollar against other currencies in
countries where the company has significant operations. Currency
changes in the United Kingdom, Canada, France, Italy, Germany and
Spain accounted for over 83 percent of the change. Inventories,
accounts receivable, net property, plant and equipment, accounts
payable and loans payable were the principal accounts affected.
In 1992, the company continued to sell an undivided fractional
ownership interest in designated pools of accounts and notes
receivables up to a maximum of $125 million. Similar agreements
have been in effect since 1987. These agreements expire in one-
and three-year periods based on the particular pool of
receivables sold. The company intends to renew these agreements
at their expiration dates with either the current institution or
another financial institution using the basic terms and
conditions of the existing agreement. At December 31, 1992 and
1991, $125 million of such receivables remained uncollected.
REVIEW OF BUSINESS SEGMENTS
Standard Machinery
Standard Machinery Segment's sales of $1.3 billion were
approximately $134.4 million lower than 1992's level. The 1993
sale of the Mining Machinery Group accounted for approximately
$50 million of the decline with the balance attributed to weak
European markets. Operating income for 1993, before a $5 million
restructure of operations charge, totalled $89.6 million, which
was slightly below the $90.9 million reported for the prior year.
The restructure of operations charge related to the sale of the
Mining Machinery Group, which was substantially completed in July
1993.
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The Construction and Mining Group's sales for 1993 were
approximately five percent lower than the prior year's level due
to the European recession, but the group reported a slight
increase in its operating income margin primarily due to a
stronger domestic market and cost-containment programs. Sales
for the Air Compressor Group also were approximately five percent
below 1992's levels because of the weak European markets, but it
essentially maintained its operating income margin at the prior
year's rate. Mining Machinery Group's operating results for 1992
and for the current year, prior to its sale, were essentially at
the break-even level.
Engineered Equipment
Engineered Equipment Segment's sales for 1993 totalled $929.6
million, as compared to $645.3 million for 1992. However, 1993
included approximately $300 million of additional sales from the
contributed pump units of Dresser to IDP, when compared to last
year's total. (See Note 2 of the Notes to Consolidated Financial
Statements for additional information on IDP). Operating income
in 1993 totalled $30.5 million, which was comparable to last
year's operating income of $29.0 million, before a $70 million
restructure of operations charge. Last year's restructure of
operations charge related to IDP and was for the reduction in
work force and excess facilities, which was provided to transform
IDP into a world-class competitor in the pump business. The
segment's operations in 1993 were adversely affected by the
European recession and continued weakness in the pulp and paper
industry.
IDP's sales and operating income for 1993 were hampered by the
European recession. However, IDP substantially completed its
restructuring activities during 1993 and anticipates significant
operating improvements in 1994 from the results of these efforts,
assuming that current or slightly higher volume levels are
achieved in 1994.
Process Systems Group's sales in 1993 were lower than in the
prior year, principally due to the uncertainties in the pulp and
paper industry and the lack of increased pricing for pulp.
However, the group's operating income improved over 1992's level
based on benefits derived from aggressive cost-containment
programs.
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Bearings, Locks and Tools
In 1993, this segment reported sales of $1.8 billion, a five
percent increase over the prior year. Operating income totalled
$210.7 million, 25.9 percent higher than the $167.4 million of
operating income reported for 1992, before a $10 million
restructure of operations charge.
Bearings and Components sales for 1993 were approximately
seven percent higher than the prior year. Operating income for
1993 was well above 1992's level even before considering the
negative effect of last year's $10 million restructure of
operations charge. The 1992 restructure charge related to the
company's decision to realign its aerospace bearings business,
which was completed during the second quarter of 1993. Overall,
strength in the domestic automobile industry during 1993 and
continued benefits from cost-containment programs were the
primary reasons for the group's improvement.
Door Hardware sales were approximately seven percent higher
than 1992's level. The improvement in operating income was
greater than the increase in sales and established a new record
for the group. Continued strength in the domestic housing market
and aggressive cost controls contributed to 1993's record
operating income.
The Production Equipment Group's sales for 1993 approximated
last year's level. However, the group reported a modest increase
in operating income over the amount reported for 1992. Softness
in sales throughout the European served area were offset by a
stronger domestic market. This domestic strength and cost-
containment programs produced the 1993 operating income
improvement.
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Consolidated Statement of Income
In thousands except per share amounts
For the years ended December 31 1993 1992 1991
Net sales $4,021,071 $3,783,787 $3,586,220
Cost of goods sold 3,016,690 2,881,861 2,725,059
Administrative, selling and
service engineering
expenses 707,867 646,687 594,800
Restructure of operations-
(charge) benefit (5,000) (80,000) 7,090
Operating income 291,514 175,239 273,451
Interest expense 51,955 54,129 59,284
Other income (expense), net (7,536) (734) (18,978)
Dresser-Rand income 33,090 27,630 40,000
Ingersoll-Dresser Pump
Company minority interest (11,589) 34,988 --
Earnings before income taxes
and effect of accounting
changes 253,524 182,994 235,189
Provision for income taxes 90,000 67,400 84,600
Earnings before effect of
accounting changes 163,524 115,594 150,589
Effect of accounting changes
(net of income tax benefits):
- Postemployment benefits (21,000) -- --
- Postretirement benefits
other than pensions -- (332,000) --
- Income taxes -- (18,000) --
Net earnings (loss) $ 142,524 $ (234,406) $ 150,589
Earnings per share of
common stock:
Earnings before effect
of accounting changes $ 1.56 $ 1.11 $1.45
Effect of accounting changes:
- Postemployment benefits (0.20) -- --
- Postretirement benefits
other than pensions -- (3.19) --
- Income taxes -- (0.17) --
Net earnings (loss) per share $ 1.36 $(2.25) $1.45
See accompanying notes to consolidated financial statements.
238 <PAGE>
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Consolidated Balance Sheet
In thousands except share amounts
December 31 1993 1992
Assets
Current assets:
Cash and cash equivalents $ 227,993 $ 216,832
Marketable securities 6,172 13,418
Accounts and notes receivable, less
allowance for doubtful accounts of
$22,089 in 1993 and $23,057 in 1992 797,525 809,646
Inventories 713,690 770,343
Prepaid expenses 39,844 55,553
Deferred income taxes 116,936 101,839
1,902,160 1,967,631
Investments and advances:
Dresser-Rand Company 112,630 119,712
Partially-owned equity companies 158,645 149,389
271,275 269,101
Property, plant and equipment, at cost:
Land and buildings 521,748 491,899
Machinery and equipment 1,143,680 1,143,018
1,665,428 1,634,917
Less-accumulated depreciation 790,284 787,813
875,144 847,104
Intangible assets, net 105,855 113,227
Deferred income taxes 90,913 76,973
Other assets 129,985 113,516
$3,375,332 $3,387,552
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $ 762,387 $ 823,122
Loans payable 206,939 201,337
Customers' advance payments 24,231 17,839
Income taxes 30,767 37,517
1,024,324 1,079,815
Long-term debt 314,136 355,598
Postemployment liabilities 515,787 494,527
Ingersoll-Dresser Pump Company
minority interest 146,331 146,216
Other liabilities 24,929 18,021
Shareowners' equity:
Common stock, $2 par value, authorized
400,000,000 shares; issued:
1993-108,939,462; 1992-108,276,462 217,879 216,553
Capital in excess of par value 34,917 17,148
Earnings retained for use in the business 1,268,472 1,199,438
1,521,268 1,433,139
239
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Consolidated Balance Sheet (Continued)
In thousands except share amounts
December 31 1993 1992
Less:
- Treasury stock, at cost 53,035 53,036
- Foreign currency equity adjustment 118,408 86,728
Shareowners' equity 1,349,825 1,293,375
$3,375,332 $3,387,552
Certain amounts have been reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
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<TABLE>
Consolidated Statement of Shareowners' Equity
In thousands except share data
December 31 1993 1992 1991
Common stock, $2 par value:
<S> <C> <C> <C>
Balance at beginning of year $ 216,553 $ 107,393 $ 107,122
Exercise of stock options
and SARs 1,095 964 164
Issuance of shares under
stock plans 231 135 107
Two-for-one stock split -- 108,061 --
Balance at end of year $ 217,879 $ 216,553 $ 107,393
Capital in excess of par value:
Balance at beginning of year $ 17,148 $ 106,265 $ 101,983
Exercise of stock options and
SARs including tax benefits 14,294 15,592 2,465
Issuance of shares under
stock plans 3,475 3,352 1,817
Two-for-one stock split -- (108,061) --
Balance at end of year $ 34,917 $ 17,148 $ 106,265
Earnings retained for use
in the business:
Balance at beginning of year $1,199,438 $1,505,881 $1,423,696
Net earnings (loss) 142,524 (234,406) 150,589
Cash dividends (73,490) (72,037) (68,404)
Balance at end of year $1,268,472 $1,199,438 $1,505,881
Treasury stock-at cost:
Common stock, $2 par value:
Balance at beginning of year $ (53,036) $ (53,036) $ (53,036)
Two-for-one stock split -- -- --
Purchases of stock -- -- --
Disposition of stock 1 -- --
Balance at end of year $ (53,035) $ (53,036) $ (53,036)
Foreign currency
equity adjustment:
Balance at beginning of year $ (86,728) $ (33,447) $ (23,341)
Adjustments due to
translation changes (31,680) (53,281) (12,040)
Sale or liquidation of
investments -- -- 1,934
Balance at end of year $ (118,408) $ (86,728) $ (33,447)
Total shareowners' equity $1,349,825 $1,293,375 $1,633,056
241 <PAGE>
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Consolidated Statement of Shareowners' Equity (Continued)
In thousands except share data
December 31 1993 1992 1991
Shares of Capital Stock
Common stock, $2 par value:
Balance at beginning of year 108,276,462 53,696,378 53,561,116
Exercise of stock options
and SARs 547,400 482,175 82,025
Issuance of shares under
stock plans 115,600 67,278 53,237
Two-for-one stock split -- 54,030,631 --
Balance at end of year 108,939,462 108,276,462 53,696,378
Treasury stock-at cost:
Common stock, $2 par value:
Balance at beginning of year 3,672,822 1,836,409 1,836,409
Two-for-one stock split -- 1,836,409 --
Purchases of stock -- 4 --
Disposition of stock (90) -- --
Balance at end of year 3,672,732 3,672,822 1,836,409
See accompanying notes to consolidated financial statements.
</TABLE>
242 <PAGE>
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<TABLE>
Consolidated Statement of Cash Flows
In thousands
For the years ended December 31 1993 1992 1991
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings (loss) $ 142,524 $(234,406) $ 150,589
Adjustments to arrive at net cash
provided by operating activities:
Effect of accounting changes 21,000 350,000 --
Restructure of operations 5,000 80,000 (7,090)
Depreciation and amortization 123,521 116,579 108,693
(Gain) loss on sale of assets (5,480) (15,429) 2,468
Minority interests 13,571 (33,181) --
Equity earnings/losses,
net of dividends (45,621) (46,790) (54,659)
Deferred income taxes (14,767) (43,575) 6,640
Other noncash items 125 44,273 (3,428)
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable (11,998) (54,634) 1,432
Inventories 35,500 37,133 62,743
Other current and noncurrent
assets (22,414) (9,825) (25,268)
(Decrease) increase in:
Accounts payable and accruals (73,250) 12,437 4,151
Other current and noncurrent
liabilities (2,838) (32,837) (15,145)
Net cash provided by operating
activities 164,873 169,745 231,126
Cash flows from investing activities:
Capital expenditures (132,001) (131,650) (140,900)
Proceeds from sales of property,
plant and equipment 6,612 5,753 4,623
Proceeds from business dispositions 55,460 53,971 58,500
Acquisitions, net of cash and
formation of Ingersoll-Dresser Pump* (42,479) (2,928) (2,140)
Distribution from Dresser-Rand -- -- 74,000
Decrease in marketable securities 6,416 1,641 566
Cash (invested in) or advances (to)
from equity companies 45,282 (32,902) (12,629)
Net cash used in investing
activities (60,710) (106,115) (17,980)
243
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Consolidated Statement of Cash Flows (Continued)
In thousands
For the years ended December 31 1993 1992 1991
Cash flows from financing activities:
(Decrease) increase in short-term
borrowings (49,480) 92,955 (160,064)
Proceeds from long-term debt 101,779 2,806 126,749
Payments of long-term debt (78,042) (12,722) (27,320)
Net change in debt (25,743) 83,039 (60,635)
Proceeds from exercise of stock
options and treasury stock sales 13,116 13,511 1,897
Dividends paid (73,490) (72,037) (68,404)
Net cash (used in) provided by
financing activities (86,117) 24,513 (127,142)
Effect of exchange rate changes on cash
and cash equivalents (6,885) (8,231) 658
Net increase in cash
and cash equivalents 11,161 79,912 86,662
Cash and cash equivalents-
beginning of year 216,832 136,920 50,258
Cash and cash equivalents-end of year $ 227,993 $ 216,832 $ 136,920
*Acquisitions and formation
of Ingersoll-Dresser Pump:
Working capital, other than cash $ (25,542) $(127,313) $ (225)
Property, plant and equipment (25,910) (78,189) (551)
Intangibles and other assets (2,000) (19,088) (1,425)
Long-term debt and other liabilities 10,973 221,662 61
Net cash used to acquire businesses $ (42,479) $ (2,928) $ (2,140)
Cash paid during the year for:
Interest, net of amounts capitalized $ 47,388 $ 53,351 $ 56,604
Income taxes 126,954 140,909 99,719
See accompanying notes to consolidated financial statements.
