<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
INGERSOLL-RAND COMPANY
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
INGERSOLL-RAND COMPANY
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[INGERSOLL-RAND LOGO]
World Headquarters
-----------------------------------
Ingersoll-Rand Company
Woodcliff Lake, New Jersey
07675-8738
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Ingersoll-Rand Company will be held
on Thursday, April 27, 1995, at 10:30 a.m., local time, at the Company's
executive offices, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey for the
following purposes:
(1) To elect one director of the First Class to hold office for two
years, four directors of the Second Class to hold office for three years
and two directors of the Third Class to hold office for one year.
(2) To act upon the adoption of the Company's Incentive Stock Plan of
1995.
(3) To act upon the adoption of the Company's Senior Executive
Performance Plan.
(4) To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for 1995.
(5) To transact such other business as may be incident to or properly
come before the Annual Meeting or any adjournments thereof.
The transfer books will not be closed, but only shareholders of record at
the close of business on February 28, 1995 are entitled to notice of and to vote
at the Annual Meeting.
A map showing the location of the Company's executive offices, as well as
necessary travel information, follows this Notice and Proxy Statement.
You are requested to vote, date and sign the enclosed proxy and return it
in the enclosed envelope at your earliest convenience. Since it is impractical
to eliminate duplication, separate proxies are mailed to persons whose names are
shown in more than one way on the Company's stock records. Therefore, you may
receive more than one proxy. PLEASE VOTE, DATE, SIGN AND RETURN ALL PROXIES
RECEIVED.
Shares held for the account of shareholders participating in the Company's
Automatic Dividend Reinvestment and Cash Payment Plan will be voted by such
Plan's administrator in the same manner as directed on the enclosed proxy. If a
shareholder participating in the Automatic Dividend Reinvestment and Cash
Payment Plan does not return a proxy, the shares held for such shareholder's
account in such Plan will not be voted.
By Order of the Board of Directors,
R.G. Heller,
Secretary
Dated: March 15, 1995
<PAGE> 3
INGERSOLL-RAND COMPANY
P.O. BOX 8738
WOODCLIFF LAKE, NEW JERSEY 07675
PROXY STATEMENT
1995 ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of the Company in
connection with the Annual Meeting to be held on April 27, 1995. It and this
Proxy Statement are being sent to shareholders beginning on or about March 15,
1995. Proxies in the accompanying form which are properly executed and received
by the Secretary prior to the Annual Meeting will be voted. The Company has
retained Georgeson & Co. to assist in the solicitation of proxies personally and
by telephone at a cost of $10,000 plus expenses. In addition, certain officers
and other employees of the Company, without extra remuneration, may assist in
the solicitation. The cost of solicitation will be borne by the Company.
REVOCABILITY OF PROXY
A shareholder giving the enclosed proxy has the power to revoke it at any
time before it is exercised and may do so by written notice to the Secretary of
the Company at the address set forth above, effective upon receipt of such
written notice, or by voting in person at the Annual Meeting. Attendance at the
Annual Meeting, in and of itself, will not constitute revocation of a proxy.
VOTING SECURITIES
The record date for the determination of shareholders entitled to vote at
the Annual Meeting is the close of business on February 28, 1995. There were
outstanding and entitled to vote on such date 105,589,255 shares of Common
Stock, each of which is entitled to one vote.
In voting for the election of directors, shareholders have cumulative
voting rights. Accordingly, each shareholder may cumulate such voting power as
such shareholder possesses and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of such shareholder's
votes, or distribute such shareholder's votes on the same principle among two or
more candidates, as such shareholder sees fit. The enclosed proxy grants
discretionary authority for the exercise of such cumulative voting rights.
The affirmative vote of the holders of a plurality of votes cast at the
Annual Meeting will be required to elect directors. The affirmative vote of the
holders of a majority of the votes of the shares represented at the meeting,
either in person or by proxy, and entitled to vote, will be required to adopt
the Company's Incentive Stock Plan of 1995, provided that a majority of the
outstanding shares votes on such proposal. The affirmative vote of the holders
of a majority of the votes cast will be required to act on all other matters to
come before the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed for the meeting, who will also determine
whether or not a quorum is present. The inspectors of election will treat
abstentions, as well as shares represented by proxies submitted by brokers who
indicate that they do not have authority to vote on a particular matter, as
shares that are present for purposes of determining the presence of a quorum,
but as unvoted (i.e., not cast) for purposes of determining the approval of the
particular matter in question, except that as to the proposal to adopt the
Company's Incentive Stock Plan of 1995 abstentions will have the same effect as
a vote against such proposal.