</TABLE>
244 <PAGE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The consolidated financial
statements include the accounts of all wholly-owned and
majority-owned subsidiaries. Intercompany transactions and
balances have been eliminated. Partially-owned equity companies
are accounted for under the equity method.
Cash Equivalents: The company considers all highly liquid
investments consisting primarily of treasury bills and notes,
time deposits and commercial paper with a maturity of three
months or less when purchased to be cash equivalents. Cash
equivalents, at cost, which approximates market, were $75,046,000
and $135,128,000 at December 31, 1993 and 1992, respectively.
Marketable Securities: Marketable securities include equity and
debt securities and short-term instruments with maturities of
longer than three months. Marketable securities are carried at
cost, which approximates market. Net realized gains and losses
on the sale of marketable securities were insignificant for all
years presented.
Inventories: Inventories are generally stated at cost, which is
not in excess of market. Domestic manufactured inventories of
standard products are valued on the last-in, first-out (LIFO)
method and all other inventories are valued using the first-in,
first-out (FIFO) method.
Property and Depreciation: The company principally uses
accelerated depreciation methods for both tax and financial
reporting.
Intangible Assets: Intangible assets primarily represent the
excess of the purchase price of acquisitions over the fair value
of the net assets acquired. Such excess costs are being
amortized on a straight-line basis over various periods not
exceeding 40 years. Intangible assets also represent costs
allocated to patents, tradenames and other specifically
identifiable assets arising from business acquisitions. These
assets are amortized on a straight-line basis over their
estimated useful lives. Accumulated amortization at December 31,
1993 and 1992, was $19,657,000 and $21,524,000, respectively.
Amortization of intangible assets was $5,852,000, $5,597,000 and
$6,675,000 in 1993, 1992 and 1991, respectively.
245
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Income Taxes: The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" in February 1992. The company
elected to adopt the new standard effective January 1, 1992.
The new accounting standard requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial
statement bases and the tax bases of the company's assets and
liabilities using the enacted tax rates in effect at year-end,
the "liability method" (see Note 12).
Prior to 1992, the company deferred the past tax effects of
timing differences between financial reporting and taxable income
(the "deferral method").
Environmental Costs: Environmental expenditures relating to
current operations are expensed or capitalized as appropriate.
Expenditures relating to existing conditions caused by past
operations, which do not contribute to current or future
revenues, are expensed. Costs to prepare environmental site
evaluations and feasibility studies are accrued when the company
commits to perform them. Liabilities for remediation costs are
recorded when they are probable and reasonably estimable,
generally the earlier of completion of feasibility studies or the
company's commitment to a plan of action.
Revenue Recognition: Sales of products, other than long-term
contracts, are recorded for financial reporting purposes
generally when the products are shipped. Revenues on certain
long-term contracts are recorded using the percentage-of-
completion method for financial reporting purposes and a similar
method for tax purposes.
Research, Engineering and Development Costs: Research and
development expenditures, including engineering costs, are
expensed when incurred and amounted to $150,100,000 in 1993,
$138,400,000 in 1992 and $123,800,000 in 1991.
Foreign Currency: Assets and liabilities of foreign entities
operating in other than highly inflationary economies have been
translated at current exchange rates, and income and expenses
have been translated using average-for-the-year exchange rates.
Adjustments resulting from translation have been recorded in
shareowners' equity and are included in net earnings only upon
sale or liquidation of the underlying foreign investment.
246
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For foreign subsidiaries operating in highly inflationary
economies, inventory and property balances and related income
statement accounts have been translated using historical exchange
rates and resulting gains and losses have been credited or
charged to net earnings.
Foreign currency transactions and translations recorded in the
income statement decreased net earnings by $4,744,000 and
$4,848,000 in 1993 and 1992, respectively, and increased net
earnings in 1991 by $1,859,000. Shareowners' equity was reduced
in 1993, 1992 and 1991 by $31,680,000, $53,281,000 and
$12,040,000, respectively, due to foreign currency equity
adjustments related to translation, financial position hedges and
corresponding tax effects. In 1991, the cumulative translation
adjustment in shareowners' equity was reduced by $1,934,000 as a
result of the sale and/or liquidation of small foreign
investments and/or subsidiaries. Tax effects were not
significant for the periods presented.
The company hedges foreign currency transactions and firm
foreign currency commitments by entering into forward foreign
exchange contracts (forward contracts). Gains and losses
associated with currency rate changes on forward contracts
hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging firm
foreign currency commitments are deferred and included as a
component of the related transaction; however, a loss is not
deferred if deferral would lead to the recognition of a loss in
future periods.
Cash flows resulting from forward contracts are accounted for
as hedges of identifiable transactions or events and classified
in the same category as the cash flows from the items being
hedged.
Earnings Per Share: Net earnings per share of common stock are
earnings divided by the average number of common shares
outstanding during the year. The effect of common stock
equivalents on earnings per share was not material.
Accounting Changes: Effective January 1, 1993, the company
adopted Statement of Financial Accounting Standards (SFAS) No.
112, "Employers' Accounting for Postemployment Benefits." SFAS
No. 112 requires an accrual for the expected cost of benefits
provided by an employer to former or inactive employees after
employment but before retirement, such as the continuation of
medical and life insurance benefits for employees on long-term
disability. Previously, these benefits were expensed as
incurred. The company elected to adopt this standard in the
247
<PAGE>
EXHIBIT 13
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fourth quarter of 1993, and recognized the postemployment benefit
obligation as of January 1, 1993. The effect of the adoption of
SFAS No. 112 for the company totalled $21.0 million ($0.20 per
share), net of a $13.5 million tax benefit. Aside from the
effect of the adjustment, the adoption of SFAS No. 112 was not
material to the company's 1993 financial results and accordingly,
the results for the first three quarters of 1993 have not been
restated to reflect this adoption. Operating results for the
years preceding 1993 were not restated for the adoption of SFAS
No. 112.
The company adopted effective January 1, 1992, SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS No. 109, "Accounting for Income Taxes." SFAS
No. 106 requires an accrual for the expected cost of providing
postretirement benefits, such as health care and life insurance
benefits, during the years that the employees provide service to
the company. Previously, these benefits were expensed as
incurred. The effect of the adoption of SFAS No. 106 for the
company's worldwide pre-1992 obligations totalled $283.8 million
($2.73 per share), net of a $145.2 million tax benefit (see Note
14).
Also, in 1992, included in the $332.0 million ($3.19 per share)
after-tax effect of this accounting change was $48.2 million
($0.46 per share), representing the company's share of the effect
of the adoption of SFAS No. 106 by the Dresser-Rand partnership.
Earnings for 1992, before the effect of accounting changes,
decreased by $19.5 million ($0.19 per share) for the company's
worldwide obligations associated with SFAS No. 106. In addition,
the company's portion of earnings from Dresser-Rand Company was
reduced by $7.2 million or $4.8 million ($0.04 per share) after-
tax for the 1992 earnings effect of this accounting change.
The company also elected to apply the provisions of SFAS No.
109, "Accounting for Income Taxes" effective January 1, 1992.
SFAS No. 109 changes the method of accounting for income taxes
from the deferral method to the liability method. Under the
liability method, deferred income taxes are determined based on
enacted tax laws and rates, which are applied to the differences
between the financial statement bases and tax bases of assets and
liabilities (see "Income Taxes" and Note 12). The effect of
adopting SFAS No. 109 at January 1, 1992, produced an $18.0
million ($0.17 per share) charge to the company. This charge
related principally to the differences between the financial
statement value of assets and liabilities and the tax bases of
those items recorded for acquisitions made since 1984. The
effect of this adoption on the 1992 earnings of the company was
not material.
248
<PAGE>
EXHIBIT 13
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Operating results for the years preceding 1992 were not
restated for the adoption of SFAS Nos. 106 and 109.
NOTE 2 - INGERSOLL-DRESSER PUMP COMPANY: Effective October 1,
1992, the company and Dresser Industries, Inc. (Dresser), formed
Ingersoll-Dresser Pump Company (IDP), a partnership, owned 51
percent by the company and 49 percent by Dresser. This joint
venture includes the majority of the worldwide pump operations of
the two companies, and its results have been included in the
consolidated financial statements of the company since the
formation date.
One of the principal purposes of this venture was to create a
pump company that is capable of competing for business on a
global basis. Management believes that the venture will produce
significantly enhanced efficiency in manufacturing, research and
development, and marketing.
The company's consolidated net sales for 1992 included
approximately $140 million for the pump units contributed by
Dresser. The effect of these sales on the company's operating
income for 1992 was minimal. However, during the fourth quarter
of 1992, the company recorded a $70.0 million restructure of
operations charge for IDP. This charge was for the reduction in
work force and realignment charges to relocate production and
eliminate excess plant and capacity, which will help transform
IDP into a world-class competitor in the pump business. This
charge was shared evenly by the partners of IDP; therefore, the
minority interest elimination for this item was $35.0 million and
the company's portion was $35.0 million ($25.7 million after-tax,
or $0.25 per share).
The net assets contributed by each partner to IDP were
approximately $180 million.
NOTE 3 - ACQUISITIONS AND DISPOSITIONS OF BUSINESSES: In 1993,
the company acquired the Kunsebeck, Germany, needle and
cylindrical bearing business of FAG Kugelfischer Georg Schafer AG
of Schweinfurt, Germany, for $42.5 million in cash, subject to
final contract negotiations.
In 1992, the company acquired Industrias del Rodamiento, S.A.
(IRSA), for $14.0 million in cash and $1.8 million in notes.
IRSA manufactures and markets an extensive line of bearings, as
well as wheel kits and automotive accessories. During 1991, the
company purchased the net assets of three small business units
for $2.1 million in cash.
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<PAGE>
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These transactions have been accounted for as purchases and
accordingly, each purchase price was allocated to the acquired
assets and assumed liabilities based on their estimated fair
values. The company has classified as intangible assets the
costs in excess of the fair value of the net assets of companies
acquired. The results of all acquired operations have been
included in the consolidated financial statements from their
respective acquisition dates.
The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash.
NOTE 4 - RESTRUCTURE OF OPERATIONS: In July 1993, the company
sold substantially all of its underground coal-mining machinery
assets to Long-Airdox Company. In connection with this sale, the
company recorded a $5.0 million restructure of operations charge
during the second quarter of 1993.
During 1992, the company reported an $80,000,000 charge for
restructuring of operations consisting of a fourth quarter
$70,000,000 charge for IDP described in Note 2 and a third
quarter $10,000,000 charge associated with the company's
aerospace bearings unit. The third quarter restructure charge
was for the realignment of the company's aerospace bearings unit
resulting from the depressed condition of the aerospace business.
The after-tax cost for this charge was $6,200,000 or $0.06 per
share.
During the first quarter of 1991, the company reported a net
benefit of $7,090,000 from a restructure of operations. The net
benefit was comprised of (i) a $38,609,000 pretax gain from the
sale on January 18, 1991, of Schlage Electronics, a business unit
of the company's Schlage Lock Company subsidiary, to Westinghouse
Electric Corporation for $50,500,000 in cash, (ii) a $14,850,000
pretax charge for the exit costs associated with the
discontinuance of certain electronic products of Schlage Lock
Company, and (iii) a $16,669,000 pretax charge associated with
the discontinuance and sale of the company's North American
consumer compressor product line. This business was sold to the
DeVilbiss Air Power Company effective as of the close of business
on April 30, 1991, for cash proceeds of approximately $8,000,000.
250
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NOTE 5 - INVENTORIES: At December 31, inventories were as
follows:
In thousands 1993 1992
Raw materials and supplies $121,083 $128,605
Work-in-process 295,829 282,474
Finished goods 462,677 545,940
879,589 957,019
Less-LIFO reserve 165,899 186,676
Total $713,690 $770,343
Work-in-process inventories are stated after deducting customer
progress payments of $14,395,000 in 1993 and $30,361,000 in 1992.
At December 31, 1993 and 1992, LIFO inventories comprised
approximately 38 percent and 43 percent, respectively, of
consolidated inventories.
During the periods presented, inventory quantities were
reduced, resulting in partial liquidations of LIFO layers. This
decreased cost of goods sold by $12,506,000 in 1993, $5,801,000
in 1992 and $19,274,000 in 1991. These liquidations increased
net earnings in 1993, 1992 and 1991 by approximately $7,641,000
($0.07 per share), $3,599,000 ($0.03 per share) and $11,957,000
($0.12 per share), respectively.
NOTE 6 - INVESTMENTS IN PARTIALLY-OWNED EQUITY COMPANIES: The
company has numerous investments, ranging from 20 percent to 50
percent, in companies which operate in similar lines of business.
The company's investments in and amounts due from partially-
owned equity companies amounted to $131,051,000 and $27,594,000,
respectively, at December 31, 1993, and $111,569,000 and
$37,820,000, respectively, at December 31, 1992.
The company's equity in the net earnings of its partially-owned
equity companies was $15,641,000, $20,578,000 and $15,904,000 in
1993, 1992 and 1991, respectively.
The company received dividends based on its equity interests in
these companies of $3,110,000, $1,417,000 and $1,245,000 in 1993,
1992 and 1991, respectively.
251
<PAGE>
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Summarized financial information for these partially-owned
equity companies at December 31, and for the years presented was:
In thousands 1993 1992
Current assets $ 355,884 $ 366,633
Property, plant and
equipment, net 256,322 246,151
Other assets 23,409 24,561
Total assets $ 635,615 $ 637,345
Current liabilities $ 326,830 $ 359,026
Long-term debt 44,024 50,006
Other liabilities 24,873 25,850
Total shareowners' equity 239,888 202,463
Total liabilities
and equity $ 635,615 $ 637,345
In thousands 1993 1992 1991
Net sales $ 730,138 $ 904,831 $ 995,336
Gross profit 127,467 187,802 196,545
Net earnings 48,494 42,167 51,788
NOTE 7 - DRESSER-RAND PARTNERSHIP: Dresser-Rand Company is a
partnership between Dresser Industries, Inc. (51 percent), and
the company (49 percent) comprising the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's investment in Dresser-Rand is accounted for using
the equity method of accounting.
Summarized financial information for Dresser-Rand at December
31, and for the years presented was:
In thousands 1993 1992
Current assets $ 489,122 $ 468,238
Property, plant and
equipment, net 220,604 237,684
Other assets and investments 18,531 23,539
728,257 729,461
Deduct:
Current liabilities 321,629 333,059
Noncurrent liabilities 188,211 172,586
509,840 505,645
Net partners' equity
and advances $ 218,417 $ 223,816
252
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In thousands 1993 1992 1991
Net sales $1,187,279 $1,232,615 $1,194,135
Gross profit 241,906 229,396 242,884
Earnings before
effect of
accounting
change 68,112 52,916 80,001
Net income (loss) 68,112 (93,209) 80,001
The effect of the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" for
Dresser-Rand effective January 1, 1992, was $146,125,000.
Operating results for 1992 were reduced by $14,400,000 because of
this accounting change. The tax effects associated with this
change are recorded on the books of the partners.
The company's investment in Dresser-Rand was $133,867,000 and
$103,297,000 at December 31, 1993 and 1992, respectively. During
1991, Dresser-Rand approved and distributed $74,000,000 of
capital to each of its partners.
At December 31, 1993, the company owed Dresser-Rand $21,237,000
and at December 31, 1992, the company was due $16,415,000 from
Dresser-Rand.
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and
accruals at December 31, were:
In thousands 1993 1992
Accounts payable $201,172 $225,519
Accrued:
Payrolls and benefits 121,063 131,303
Taxes 46,842 42,112
Insurance and claims 98,474 92,535
Pensions and severance pay 31,862 47,919
Interest 14,057 12,841
Plant closings and
relocation expenses 14,743 43,748
Other accruals 234,174 227,145
$762,387 $823,122
253 <PAGE>
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NOTE 9 - LONG-TERM DEBT AND CREDIT FACILITIES:
At December 31, long-term debt consisted of:
In thousands 1993 1992
6 7/8% Notes Due 2003 $100,000 $ --
9% Debentures Due 2021 125,000 125,000
8 3/8% Notes Due 1994 -- 75,000
8 1/4% Notes Due 1996 75,000 75,000
8.05% Debentures Due 1993-2004 -- 60,000
Other domestic and foreign
loans and notes, at end-
of-year average interest
rates of 8.61% in 1993
and 9.02% in 1992, maturing
in various amounts to 2012 14,136 20,598
$314,136 $355,598
Debt retirements for the next five years are as follows:
$81,962,000 in 1994, $4,523,000 in 1995, $79,919,000 in 1996,
$666,000 in 1997 and $473,000 in 1998.
In February 1993, the company issued $100,000,000 of notes at
6 7/8% per annum, which are not redeemable prior to maturity in
2003. The proceeds from these notes were used to redeem
$68,000,000 of the company's outstanding 8.05% Debentures Due
2004 and for general corporate purposes.
The approximate fair value of the company's long-term debt at
December 31, 1993, was $349,455,000. Fair value was determined
by reference to the December 31, 1993, market value of comparably
rated debt instruments.
At December 31, 1993, the company had a $100,000,000 364-day
revolving credit line and a $300,000,000 four year committed
revolving credit line, all of which were unused. These lines
provide support for commercial paper and indirectly provide
support for other financial instruments, such as letters of
credit and comfort letters, as required in the normal course of
business. The company compensates banks for these lines with
fees ranging from .08% to .125%, per annum. Available foreign
lines of credit were $548,177,000, of which $411,609,000 were
unused at December 31, 1993. No major cash balances were subject
to withdrawal restrictions. At December 31, 1993, the average
rate of interest for loans payable, excluding the current portion
of long-term debt, was 7.90% and related principally to foreign
loans.
254
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At December 31, 1992, the company had $64,000,000 of short-term
debt and an equivalent amount of short-term investments, for
which the company had a right of offset. Accordingly, the debt
and investments have been eliminated from the December 31, 1992,
balance sheet.
Capitalized interest on construction and other capital projects
amounted to $2,838,000, $3,460,000 and $4,201,000 in 1993, 1992
and 1991, respectively. Interest income, included in "Other
income (expense)," was $11,720,000, $15,396,000 and $11,595,000
in 1993, 1992 and 1991, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES: The company is involved
in various litigations, claims and administrative proceedings,
including environmental matters, arising in the normal course of
business. Based on the advice of counsel, management believes
that recovery or liability with respect to these matters would
not have material effect on the financial condition or the
results of operations of the company for any year.
In the normal course of business, the company has issued
several direct and indirect guarantees, including performance
letters of credit, totalling approximately $108,000,000 at
December 31, 1993. Management believes these guarantees will not
adversely affect the consolidated financial statements.
In 1993, the company continued to sell an undivided interest in
designated pools of accounts and notes receivable up to a maximum
of $125,000,000. Similar agreements have been in effect since
1987. During 1993, 1992 and 1991, such sales amounted to
$518,651,000, $526,090,000 and $490,500,000, respectively. At
December 31, 1993 and 1992, $125,000,000 of such sold receivables
remained uncollected. The undivided interest in the designated
pool of receivables was sold with limited recourse. These
agreements expire in one- and two-year periods based on the
particular pool of receivables sold. The company intends to
renew these agreements at their expiration dates with either the
current financial institution or another financial institution,
using the basic terms and conditions of the existing agreements.
For receivables sold, the company has retained collection and
administrative responsibilities as agent for the purchaser.
Receivables, excluding the designated pool of accounts and
notes receivable, sold during 1993, 1992 and 1991 with recourse
amounted to $39,284,000, $38,343,000 and $77,481,000,
respectively. At December 31, 1993 and 1992, $16,076,000 and
$19,999,000, respectively, of such receivables sold remained
uncollected.
255
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As of December 31, 1993, the company had no significant
concentrations of credit risk in trade receivables due to the
large number of customers which comprise its receivables base and
their dispersion across different industries and countries.
At December 31, 1993, the company had entered into forward
foreign exchange contracts to purchase and sell the equivalent of
approximately $306,515,000 of foreign currencies principally
denominated in pounds sterling, yen, French francs, Italian lira,
Deutsche marks and Canadian dollars. The fair value for these
forward foreign exchange contracts approximates carrying value.
Fair value is based on dealer quotes.
The forward contracts have maturities ranging from one to 36
months. The company's forward contracts do not subject the
company to risk due to exchange rate movements, because gains and
losses on these contracts generally offset losses and gains on
the assets, liabilities or other transactions being hedged.
The counterparties to these contracts consist of a number of
major international financial institutions. The credit ratings
and concentration of risk of these financial institutions are
monitored on a continuing basis and present no significant credit
risk to the company.
All principal manufacturing facilities are owned by the
company. Certain office and warehouse facilities, transportation
vehicles and data processing equipment are leased. Total rental
expense was $57,949,000 in 1993, $56,218,000 in 1992 and
$56,936,000 in 1991. Minimum lease payments required under
noncancellable operating leases with terms in excess of one year
for the next five years and thereafter, are as follows:
$33,863,000 in 1994, $24,618,000 in 1995, $15,818,000 in 1996,
$8,648,000 in 1997, $6,738,000 in 1998 and $21,449,000
thereafter.
NOTE 11 - INCENTIVE STOCK PLANS: Under the company's Incentive
Stock Plans, key employees have been granted options to purchase
common shares at prices not less than the fair market value at
the date of grant. The plans, approved in 1980, 1985 and 1990,
also authorize stock appreciation rights (SARs) and stock awards.
If SARs issued in conjunction with stock options are exercised,
the related stock options are cancelled; conversely, the exercise
of stock options cancels the SARs.
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Changes during the year in options outstanding under the plans
were as follows:
Shares subject Option price
to option range per share
January 1, 1993 2,787,400 $ 9.38-31.00
Granted 946,200 32.44-36.31
Exercised 970,900 9.38-31.00
December 31, 1993 2,762,700 $ 9.79-36.31
Of the shares subject to option, 1,512,500 were granted with
SARs. In addition, there are 176,000 SARs outstanding with no
stock options. At December 31, 1993, 273,160 shares of common
stock were reserved for future issue, contingent upon attainment
of certain performance goals and future service. At December 31,
1993, options for 1,816,500 shares were exercisable and
1,622,360 shares were available for future awards.
NOTE 12 - INCOME TAXES: Earnings before income taxes and the
effect of accounting changes for the years ended December 31,
were taxed within the following jurisdictions:
In thousands 1993 1992 1991
United States $229,503 $120,311 $137,649
Foreign 24,021 62,683 97,540
Total $253,524 $182,994 $235,189
The provision for income taxes before the effect of accounting
changes was as follows:
Current tax expense:
United States $ 74,912 $ 73,655 $ 50,093
Foreign 30,625 37,320 38,603
Total current 105,537 110,975 88,696
Deferred tax expense:
United States 5,261 (36,698) (9,141)
Foreign (20,798) (6,877) 5,045
Total deferred (15,537) (43,575) (4,096)
Total provision for
income taxes $ 90,000 $ 67,400 $ 84,600
As discussed in Note 1, the company adopted SFAS No. 109 as of
January 1, 1992, and the effect of this accounting change was
reported in the 1992 Consolidated Statement of Income. Prior
years' financial statements were not restated to reflect the
provisions of SFAS No. 109.