<PAGE> 4
1. ELECTION OF DIRECTORS
It is intended that the proxies will be voted for the election of (i)
Richard J. Swift as a director of the First Class for a term of two years, (ii)
Donald J. Bainton, Brendan T. Byrne, Constance J. Horner and Orin R. Smith as
directors of the Second Class for a term of three years, and (iii) H. William
Lichtenberger and Alexander H. Massad as directors of the Third Class for a term
of one year. If, for reasons not now known, any of said nominees is not a
candidate when the Annual Meeting takes place, it is intended that such proxies
will be voted for the election of the other nominees named and may be voted for
any substitute nominees. The proxies may be voted cumulatively for less than the
entire number of nominees if any situation arises which, in the opinion of the
proxyholders, makes such action necessary or desirable.
Information with respect to each nominee and each director whose term of
office will continue after the Annual Meeting is as follows:
DONALD J. BAINTON
Mr. Bainton has been Chairman and Chief Executive Officer and a director of
Continental Can Co., Inc., an industrial packaging company which also provides
engineering, architectural and surveying services, since 1983. He is also a
director of General Public Utilities Corporation. Mr. Bainton, who is 63 years
old, became a director of the Company in 1993, and he is a candidate for a
three-year term. Member of Audit and Compensation and Nominating Committees.
THEODORE H. BLACK
Mr. Black retired in 1993 as Chairman and Chief Executive Officer of the
Company, a position he had held from 1988. He previously served as a Vice
President of the Company from 1972 through 1986, as President and Chief
Executive Officer of Dresser-Rand Company (in which the Company holds a 49%
ownership interest) from 1987 until 1988 and as President of the Company from
1988 to 1992. He is also a director of CPC International, Inc., General Public
Utilities Corporation and McDermott International, Inc. Mr. Black, who is 66
years old, became a director of the Company in 1988, and his current term
expires in 1997.
BRENDAN T. BYRNE
Mr. Byrne has been a member of the law firm of Carella, Byrne, Bain,
Gilfillan, Cecchi and Stewart since 1982. He previously served as Governor of
New Jersey from 1974 to 1982. He is also a director of Bell Atlantic-New Jersey,
Inc., Chelsea GCA Realty, Inc. and Elizabethtown Water Co. Mr. Byrne, who is 70
years old, became a director of the Company in 1988, and he is a candidate for a
three-year term. Member of Audit, Corporate Affairs and Finance Committees.
JOSEPH P. FLANNERY
Mr. Flannery has been Chairman, President and Chief Executive Officer of
Uniroyal Holding, Inc., a holding company, since 1986. He was also a partner in
Clayton & Dubilier, an investment firm, from 1988 to 1990. Mr. Flannery served
as Chairman, President and Chief Executive Officer of Uniroyal, Inc., a
manufacturer of chemicals, tires, engineered products and leisure products, from
1982 to 1986. He is also a director of APS, Inc., Arvin Industries, Inc., K Mart
Corporation, Newmont Gold Company, Newmont Mining Corporation and The Scotts
Company. Mr. Flannery, who is 62 years old, became a director of the Company in
1986, and his current term expires in 1997. Member of Audit, Compensation and
Nominating and Finance Committees.
CONSTANCE J. HORNER
Mrs. Horner has been a Guest Scholar at The Brookings Institution since
1993. She previously served at the White House as Assistant to the President and
Director of Presidential Personnel from 1991 to 1993, and as Deputy Secretary,
U.S. Department of Health and Human Services from 1989 to 1991. She is also a
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<PAGE> 5
director of Pfizer Inc. and The Prudential Insurance Company of America. Mrs.
Horner, who is 53 years old, became a director of the Company in 1994, and she
is a candidate for a three-year term. Member of Corporate Affairs and Finance
Committees.
H. WILLIAM LICHTENBERGER
Mr. Lichtenberger has been Chairman and Chief Executive Officer of Praxair,
Inc., an industrial gases company, since 1992. He previously served as a Vice
President of Union Carbide Corporation ("Union Carbide") from 1986 to 1990, and
as the President and Chief Operating Officer of Union Carbide from 1990 until
his resignation in 1992 in connection with the spinoff of Praxair, Inc. from
Union Carbide. He is also a director of Olin Corporation. Mr. Lichtenberger, who
is 59 years old, is a candidate for a one-year term.