257 <PAGE>
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The provision for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory
income tax rate to pretax income before the effect of accounting
changes, as a result of the following differences:
Percent of pretax income
1993 1992 1991
Statutory U.S. rates 35.0% 34.0% 34.0%
Increase (decrease) in rates
resulting from:
Foreign operations 0.6 3.3 4.4
Bases difference on dispositions -- -- (3.6)
Effect of changes in statutory
rate on deferred taxes (2.2) -- --
Earnings/losses of equity
companies (2.2) (4.4) (2.5)
State and local income taxes,
net of U.S. tax 1.3 2.3 2.0
Other 3.0 1.6 1.7
Effective tax rates 35.5% 36.8% 36.0%
The deferred income tax accounts for 1993 and 1992 reflect the
impact of "temporary differences" between the value of assets and
liabilities for financial reporting purposes and their related
value as measured by tax laws. These temporary differences have
now been calculated in accordance with SFAS No. 109 and are more
inclusive in nature than "timing differences" as determined under
previously applicable accounting principles.
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EXHIBIT 13
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A summary of the deferred tax accounts at December 31, follows:
In thousands 1993 1992
Current deferred assets and (liabilities):
Differences between book and tax bases
of inventories and receivables $ 32,576 $ 32,046
Differences between book and tax
expense for other employee related
benefits and allowances 42,137 31,373
Provisions for restructure of
operations and plant closings
not yet deductible for tax purposes 5,328 15,718
Other reserves and valuation
allowances in excess of tax deductions 27,954 25,604
Other differences between tax and
financial statement values 8,941 (2,902)
Gross current deferred net tax assets 116,936 101,839
Noncurrent deferred tax assets and
(liabilities):
Tax items associated with equity
companies 31,022 29,653
Postretirement and postemployment
benefits other than pensions in
excess of tax deductions 159,922 150,125
Other reserves in excess of tax expense 28,136 12,747
Tax depreciation in excess of book
depreciation (54,855) (52,841)
Pension contributions in excess of
book expense (36,607) (33,719)
Taxes provided for unrepatriated
foreign earnings (26,353) (25,600)
Gross noncurrent deferred net tax assets 101,265 80,365
Less: deferred tax valuation allowances (10,352) (3,392)
Total net deferred tax assets $207,849 $178,812
259
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The information presented above is in accordance with SFAS No.
109 for the years ended December 31, 1993 and 1992, respectively.
The following table identifies the current and noncurrent
deferred tax items which were part of the company's tax provision
for the year ended December 31, 1991.
In thousands 1991
Current deferred:
Plant closings and resizing costs $ (1,956)
Increase in reserves not currently
deductible for tax purposes (7,825)
Other (955)
Total current deferred $(10,736)
Noncurrent deferred:
Depreciation $ (3,233)
Pensions 6,915
Unrepatriated foreign earnings 4,760
Other (1,802)
Total noncurrent deferred $ 6,640
A total of $26,353,000 of deferred taxes have been provided for
a portion of the undistributed earnings of subsidiaries operating
outside of the United States. As to the remainder, these
earnings have been, and under current plans, will continue to be
reinvested and it is not practicable to estimate the amount of
additional taxes which may be payable upon repatriation.
NOTE 13 - PENSION PLANS: The company has noncontributory pension
plans covering substantially all domestic employees. In
addition, certain employees in other countries are covered by
pension plans. The company's domestic salaried plans principally
provide benefits based on a career average earnings formula. The
company's hourly pension plans provide benefits under flat
benefit formulas. Foreign plans provide benefits based on
earnings and years of service. Most of the foreign plans require
employee contributions based on the employee's earnings. The
company's policy is to fund an amount which could be in excess of
the pension cost expensed, subject to the limitations imposed by
current statutes or tax regulations. Ingersoll-Dresser Pump
Company's costs for the year ended December 31, 1993, and the
three months ended December 31, 1992, and status of its benefit
plans at December 31, 1993 and 1992, have been consolidated.
260
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EXHIBIT 13
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The components of the company's pension cost for the years
ended December 31, include the following:
In thousands 1993 1992 1991
Benefits earned during the
year $ 27,749 $ 25,813 $ 23,700
Interest cost on projected
benefit obligation 72,131 70,543 67,758
Actual return on plan assets (124,432) (84,446) (199,672)
Net amortization and deferral 32,685 (7,484) 121,729
Net pension cost $ 8,133 $ 4,426 $ 13,515
261 <PAGE>
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The status of employee pension benefit plans at December 31, 1993 and 1992, was as
follows:
1993 1992
Overfunded Underfunded Overfunded Underfunded
In thousands plans plans plans plans
Actuarial present value of
projected benefit obligation,
based on employment service to
date and current salary levels:
<S> <C> <C> <C> <C>
Vested employees $ (962,348) $ (84,311) $ (807,210) $(67,972)
Nonvested employees (8,067) (4,764) (4,878) (3,146)
Accumulated benefit obligation (970,415) (89,075) (812,088) (71,118)
Additional amount related to
projected salary increases (38,713) (17,361) (45,873) (15,704)
Total projected benefit obligation (1,009,128) (106,436) (857,961) (86,822)
Funded assets at fair value 1,079,203 46,035 1,026,711 38,523
Assets in excess of (less than)
projected benefit obligation 70,075 (60,401) 168,750 (48,299)
Unamortized (net asset) liability
existing at date of adoption (3,344) 4,573 (7,289) 2,826
Unrecognized prior service cost 13,685 10,015 16,196 9,901
Unrecognized net loss (gain) 27,103 5,506 (75,026) --
Adjustment required to recognize
minimum liability -- (7,060) -- (1,430)
Purchase accounting tax benefit
on unfunded pension liability -- -- -- 3,354
Prepaid (accrued) pension cost $ 107,519 $ (47,367) $ 102,631 $(33,648)
</TABLE>
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Plan investment assets of domestic plans are balanced between
equity securities and cash equivalents or debt securities.
Assets of foreign plans are invested principally in equity
securities.
The present value of benefit obligations for domestic plans at
December 31, 1993 and 1992, was determined using an assumed
discount rate of 7.0% and 7.5%, an expected long-term rate of
return on assets of 8.5% and 9.0% and an assumed rate of increase
in future compensation levels of 4.5% and 5.0%, respectively.
The weighted averages of the actuarially assumed discount rate,
long-term rate of return on assets and the rate for compensation
increases for foreign plans were 8.0%, 9.0% and 5.5% in 1993, and
9.0%, 9.0% and 6.5% in 1992, respectively.
Most of the company's domestic employees are covered by savings
and other defined contribution plans. Employer contributions and
costs are determined based on criteria specific to the individual
plans and amounted to approximately $20,494,000, $19,106,000 and
$18,200,000 in 1993, 1992 and 1991, respectively. In addition,
the company maintains other supplemental benefit plans for
officers and other key employees.
The company's costs relating to foreign defined contribution
plans, insured plans and other foreign benefit plans were
$307,000, $553,000 and $650,000 in 1993, 1992 and 1991,
respectively.
In 1993, 1992 and 1991, 214, 211 and 216 employees,
respectively, were covered by multiemployer pension plans.
Amounts charged to pension cost and contributed to multiemployer
plans in 1993, 1992 and 1991 were $484,000, $460,000 and
$459,000, respectively.
The existing pension rules require the recognition of a
liability in the amount of the company's unfunded accumulated
benefit obligation with an equal amount recognized as an
intangible asset. As a result, the company recorded a current
liability of $1,226,400 and a noncurrent liability of $5,833,400
in 1993. An offsetting intangible asset was recorded in the
Consolidated Balance Sheet.
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NOTE 14 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: In the
fourth quarter of 1992, the company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," effective
January 1, 1992. The company elected to immediately recognize
the effect of the change in accounting for postretirement
benefits of $428.9 million ($283.8 million net of income tax
benefit), which represented the accumulated postretirement
benefit obligation (APBO) existing at January 1, 1992. The
results for the first three quarters of 1992 were restated as a
result of the adoption. In addition to the effect, the company's
1992 postretirement benefits cost increased $29.6 million ($19.5
million after-tax, or $0.19 per share). The company continues to
fund benefit costs principally on a pay-as-you-go basis, with the
retiree paying a portion of the costs. In situations where
full-time employees retire from the company between age 55 and
age 65, most are eligible to receive, at a cost to the retiree,
certain health care benefits identical to those available to
active employees. After attaining age 65, an eligible retiree's
health care benefit coverage becomes coordinated with Medicare,
with the retiree paying a portion of the cost of the coverage.
Summary information on the company's plans was as follows:
In thousands
December 31 1993 1992
Financial status of plans:
Accumulated postretirement benefit
obligation:
Retirees $(286,470) $(227,327)
Active employees (181,606) (227,917)
(468,076) (455,244)
Plan assets at fair value -- --
Unfunded accumulated benefit
obligation in excess of plan assets (468,076) (455,244)
Unrecognized net loss (gain) 88,325 --
Unrecognized prior service benefit (95,269) (21,700)
Accrued postretirement benefit cost $(475,020) $(476,944)
The components of net periodic postretirement benefit cost for
the years ended December 31, were as follows:
In millions 1993 1992
Service cost, benefits attributed to
employee service during the year $ 5.7 $11.4
Interest cost on accumulated
postretirement benefit obligation 28.3 32.6
Net amortization and deferral (5.1) --
Net periodic postretirement benefit cost $28.9 $44.0
264 <PAGE>
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The discount rates used in determining the APBO were 7.0% and
7.5% at December 31, 1993 and 1992, respectively. The assumed
health care cost trend rates used in measuring the accumulated
postretirement benefit obligation were 13.0% in 1993 and 14.4% in
1992, declining each year to ultimate rates of 5.0% and 5.5% by
2003, respectively.
Increasing the health care cost trend rate by 1% as of December
31, 1993, would increase the APBO by 9.3%. The effect of this
change on the sum of the service cost and interest cost
components of net periodic postretirement benefit cost for 1993
would be an increase of 8.2%. The company has made several
modifications to the cost-sharing provisions of its
postretirement plans.
In 1991, charges relating to the health care and life insurance
benefits for retirees were based on benefits paid and expenses
incurred. Such charges amounted to $12,916,000 in 1991.
NOTE 15 - COMMON STOCK: In May 1992, the board of directors
declared a two-for-one split of the company's common stock. The
stock split was made in the form of a stock dividend, payable on
June 1, 1992, to shareowners of record on May 19, 1992. All
prior year per share amounts have been restated to reflect the
stock split.
On December 7, 1988, the board of directors adopted a Rights
Plan (Plan) and declared a dividend distribution of one right for
each outstanding share of the company's common stock. Each right
entitles the holder to purchase 1/100th of a share of Series A
preference stock at an exercise price of $130, or, in lieu of
preference stock, the common stock of the company (or in certain
circumstances, the stock of an acquiring entity) for a price of
approximately one-half of its value. The rights become
exercisable in accordance with the provisions of the Plan a
specified number of days following (i) the acquisition by a
person or group of persons of 20 percent or more of the company's
common stock or (ii) the commencement of a tender or exchange
offer for 20 percent or more of the company's common stock. The
rights may not be exercisable by holders of 20 percent or more of
the company's common stock. The company has reserved 563,000
shares of Series A preference stock for issuance upon exercise of
the rights. The rights may be redeemed by the company for one
cent per right in accordance with the provisions of the Plan.
The rights will expire on December 22, 1998, unless redeemed
earlier by the company.
Shares held in treasury at December 31, 1993, will be used for
employee benefit plans and for other corporate purposes.
265
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NOTE 16 - BUSINESS SEGMENT INFORMATION: A description of
business segments and operations by business segments and
geographic area for the three years ended December 31, 1993 were
as follows:
DESCRIPTION OF BUSINESS SEGMENTS
Ingersoll-Rand's operations are organized into three worldwide
business segments: Standard Machinery; Engineered Equipment; and
Bearings, Locks and Tools.
Standard Machinery
The segment's products are categorized into three groups:
Air Compressor - products include reciprocating, rotary and
centrifugal air compressors, vacuum pumps, air drying and
filtering systems and other compressor accessories. The products
are used primarily to supply pressurized air to industrial
plants, refineries, chemical plants, electrical utilities and
service stations.
Construction and Mining - manufactures portable and packaged air
compressors, vibratory compactors, pavement millers, asphalt
pavers, rock drills, blasthole drills, water-well drills, crawler
drills, jumbo drills, jackhammers and rock and roof stabilizers
primarily for the construction, highway maintenance,
metals-mining and well-drilling industries.
Mining Machinery(1) - products include continuous and long-wall
mining machines, crushers, coal haulers and mine-service
vehicles, which principally serve the underground coal-mining
industry.
Engineered Equipment
The segment's products are categorized into two groups:
Pump(2) - manufactures centrifugal and reciprocating pumps.
These products serve oil production and refining, chemical
process, marine, agricultural, electric utility and general
manufacturing industries.
Process Systems - consists of pulp and paper processing
equipment, pelleting equipment, filters, aerators and dewatering
systems. This equipment is used in the pulp and paper, food and
agricultural, and minerals processing industries.
266
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Bearings, Locks and Tools
The segment's products are categorized into three groups:
Bearings and Components - principal products include needle
bearings, needle roller bearings, needle rollers, thrust
bearings, tapered roller bearings, drawn cup bearings,
high-precision ball bearings, spherical bearings, radial
bearings, universal joints, dowel pins, swagers and precision
components. These products are sold principally to durables-
industry customers primarily in the automotive and aerospace
markets.
Production Equipment - manufactures air-powered tools, hoists and
winches, air motors and air starters, automated assembly and test
systems, air and electric automated fastener tightening systems
and waterjet cutting systems. These products are sold to general
manufacturing industries and to the appliance, aircraft,
construction and automotive industries.
Door Hardware - major products include locks, door closers and
exit devices used in commercial and residential construction and
the retail hardware market.
(1)
The Mining Machinery Group was sold during 1993.
(2)
See Note 2 in the accompanying Notes to the Consolidated
Financial Statements for information regarding the joint
venture relating to this group.
267 <PAGE>
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Operations by Business Segments
Dollar amounts in millions
For the years ended % of % of % of
December 31 1993 total 1992(b) total 1991 total
Standard Machinery
<S> <C> <C> <C> <C> <C> <C>
Sales $1,250.9 31% $1,385.3 37% $1,363.2 38%
Operating income excluding
restructure of operations 89.6 27% 90.9 32% 86.8 29%
Restructure of operations
(charge) benefit (5.0) -- (16.7)
Operating income from
operations 84.6 26% 90.9 44% 70.1 23%
Operating income as % of sales 6.8% 6.6% 5.1%
Identifiable assets 927.1 980.6 1,000.7
Depreciation 25.0 26.6 26.3
Capital expenditures 25.0 42.8 46.4
Engineered Equipment
Sales 929.6 23% 645.3 17% 575.7 16%
Operating income excluding
restructure of operations 30.5 9% 29.0 10% 55.7 19%
Restructure of operations
(charge) benefit -- (70.0) --
Operating income from
operations 30.5 9% (41.0) (20)% 55.7 18%
Operating income as % of sales 3.3% (6.4)% 9.7%
Identifiable assets 622.3 696.4 400.2
Depreciation 28.1 19.0 14.6
Capital expenditures 29.0 27.1 25.4
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Operations by Business Segments (Continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1993 total 1992(b) total 1991 total
Bearings, Locks and Tools
Sales 1,840.6 46% 1,753.2 46% 1,647.3 46%
Operating income excluding
restructure of operations 210.7 64% 167.4 58% 155.3 52%
Restructure of operations
(charge) benefit -- (10.0) 23.8
Operating income from
operations 210.7 65% 157.4 76% 179.1 59%
Operating income as % of sales 11.4% 9.0% 10.9%
Identifiable assets 1,102.7 1,029.8 1,045.5
Depreciation 63.3 64.0 59.4
Capital expenditures 77.8 61.7 68.6
Total
Sales 4,021.1 100% 3,783.8 100% 3,586.2 100%
Operating income excluding
restructure of operations 330.8 100% 287.3 100% 297.8 100%
Restructure of operations
(charge) benefit (5.0) (80.0) 7.1
Operating income from
operations 325.8 100% 207.3 100% 304.9 100%
Operating income as % of sales 8.1% 5.5% 8.5%
Identifiable assets 2,652.1 2,706.8 2,446.4
Depreciation 116.4 109.6 100.3
Capital expenditures 131.8 131.6 140.4
General corporate expenses
charged to operating income 34.3 32.1 31.4
Operating income 291.5 175.2 273.5
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Operations by Business Segments (Continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1993 total 1992(b) total 1991 total
Unallocated
Interest expense 52.0 54.1 59.3
Other income (expense), net (7.5) (0.7) (19.0)
Dresser-Rand income 33.1 27.6 40.0
Ingersoll-Dresser Pump
Company minority interest (11.6) 35.0 --
Earnings before income taxes,
extraordinary item and effect
of accounting changes 253.5 183.0 235.2
Corporate assets (a) 723.2 680.8 533.2
Total assets $3,375.3 $3,387.6 $2,979.6
(a) Corporate assets consist primarily of cash and cash equivalents, marketable securities,
investments and advances, and other assets not directly associated with the operations of a business
segment. (b) The 1992 change in accounting for postretirement benefits decreased operating income by
$4.7 million for Standard Machinery, $5.3 million for Engineered Equipment and $19.6 million for
Bearings, Locks and Tools.
</TABLE>
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Operations by Geographic Area
In millions United Other Adjustments/
For the year 1993 States Europe International Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Sales to customers $2,526.9 $1,071.5 $422.7 $ -- $4,021.1
Transfers between geographic
areas 357.3 53.0 33.0 (443.3) --
Total sales and transfers $2,884.2 1,124.5 455.7 (443.3) $4,021.1
Operating income excluding
restructure of operations $ 260.0 35.5 34.7 0.6 $ 330.8
Restructure of operations
(charge) benefit (5.0) -- -- -- (5.0)
Operating income from
operations $ 255.0 35.5 34.7 0.6 $ 325.8
General corporate expenses
charged to operating income 34.3
Operating income $ 291.5
Identifiable assets at
December 31, 1993 $1,597.3 780.5 286.7 (12.4) $2,652.1
Corporate assets 723.2
Total assets at
December 31, 1993 $3,375.3
For the year 1992
Sales to customers $2,311.2 1,064.4 408.2 -- $3,783.8
Transfers between geographic
areas 370.7 47.7 44.4 (462.8) --
Total sales and transfers $2,681.9 1,112.1 452.6 (462.8) $3,783.8
Operating income excluding
restructure of operations $ 184.3 54.9 47.0 1.1 $ 287.3
Restructure of operations
(charge) benefit (64.5) (12.7) (2.8) -- (80.0)
Operating income from
operations $ 119.8 42.2 44.2 1.1 $ 207.3
General corporate expenses
charged to operating income 32.1
Operating income $ 175.2
Identifiable assets at
December 31, 1992 $1,564.0 854.3 301.5 (13.0) $2,706.8
Corporate assets 680.8
Total assets at
December 31, 1992 $3,387.6
271 <PAGE>
EXHIBIT 13
Page 61 of 64
Operations by Geographic Area (Continued)
In millions
United Other Adjustments/
For the year 1991 States Europe International Eliminations Consolidated
Sales to customers $2,160.3 980.1 445.8 -- $3,586.2
Transfers between geographic
areas 381.2 49.1 47.8 (478.1) --
Total sales and transfers $2,541.5 1,029.2 493.6 (478.1) $3,586.2
Operating income excluding
restructure of operations $ 149.6 89.2 57.7 1.3 $ 297.8
Restructure of operations
(charge) benefit 20.1 (13.0) -- -- 7.1
Operating income from
operations $ 169.7 76.2 57.7 1.3 $ 304.9
General corporate expenses
charged to operating income 31.4
Operating income $ 273.5
Identifiable assets at
December 31, 1991 $1,459.9 702.8 297.8 (14.1) $2,446.4
Corporate assets 533.2
Total assets at
December 31, 1991 $2,979.6
International sales of U.S. manufactured products were $580,700,000 in 1993, $577,200,000 in 1992 and
$564,400,000 in 1991.
</TABLE>
272 <PAGE>
EXHIBIT 13
Page 62 of 64
NOTE 17 - PENDING TRANSACTION: On December 22, 1993, Ingersoll-
Rand announced that it has agreed to acquire a 12-percent
interest in Nuovo Pignone from Ente Nazionale Idrocarburi (ENI),
the Italian government-owned energy conglomerate. Nuovo Pignone
is a manufacturer of turbines, compressors, pumps, valves and
fuel dispensing systems, primarily for energy-related industries.
The agreement with ENI also calls for General Electric USA,
which leads the consortium, to acquire a 25-percent share and for
Dresser Industries to acquire a 12-percent share in Nuovo
Pignone. The consortium has invited several Italian banks to
acquire up to 20-percent ownership. The remainder of the company
will be owned by subsidiaries of ENI (20 percent) and public
shareholders (11 percent). The purchase price for the company's
interest totals approximately $73 million.
The transaction is subject to antitrust review and is expected
to close in the first half of 1994.
273
<PAGE>
EXHIBIT 13
Page 63 of 64
Report of Management
The accompanying consolidated financial statements have been
prepared by the company. They conform with generally accepted
accounting principles and reflect judgments and estimates as to
the expected effects of incomplete transactions and events being
accounted for currently. The company believes that the
accounting systems and related controls that it maintains are
sufficient to provide reasonable assurance that assets are
safeguarded, transactions are appropriately authorized and
recorded, and the financial records are reliable for preparing
such financial statements. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal
accounting controls must be related to the benefits derived. The
company maintains an internal audit function that is responsible
for evaluating the adequacy and application of financial and
operating controls and for testing compliance with company
policies and procedures.
The Audit Committee of the Board of Directors is comprised
entirely of individuals who are not employees of the company.
This committee meets periodically with the independent
accountants, the internal auditors and management to consider
audit results and to discuss significant internal accounting
controls, auditing and financial reporting matters. The Audit
Committee recommends the selection of the independent
accountants, who are then appointed by the board of directors,
subject to ratification by the shareowners.
The independent accountants are engaged to perform an audit
of the consolidated financial statements in accordance with
generally accepted auditing standards. Their report follows.
/S/ T. F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
274
<PAGE>
EXHIBIT 13
Page 64 of 64
Report of Independent Accountants
February 1, 1994
To the Shareowners of Ingersoll-Rand Company:
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of income, of
shareowners' equity and of cash flows present fairly, in all
material respects, the financial position of Ingersoll-Rand
Company and its subsidiaries at December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the consolidated financial
statements, the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993 and adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," and Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," effective January 1, 1992.
/S/ Price Waterhouse
Price Waterhouse
Hackensack, New Jersey 07601
275
<PAGE>
EXHIBIT 21
Page 1 of 3
LIST OF SUBSIDIARIES OF INGERSOLL-RAND COMPANY
The following list represents the principal subsidiaries of
the company all of which (except as otherwise indicated) are
deemed to be 100% owned, directly or indirectly, and whose
financial statements are included in the consolidated statements.
The subsidiaries of Ingersoll-Dresser Pump Company (IDP), a
general partnership owned 51% by the company, are deemed to be
100% owned by IDP directly or indirectly. The names of
particular subsidiaries omitted, if considered in the aggregate
as a single subsidiary, would not constitute a significant
subsidiary.
SUBSIDIARIES OF INGERSOLL-RAND COMPANY
California Pellet Mill Company California
Ingersoll-Rand China Limited Delaware
Ingersoll-Rand International, Inc. Delaware
Ingersoll-Rand International Sales Inc. Delaware
Ingersoll-Rand International Holding Corporation New Jersey
Ingersoll-Rand S.A. Switzerland
Woodcliff Insurance, Ltd. Bermuda
Ingersoll-Rand Worldwide, Inc. Delaware
Schlage Lock Company California
Von Duprin, Inc. Indiana
Silver Engineering Works, Inc. Colorado
The Aro Corporation Delaware
The Torrington Company Delaware
Kilian Manufacturing Corporation Delaware
Torrington Holdings, Inc. Delaware
Torrington France, S.A.R.L. France
Ingersoll-Rand Espanola, S.A. Spain
Industrias del Rodamiento S.A. Spain
Ingersoll-Rand (Australia) Ltd. Australia
Ingersoll-Rand S.E. Asia (Private), Limited Singapore
Ingersoll-Rand Benelux Belgium
N.V. Aro S.A. Belgium
Ingersoll-Rand Canada, Inc. Canada
Torrington, Inc. Canada
Torrington Industria e Comercio Ltda. Brazil
Ingersoll-Rand World Trade Ltd. Bermuda
Ingersoll-Rand (Barbados) Corporation Barbados
Torrington Beteiligungs GmbH Germany
Torrington GmbH Germany
Torrington Nadellager GmbH Germany
Compagnie Ingersoll-Rand France
Ingersoll-Rand Equipements de Production France
276
<PAGE>
EXHIBIT 21
Page 2 of 3
Ingersoll-Rand Sales Company Limited Delaware
Ingersoll-Rand Holdings Limited England
Ingersoll-Rand Company Limited England
Ingersoll-Rand Company South Africa
(Proprietary) Ltd. South Africa
The Torrington Company Limited England
The Aro Corporation (U.K.) Limited England
Ingersoll-Rand Beteiligungs GmbH Germany
ABG Allgemeine Baumaschinen-Gesellschaft mbH Germany
ABG Verwaltungs GmbH Germany
ABG Werke GmbH Germany
Ingersoll-Rand GmbH Germany
Ingersoll-Rand Beteiligungs und
Grundstucks Verwaltungs GmbH Germany
Ingersoll-Rand Verwaltungs Gesellschaft mbH Germany
Ingersoll-Rand (India) Ltd. (74% owned by
the company) India
Ingersoll-Rand Italiana S.p.A. Italy
Ingersoll-Rand Japan Ltd. Japan
Tokyo Ryuki Seizo Kabushiki Kaisha Japan
Ingersoll-Rand Philippines, Inc. Philippines
Ingersoll-Rand AB Sweden
Ingersoll-Rand Services & Engineering Company Switzerland
Ingersoll-Rand Acceptance Company, S.A. Switzerland
Ingersoll-Rand Investment Company, S.A. Switzerland
G. Klemm Bohrtechnik GmbH Germany
Ingersoll-Rand Best Matic AB Sweden
SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY
Worthington Argentina S.A.I.C. Argentina
Ingersoll-Dresser Pumps (Australia) Pty. Limited Australia
Worthington GmbH Austria
Worthington Industria e Comercio Ltda. Brazil
Ingersoll-Dresser Pump Canada Inc. Canada
Worthington Colombiana, S.A. Colombia
Worthington Centroamericana Ltda. Costa Rica
Ingersoll-Dresser Pompes France
IDP Pleuger France
IDP International France
Deutsche Ingersoll-Dresser Pumpen GmbH Germany
Ingersoll-Dresser Pumpen GmbH Germany
Pleuger Worthington GmbH Germany
Ingersoll-Dresser Pumps S.p.A. Italy
Worthington S.p.A. Italy
Ingersoll-Dresser Pump (Asia) Pte. Ltd. Singapore
Ingersoll-Dresser Pump S.A. Switzerland
Ingersoll-Dresser Pump Services Sarl Switzerland
277
<PAGE>
EXHIBIT 21
Page 3 of 3
ID Pump AG Switzerland
Ingersoll-Dresser Pump Nederland B.V. Netherlands
Ingersoll-Dresser Pumps (UK) Limited England
Ingersoll-Dresser Pumps Newark Limited England
Bombas Ingersoll-Dresser de Venezuela, C.A.
(51% owned by IDP) Venezuela
IDP Alternate Energy Company Delaware
Mascoma Hydro Corporation New Hampshire
Pump Investments, Inc. Delaware
Energy Hydro Inc. Delaware
Compania Ingersoll-Dresser Pump, S.A. Spain
278 <PAGE>
EXHIBIT
10(iii)(h)
Page 1 of 19
INGERSOLL-RAND COMPANY
Incentive Stock Plan of 1985
Section 1. Purposes: The purposes of the Plan are (a) to
provide additional incentive for such Key Employees of the
Company, its Subsidiaries and divisions, as may be designated for
participation in the Plan, by authorizing payment of bonus or
incentive compensation in shares of Common Stock and by
encouraging such Key Employees to invest in shares of Common
Stock, thereby furthering their identity of interest with the
interests of the Company's shareholders, increasing their stake
in the future growth and prosperity of the Company and
stimulating and sustaining constructive and imaginative thinking;
and (b) to enable the Company, by offering comparable incentives,
to induce the employment and continued employment of Key
Employees and to compete with other organizations in attracting
and retaining the services of competent executives.
Section 2. Definitions: Unless otherwise required by the
context, the following terms, when used in the Plan, shall have
the meanings set forth in this section 2.
Board of Directors or Board: The Board of Directors of
the Company.
Committee: Such committee or committees as shall be
appointed by the Board of Directors to administer the Plan
pursuant to the provisions of section 11.
Common Stock: The Common Stock of the Company, par
value $2 per share, or such other class of shares or other
securities as may be applicable pursuant to the provisions
of section 9.
Common Stock Equivalents: Common Stock Equivalents
shall provide the holder with such of the rights and
benefits of the actual owner of shares of Common Stock as
the Board of Directors may determine, including the right to
receive dividends and the right to receive the amount of
appreciation in value, if any, on such shares of Common
Stock from the date the grant of such Common Stock
Equivalents became effective until they become payable to
the holder.
133
<PAGE>
EXHIBIT
10(iii)(h)
Page 2 of 19
Company: Ingersoll-Rand Company, a New Jersey
corporation.
Disability: Such term as defined under the pension,
retirement or appropriate benefit plan or plans of the
Company or a Subsidiary applicable to the Key Employee.
Dividend Equivalents: A right to receive immediately or
on a deferred basis, whether or not subject to forfeiture,
an amount equivalent to all or part of dividends paid or
payable on a share of Common Stock subject to a Stock
Incentive.
Fair Market Value: As applied to any date, and except
as otherwise provided in paragraph (e) of section 7 of the
Plan, the mean between the high and low sales prices of a
share of Common Stock on such date as reported on the
Composite Tape, or, if no such sales were made on such date,
on the next preceding date on which there were such sales of
Common Stock as reported on the Composite Tape; provided,
however, that if such method of determining Fair Market
Value shall not be consistent with regulations of government
agencies at the time applicable to the determination of Fair
Market Value in respect of a Stock Incentive, Fair Market
Value in the case of such Stock Incentive shall be
determined in accordance with such regulations and shall
mean the value as so determined.
Incentive Compensation: Bonuses, extra and other
compensation payable in addition to a salary or other base
amount, whether contingent or not, whether discretionary or
required to be paid pursuant to an agreement, resolution,
arrangement, plan or practice and whether payable currently
or on a deferred basis, in cash, Common Stock or other
property, awarded by the Company or a Subsidiary, whether
prior or subsequent to the date of the approval and adoption
of the Plan by the shareholders of the Company.
Key Employee: An employee of the Company or of a
Subsidiary, including an officer or director who is an
employee, who in the opinion of the Committee can contribute
significantly to the growth and successful operations of the
Company or a Subsidiary. The recommendation of the grant of
a Stock Incentive to an employee by the Committee shall be
deemed a determination by the Committee that such employee
is a Key Employee.
134
<PAGE>
EXHIBIT
10(iii)(h)
Page 3 of 19
Management Incentive Unit: A unit credited to the
account of a participant under the Management Incentive Unit
Plan of the Company approved by the shareholders of the
Company on April 22, 1958, as amended.
Option: An Option to purchase shares of Common Stock.
Performance Unit: A unit representing a cash sum or one
or more shares of Common Stock subject to a Stock Award the
payment, issuance, transfer or retention of which is
contingent, in whole or in part, upon attainment of a
specified performance objective or objectives, including,
without limitation, objectives determined by reference to or
changes in (a) book value or earnings per share of Common
Stock, or (b) sales and revenues, income, profits and
losses, return on capital employed, or net worth of the
Company or of any one or more of its groups, divisions,
Subsidiaries or departments (on a consolidated, partially
consolidated or unconsolidated basis), or (c) a combination
of two or more of the foregoing factors.
Plan: The Incentive Stock Plan of 1985 herein set forth
as the same may from time to time be amended.
Restricted Shares: Shares of Common Stock issued or
transferred subject to restrictions as authorized by
paragraph (d) of section 5 or paragraph (a) of section 12 of
the Plan.
Retirement: Such term as defined under the pension or
retirement plan or plans of the Company or a Subsidiary
applicable to the Key Employee, pursuant to which he is
receiving or will, upon such retirement, be entitled to
receive retirement benefits.
Stock Appreciation Right: A right to receive a number
of shares of Common Stock or, at the election of the
Company, cash, in either event based on the increase in the
Fair Market Value of the number of shares of Common Stock
subject to such right, as set forth in section 7 of the
Plan.
135
<PAGE>
EXHIBIT
10(iii)(h)
Page 4 of 19
Stock Award: An issuance or transfer of shares of
Common Stock at the time a Stock Incentive is granted or as
soon thereafter as practicable, or an undertaking to issue
or transfer such shares in the future, including, without
limitation, such an issuance, transfer or undertaking with
respect to Performance Units.
Stock Incentive: A Stock Incentive granted under the
Plan in one of the forms provided for in section 3.
Subsidiary: A corporation or other form of business
association of which shares (or other ownership interests)
having 50% or more of the voting power are owned or
controlled, directly or indirectly, by the Company.
Section 3. Grants of Stock Incentives:
(a) Subject to the provisions of the Plan, the Board of
Directors may at any time, or from time to time, grant Stock
Incentives under this Plan to, and only to, Key Employees,
provided, however, that no Stock Incentive shall be granted to a
Key Employee who at the time of such grant is a member of the
Board of Directors except by or upon the recommendation of the
Committee, or by a majority of disinterested members of the Board
as provided in paragraph (b) of section 11.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, in accordance with section 5, or
(ii) an Option, in accordance with section 6, or
(iii) a Stock Appreciation Right, in accordance with
section 7, or
(iv) a combination of any one or more of the
foregoing.
Section 4. Stock Subject to the Plan:
(a) Subject to the provisions of paragraph (c) of this
section 4 and of section 9, the aggregate number of shares of
Common Stock which may be issued or transferred pursuant to Stock
Incentives granted under the Plan shall not exceed 1,000,000
shares of Common Stock.
136
<PAGE>
EXHIBIT
10(iii)(h)
Page 5 of 19
(b) Authorized but unissued shares of Common Stock and
shares of Common Stock held in the treasury, whether acquired by
the Company specifically for use under the Plan or otherwise, may
be used, as the Board of Directors may from time to time
determine, for purposes of the Plan, provided, however, that any
shares acquired or held by the Company for the purposes of the
Plan shall, unless and until transferred to a Key Employee in
accordance with the terms and conditions of a Stock Incentive, be
and at all times remain treasury shares of the Company
irrespective of whether such shares are entered in a special
account for purposes of the Plan, and shall be available for any
corporate purpose.
(c) If any shares of Common Stock subject to a Stock
Incentive shall not be issued or transferred and shall cease to
be issuable or transferable because of the termination, in whole
or in part, of such Stock Incentive or, subject to the provisions
of paragraph (h) of section 6 and paragraph (d) of section 7, for
any other reason, or if any such shares shall, after issuance or
transfer, be reacquired by the Company or a Subsidiary because of
an employee's failure to comply with the terms and conditions of
a Stock Incentive, the shares not so issued or transferred, or
the shares so reacquired by the Company or a Subsidiary, shall no
longer be charged against the limitation provided for in
paragraph (a) of this section 4 and may again be made subject to
Stock Incentives.
Section 5. Stock Awards: Stock Incentives in the form of
Stock Awards shall be subject to the following provisions:
(a) A Stock Award shall be granted only (i) in payment of
Incentive Compensation that has been earned or (ii) as Incentive
Compensation to be earned, including, without limitation,
Incentive Compensation awarded concurrently with or prior to the
grant of the Stock Award and Incentive Compensation awarded
whether subsequent or prior to the approval and adoption of the
Plan by the shareholders of the Company.
(b) For the purposes of the Plan, in determining the value
of a Stock Award, all shares of Common Stock subject to such
Stock Award shall be valued at not less than 100% of the Fair
Market Value of such shares on the date such Stock Award is
granted, regardless of whether or when such shares are issued or
transferred to the Key Employee and whether or not such shares
are subject to restrictions which affect their value.
137
<PAGE>
EXHIBIT
10(iii)(h)
Page 6 of 19
(c) Shares of Common Stock subject to a Stock Award may be
issued or transferred to a Key Employee at the time the Stock
Award is granted, or at any time subsequent thereto, or in
installments from time to time, as the Board of Directors shall
determine. In the event that any such issuance or transfer shall
not be made to the Key Employee at the time the Stock Award is
granted, the Board of Directors may provide for the payment or
crediting to such Key Employee of Dividend Equivalents. Any
amount payable in shares of Common Stock under the terms of a
Stock Award may, at the discretion of the Company, be paid in
cash on each date on which delivery of shares would otherwise
have been made, in an amount equal to the Fair Market Value on
such date of the shares which would otherwise have been
delivered.
(d) A Stock Award shall contain such terms and conditions as
the Board shall determine with respect to payment or forfeiture
of all or any part of the Stock Award upon termination of
employment or the occurrence of other circumstances.
(e) A Stock Award shall be subject to such other terms and
conditions, including, without limitation, restrictions on sale
or other disposition of the Stock Award or of the Shares issued
or transferred pursuant to such Stock Award, as the Board of
Directors shall determine; provided, however, that upon the
issuance or transfer of shares pursuant to a Stock Award, the
recipient shall, with respect to such shares, be and become a
shareholder of the Company fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder except
to the extent otherwise provided in the Stock Award. Each Stock
Award shall be evidenced by a written instrument in such form as
the Board of Directors or the Committee shall determine, provided
the Stock Award is consistent with the Plan and incorporates it
by reference.
Section 6. Options: Stock Incentives in the form of Options
shall be subject to the following provisions:
(a) The Option price per share shall be determined by the
Board of Directors from time to time, but in no instance shall be
less than the Fair Market Value of a share of Common Stock on the
date the Option shall be granted.
138
<PAGE>
EXHIBIT
10(iii)(h)
Page 7 of 19
(b) Each Option shall expire at such time as the Board may
determine at the time such Option shall be granted but not later
than ten years from the date such Option shall be granted. When
an Option is granted for a term of less than ten years the Board
may, with the holder's consent and at any time prior to the
expiration of the Option, extend its term for a period ending not
later than ten years from the date of grant of the Option; such
extension shall not be deemed the grant of a new or additional
Option for any purpose under the Plan.
(c) The Option may be exercised solely by the person to whom
granted except as hereinafter provided in the case of such
person's death or Disability. During the lifetime of the
optionee, the Option and any rights and privileges pertaining
thereto shall not be transferred, assigned, pledged or
hypothecated in any way, whether by operation of law or
otherwise, and shall not be subject to execution, attachment or
similar process.
(d) The optionee must complete twelve months of continuous
employment with the Company or a Subsidiary, or both, immediately
following the date on which the Option shall be granted before
any part of the Option may be exercised by him.
(e) After the completion of the required period of
employment, the Option may be exercised, in whole or in part, and
from time to time during the balance of the term of the Option,
subject to the terms and conditions specified in the Option or by
the Board of Directors.
(f) The Option shall terminate if and when the optionee
shall cease to be an employee of the Company and its
Subsidiaries, except as follows:
(i) If the optionee shall die or become subject to a
Disability while in the employ of the Company or of a
Subsidiary, or within three months of the termination of his
employment with the Company and its Subsidiaries, and after
he shall have completed at least twelve months of continuous
employment following the date upon which the Option was
granted, then the Option shall be exercisable within such
period as shall be set forth in the Option grant by the
optionee or by such person or persons as shall have acquired
139
<PAGE>
EXHIBIT
10(iii)(h)
Page 8 of 19
the optionee's rights under the Option by will or by the
laws of descent and distribution, or by the optionee's
guardian, conservator or similar legal representative, but
not later than three years after the date of death or
Disability. In the event of the Retirement of the optionee
after he shall have completed at least twelve months of
continuous employment following the date upon which the
Option was granted, then the Option shall be exercisable
within such period as shall be set forth in the Option grant
but not later than three years after the date of Retirement.
(ii) If employment of the optionee by the Company and
its Subsidiaries shall have terminated for any reason other
than death, Disability or Retirement, and after he shall
have completed at least twelve months of continuous
employment following the date upon which the Option was
granted, the Option shall be exercisable by him only within
three months after such termination, but not after the
expiration of the term of the Option.
(g) Shares purchased under the Option shall be paid for in
full at the time of the exercise of the Option as to such shares
upon such terms as the Board of Directors may approve, including
cash, secured or unsecured indebtedness, by exchange for other
property, including shares of Common Stock of the Company, or
otherwise.
(h) The Board of Directors may at any time and from time to
time provide for payment to the optionee of Dividend Equivalents.
The Option agreements or Option grants authorized by the Plan may
contain such other provisions as the Board of Directors shall
deem advisable. Without limiting the foregoing and if so
provided in the Option, or if so authorized by the Board of
Directors and subject to such terms and conditions as are
specified in the Option or by the Board of Directors, the Company
may, with the consent of the holder of the Option, and at any
time or from time to time, cancel all or a portion of the Option
then subject to exercise and discharge its obligation in respect
of the Option either by payment to the holder of an amount of
money equal to the excess, if any, of the Fair Market Value, at
such time or times, of the shares subject to the portion of the
Option so cancelled over the aggregate purchase price of such
shares, or by issuance or transfer to the holder of shares of
Common Stock with a Fair Market Value, at such time or times,
140
<PAGE>
EXHIBIT
10(iii)(h)
Page 9 of 19
equal to any such excess, or by a combination of cash and shares.
The number of shares of Common Stock subject to the Option, or
portion thereof, so cancelled shall, in the event that a payment
of money or transfer of shares is made by the Company in respect
of such cancellation, be charged against the maximum limitation
set forth in paragraph (a) of section 4 of the Plan.
(i) Options may be granted under the Plan from time to time
in substitution for stock options held by employees of other
corporations who are about to become employees of the Company or
a Subsidiary as the result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary, or the
acquisition by the Company or a Subsidiary of the assets of the
employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation as the result of
which it becomes a Subsidiary. The terms and conditions of the
substitute options so granted may vary from the terms and
conditions set forth in this section 6 to such extent as the
Board of Directors at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
(j) In the case of any Option granted under the terms of
this Plan, which Option is determined to be an incentive stock
Option as that term is defined under Section 422A of the Internal
Revenue Code of 1954, as amended, the aggregate Fair Market Value
(determined as of the time the Option is granted) of the shares
for which any employee may be granted incentive stock Options in
any calendar year shall not exceed $100,000 plus any unused limit
carryover to such year. The purpose of this Section of the Plan
is to permit the Company to grant incentive stock Options, as
defined above, to key employees and the provisions of this
Section shall be interpreted in accordance with the aforesaid
Section 422A and the regulations promulgated thereunder.
(k) If permitted under the Option grant, the Board may at
any time, with the consent of the optionee and in its sole
discretion, cancel any Option and issue to the optionee a new
Option for the same or different number of shares and at the same
or different Option price.
141
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EXHIBIT
10(iii)(h)
Page 10 of 19
Section 7. Stock Appreciation Rights:
(a) Stock Appreciation Rights may be granted in connection
with any Option granted under the Plan, either at the time of the
grant of such Option or at any time thereafter during the term of
the Option, or may be granted independently of the grant of an
Option.
(b) If granted in connection with an Option, Stock
Appreciation Rights shall entitle the holder of the related
Option, upon surrender of the Option, or any portion thereof, to
exercise the Stock Appreciation Rights, to the extent
unexercised, and to receive a number of shares of Common Stock,
or cash, determined pursuant to paragraph (c)(iii) of this
section 7. Such Option shall, to the extent so surrendered,
thereupon cease to be exercisable. If granted independently of
an Option, Stock Appreciation Rights shall entitle the holder of
the Stock Appreciation Rights to receive a number of shares of
Common Stock, or cash, determined pursuant to paragraph (c)(iii)
of this section 7.
(c) Stock Appreciation Rights shall be subject to the
following terms and conditions and to such other terms and
conditions not inconsistent with the Plan as shall from time to
time be approved by the Board of Directors.
(i) If granted in connection with an Option, Stock
Appreciation Rights shall be exercisable at such time or
times and to the extent, but only to the extent, that the
Option to which they relate shall be exercisable. If
granted independently of an Option, Stock Appreciation
Rights shall be exercisable at such time or times as shall
be determined by the Board of Directors at the time of the
grant of the Stock Appreciation Rights but in no event later
than three months after the employment of the holder of the
Stock Appreciation Rights by the Company and its
Subsidiaries shall have terminated other than by reason of
death, Disability or Retirement. In the event of
termination of employment by reason of death or Disability,
Stock Appreciation Rights shall be exercisable no later than
three years after such termination of employment by the
optionee or by the beneficiary designated pursuant to
paragraph (1) of section 12, and in the case of Retirement,
no later than three years after the date of such Retirement.
If the holder shall die or become subject to a Disability
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within three months of the termination of his employment
with the Company and its Subsidiaries then the Stock
Appreciation Rights shall be exercisable within such period
as shall be set forth in the grant of the Stock Appreciation
Rights by the optionee or by such person or persons as shall
have acquired the holder's rights under the grant by will or
by the laws of descent and distribution, or by the holder's
guardian, conservator or similar legal representative, but
not later than three years after the date of death. In no
event shall Stock Appreciation Rights be exercisable after
the expiration date of such Rights.
(ii) Stock Appreciation Rights shall in no event be
exercisable unless and until the holder of the Stock
Appreciation Rights shall have completed at least twelve
months of continuous service with the Company or a
Subsidiary, or both, immediately following the date upon
which the Stock Appreciation Rights shall have been granted.
(iii) Upon exercise of Stock Appreciation Rights, the
holder thereof shall be entitled to receive a number of
shares equal in Fair Market Value on the date of exercise to
the amount by which the Fair Market Value of one share of
Common Stock on the date of such exercise shall exceed the
Fair Market Value of a share of Common Stock on the date of
grant of such Stock Appreciation Rights multiplied by the
number of shares in respect of which the Stock Appreciation
Rights shall have been exercised. The Company may settle
all or any part of its obligation arising out of an exercise
of Stock Appreciation Rights by the payment of cash equal to
the aggregate value of shares of Common Stock (or a fraction
of a share) that it would otherwise be obligated to deliver
under the preceding sentence of this paragraph 7(c)(iii).
(d) To the extent that Stock Appreciation Rights shall be
exercised, an Option in connection with which such Stock
Appreciation Rights shall have been granted shall be deemed to
have been exercised for the purpose of the maximum limitation set
forth in the Plan under which such Option shall have been
granted. In the case of Stock Appreciation Rights granted
independently of an Option, the number of shares of Common Stock
in respect of which such Stock Appreciation Rights shall be
exercised shall be charged against the maximum limitation set
forth in paragraph (a) of section 4.
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(e) Stock Appreciation Rights may be granted by the Board in
substitution for Management Incentive Units, with the consent of
the holder of such Management Incentive Units, but only if the
holder of such Units shall have been in the employ of the Company
or a Subsidiary, or both, for a period of not less than five
years from the date of the award of such Management Incentive
Units. Notwithstanding anything in section 2 of the Plan or
elsewhere in the plan to the contrary, in the event that Stock
Appreciation Rights shall be granted in substitution for
Management Incentive Units, the Fair Market Value of a share of
Common Stock on the date that such units were credited to the
account of the participant shall be deemed the Fair Market Value
of such shares on the date of grant of Stock Appreciation Rights
for the purpose of paragraph (c)(iii) of this section 7.
(f) If so directed by the Board at any time and from time to
time, the grant of Stock Appreciation Rights may provide for
payment of Dividend Equivalents to the holder of the Stock
Appreciation Rights.
(g) Stock Appreciation Rights may provide that, upon
exercise of such Stock Appreciation Rights, the shares or cash,
as the case may be, which the holder of such Stock Appreciation
Rights shall be entitled to receive, shall be distributed or paid
in such installments and over such number of years as the Board
may direct, with distribution or payment of each such installment
contingent upon continued services of the employee to the Company
or a Subsidiary, or both (except for death, Disability,
Retirement or termination of employment by the Company or with
its consent), to the time for distribution or payment of such
installment.
Section 8. Dividend Equivalents: A grant of Dividend
Equivalents shall be made subject to such terms and conditions as
the Board of Directors may determine, and may be awarded only in
connection with a Stock Incentive granted under sections 5, 6 or
7. Dividend Equivalents may be awarded either at the time of
grant of a Stock Incentive or at anytime thereafter during the
term of the Stock Incentive. Dividend Equivalents may be payable
or credited either in cash, shares of Common Stock, or in Common
Stock Equivalents. If credited in Common Stock or in Common
Stock Equivalents, they shall be credited at the Fair Market
Value of a share of Common Stock on the day of such crediting.
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The Committee may provide that any amounts representing dividends
earned by Common Stock Equivalents may either be paid currently
or credited in cash or in Common Stock or that they may be
represented by further Common Stock Equivalents, or any combina-
tion thereof. The Board of Directors may provide that when
Common Stock Equivalents shall become payable to the holder, they
may be paid in cash or in shares of Common Stock or a combination
of both. To the extent that any payment to the holder with
respect to Dividend Equivalents is made in shares of Common
Stock, the number of shares of Common Stock used for such payment
shall be charged against the maximum limitation set forth in
paragraph (a) of section 4 of the Plan.
Section 9. Adjustment Provisions: In the event that any
recapitalization, or reclassification, split-up or consolidation
of shares of Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or
consolidation of the Company or a sale by the Company of all or a
part of its assets, exchanged for a different number or class of
shares of stock or other securities of the Company or for shares
of the stock or other securities of any other corporation, or a
public offer is made to purchase all or a substantial number of
the outstanding shares of Common Stock for cash or other
securities, or new, different or additional shares or other
securities of the Company or of another corporation are received
by the holder of Common Stock or any distribution is made to the
holders of Common Stock other than a cash dividend, (a) the
number and class of shares or other securities that may be issued
or transferred pursuant to Stock Incentives, (b) the number and
class of shares or other securities which have not been issued or
transferred under outstanding Stock Incentives, (c) the purchase
price to be paid per share under outstanding Options and other
Stock Incentives, (d) the Fair Market Value of a share of Common
Stock on the date of grant of outstanding Stock Appreciation
Rights, (e) the dates or events upon which Options and Stock
Appreciation Rights may be exercised, which may, in appropriate
instances, be related to specific dates or events under any of
the aforesaid actions, and (f) the price to be paid per share by
the Company or a Subsidiary for shares or other securities issued
or transferred pursuant to Stock Incentives which are subject to
a right of the Company or a Subsidiary to reacquire such share or
other securities, shall in each case be equitably adjusted.
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Section 10. Term: The Plan shall be deemed adopted and shall
become effective on the date it is approved by the shareholders
of the Company. No Stock Incentives shall be granted under the
Plan after April 30, 1990.
Section 11. Administration:
(a) The Plan shall be administered by a Committee which
shall consist of not less than three directors of the Company
designated by the Board of Directors, provided, however, that no
director shall be designated as or continue to be a member of the
Committee, unless he shall at the time of designation and service
be a "disinterested person" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (or any successor
provision at the time in effect). In no event shall a member of
the Committee be eligible to be granted a Stock Incentive while
serving on the Committee. Grants of Stock Incentives may be
recommended or granted either in or without consultation with
employees, but, anything in the Plan to the contrary
notwithstanding, the Committee shall have full authority to act
in the matter of selection of all Key Employees who are members
of the Board of Directors and in recommending Stock Incentives to
be granted to them.
(b) The Board of Directors may delegate to the Committee any
or all its authority under the Plan, including the authority to
award Stock Incentives, except its authority to amend or
discontinue the Plan. Any powers conferred on the Committee by
this section 11 or by any other provision of the Plan shall, to
the extent such authority shall not have been so delegated by the
Board of Directors, be exercised by the Board, provided however,
that, with respect to the participation in the Plan of any
director, unless his participation shall have been recommended by
the Committee, a majority of the members of the Board and a
majority of its members acting in the matter shall, at the time
so acting, be "disinterested persons" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 (or any successor
provision at the time in effect).
(c) The Committee may establish such rules and regulations,
not inconsistent with the provisions of the Plan, as it deems
necessary to determine eligibility to participate in the Plan and
for the proper administration of the Plan, and may amend or
revoke any rule or regulation so established. The Committee may
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make such determinations and interpretations under or in
connection with the Plan as it deems necessary or advisable. All
such rules, regulations, determinations and interpretations shall
be binding and conclusive upon the Company, its Subsidiaries, its
shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon
all other persons claiming under or through any of them.
(d) Any action required or permitted to be taken by the
Committee under the Plan shall require the affirmative vote of a
majority of all the members of the Committee. The Committee may
act by written determination instead of by affirmative vote at a
meeting, provided that any written determination shall be signed
by all of the members of the Committee, and any such written
determination shall be as fully effective as a majority vote at a
meeting.
(e) Members of the Board of Directors and members of the
Committee acting under the Plan shall be fully protected in
relying in good faith upon the advice of counsel and shall incur
no liability except for gross negligence or willful misconduct in
the performance of their duties.
Section 12. General Provisions:
(a) With respect to any shares of Common Stock issued or
transferred under any provision of the Plan, such shares may be
issued or transferred subject to such conditions, in addition to
those specifically provided in the Plan, as the Board of
Directors or Committee may direct and, without limiting the
generality of the foregoing, provision may be made in the grant
of Stock Incentives that shares issued or transferred upon their
grant or exercise shall be Restricted Shares subject to
forfeiture upon failure to comply with conditions and
restrictions imposed in the grant of such Stock Incentives.
(b) The Board of Directors may fix a uniform date, within
any specified period, either before or after the date so fixed,
as of which any exercise of an Option or Stock Appreciation
Rights shall be deemed to be effective.
(c) The Board of Directors may, in its discretion, in the
event of termination of employment with the consent of the
Company or death, Retirement or Disability, of the holder of a
Stock Incentive reduce the period of additional continuous
service required before such Stock Incentive may be exercised.
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(d) In the event of termination of employment of an optionee
or of a holder of Stock Appreciation Rights with the consent of
the Company, other than by death, Retirement or Disability, the
Board of Directors may extend the period during which such Option
or Stock Appreciation Rights may be exercised up to two years
after the date of termination of employment but not beyond the
expiration date of the term of the Option.
(e) Whether authorized leave of absence or absence for
military or government service shall constitute termination of
employment or interruption of required additional continuous
employment for the purpose of the Plan shall be determined by the
Board of Directors.
(f) Nothing in the Plan nor in any instrument executed
pursuant thereto shall confer upon any employee any right to
continue in the employ of the Company or Subsidiary or shall
affect the right of the Company or of a Subsidiary to terminate
the employment of any employee with or without cause.
(g) No shares of Common Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal
requirements applicable to the issuance or transfer of such
shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance or transfer,
the person acquiring the shares shall, if requested by the
Company, give assurances satisfactory to counsel to the Company
that the shares are being acquired for investment and not with a
view to resale or distribution thereof and assurances in respect
of such other matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal
requirements.
(h) No employee (individually or as a member of a group),
and no beneficiary or other person claiming under or through him,
shall have any right, title or interest in or to any shares of
Common Stock allocated or reserved for the purposes of the Plan
or subject to any Stock Incentive except as to such shares of
Common Stock, if any, as shall have been issued or transferred to
him.
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(i) The Company or a Subsidiary may, with the approval of
the Board of Directors, enter into an agreement or other
commitment to grant a Stock Incentive in the future to a person
who is or will be a Key Employee at the time of grant, and,
notwithstanding any other provision of the Plan, any such
agreement or commitment shall not be deemed the grant of a Stock
Incentive until the date on which the Board of Directors takes
action to implement such agreement or commitment.
(j) In the case of a grant of a Stock Incentive to any
employee of a Subsidiary, such grant may, if the Board of
Directors so directs, be implemented by the Company issuing or
transferring the shares, if any, covered by the Stock Incentive
to the Subsidiary, for such lawful consideration as the Board of
Directors may specify, upon the condition or understanding that
the Subsidiary will transfer the shares to the employee in
accordance with the terms of the Stock Incentive specified by the
Board of Directors pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Stock Incentive
may be issued by and in the name of the Subsidiary and shall be
deemed granted on the date it is approved by the Board of
Directors, on the date it is delivered by the Subsidiary, or on
such other date between such two dates, as the Board of Directors
shall specify.
(k) The Company or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes which
the Company or Subsidiary determines it is required to withhold
in connection with any Stock Incentive.
(l) No Stock Incentive and no rights under the Plan,
contingent or otherwise, shall be assignable or subject to any
encumbrance, pledge or charge of any nature except that, under
such rules and regulations as the Board may establish, a
beneficiary may be designated in respect of a Stock Incentive in
the event of the death of the holder of such Stock Incentive and
except, also, that if such beneficiary shall be the executor or
administrator of the estate of the holder of such Stock
Incentive, any rights in respect of such Stock Incentive may be
transferred to the person or persons or entity (including a
trust) entitled thereto under the will of the holder of such
Stock Incentive or, in the case of intestacy, under the laws
relating to intestacy. A Stock Incentive shall be exercisable
during a Key Employee's lifetime only by him or by his guardian,
conservator or similar legal representative.
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(m) Nothing in the Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of,
any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any
class or group of employees, which the Company or any Subsidiary
now has or may hereafter lawfully put into effect, including
without limitation, any retirement, pension, insurance, stock
purchase, incentive compensation or bonus plan.
(n) The place of administration of the Plan shall
conclusively be deemed to be within the State of New Jersey and
the validity, construction, interpretation and administration of
the Plan and of any rules and regulations or determinations or
decisions made thereunder, and the rights of any and all persons
having or claiming to have any interest therein or thereunder,
shall be governed by, and determined exclusively and solely in
accordance with, the laws of the State of New Jersey. Without
limiting the generality of the foregoing, the period within which
any action must be commenced arising under or in connection with
the Plan, or any payment or award made or purportedly made under
or in connection therewith, shall be governed by the laws of the
State of New Jersey, irrespective of the place where the act or
omission complained of took place and of the residence of any
party to such action and irrespective of the place where the
action may be brought.
Section 13. Amendment or Discontinuance of Plan:
(a) The Plan may be amended by the Board of Directors at any
time, provided that, without the approval of the shareholders of
the Company, no amendment shall be made which (i) increases the
aggregate number of shares of Common Stock that may be issued or
transferred pursuant to Stock Incentives as provided in paragraph
(a) of section 4, (ii) amends the provisions of paragraph (a) of
section 11 with respect to eligibility and disinterest of members
of the Committee or of paragraph (b) of section 11 with respect
to eligibility and disinterest of a majority of members of the
Board of Directors, (iii) permits any person who is not
determined to be a Key Employee at the time to be granted a Stock
Incentive, (iv) amends the provisions of paragraph (b) of section
5 or paragraph (a) of section 6 to permit shares to be valued or
to be optioned at less than 100% of Fair Market Value, (v) amends
section 10 to extend the term of the Plan, or (vi) amends this
section 13.
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(b) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue the Plan.
(c) No amendment or discontinuance of the Plan by the Board
of Directors or the shareholders of the Company shall adversely
affect any Stock Incentive theretofore granted without the
consent of the holder.
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