ALEXANDER H. MASSAD
Mr. Massad served as a director of Mobil Corporation from 1977 and a
director and Executive Vice President of Mobil Oil Corporation from 1976 until
his retirement from these positions in 1986. He is also a director of Maxim
Engineers, Inc., Research Applications Inc. and Texas Commerce Bank-Austin. Mr.
Massad, who is 71 years old, became a director of the Company in 1982, and he is
a candidate for a one-year term. Member of Audit and Corporate Affairs
Committees.
JAMES E. PERRELLA
Mr. Perrella has been Chairman and Chief Executive Officer of the Company
since 1993. He has also served as President of the Company since 1992, prior to
which he served as an Executive Vice President of the Company. He is also a
director of Cincinnati Milacron, Inc. Mr. Perrella, who is 59 years old, became
a director of the Company in 1992, and his current term expires in 1996.
JOHN E. PHIPPS
Mr. Phipps has been a private investor for many years. He is also a
director of W.R. Grace & Co. Mr. Phipps, who is 62 years old, became a director
of the Company in 1970, and his current term expires in 1996. Member of
Corporate Affairs and Finance Committees.
DONALD E. PROCKNOW
Mr. Procknow served as Vice Chairman and Chief Operating Officer and a
director of AT&T Technologies, Inc. (formerly Western Electric Company, Inc.)
from 1984 until his retirement from these positions in 1986. Previously he had
served as Chief Executive Officer of Western Electric Company, Inc. from 1972.
He is also a director of The Prudential Insurance Company of America. Mr.
Procknow, who is 71 years old, became a director of the Company in 1973, and his
current term expires in 1996. Member of Audit and Compensation and Nominating
Committees.
CEDRIC E. RITCHIE
Mr. Ritchie has been Chairman of the Executive Committee of The Bank of
Nova Scotia since January 1993 and has served as a director of The Bank of Nova
Scotia for many years. He served as Chairman of the Board of The Bank of Nova
Scotia from 1974 until January 1995 and as its Chief Executive Officer from 1974
until January 1993. He is also a director of J. Ray McDermott S.A., MacMillan
Bloedel Limited, Moore Corporation Limited and Nova Corporation of Alberta. Mr.
Ritchie, who is 67 years old, became a director of the Company in 1987, and his
current term expires in 1997. Member of Compensation and Nominating and Finance
Committees.
ORIN R. SMITH
Mr. Smith has been Chairman and Chief Executive Officer and a director of
Engelhard Corporation, a provider of specialty chemical products, engineered
materials and precious metals management services for
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various industries, since January 1995. He previously served as President and
Chief Executive Officer of Engelhard Corporation from 1984 to January 1995. He
is also a director of Louisiana Land & Exploration Company, The Summit
Bancorporation and Vulcan Materials Company. Mr. Smith, who is 59 years old, is
a candidate for a three-year term.
RICHARD J. SWIFT
Mr. Swift has been Chairman, President and Chief Executive Officer of
Foster Wheeler Corporation, a provider of design, engineering, construction,
manufacturing, management and environmental services, since April 1994.
Previously, he held several executive positions with Foster Wheeler Corporation,
including serving as its President and Chief Operating Officer from December
1992 to April 1994. He is also a director of Public Service Enterprise Group
Incorporated. Mr. Swift, who is 50 years old, is a candidate for a two-year
term.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of February 28, 1995, the beneficial
ownership of the Company's Common Stock by (i) each of the directors and each of
the nominees for director of the Company, (ii) each of the executive officers of
the Company named in the Summary Compensation Table below, and (iii) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AND NATURE OF BENEFICIAL
NAME OWNERSHIP(A)
---------------------------------------------------------------- -------------------------
<S> <C>
D.J. Bainton.................................................... 300
P.L. Bergren.................................................... 34,407(b)
T.H. Black...................................................... 190,166(b)(c)
B.T. Byrne...................................................... 400
J.P. Flannery................................................... 1,000
C.J. Horner..................................................... 503
H.W. Lichtenberger.............................................. 1,000
A.H. Massad..................................................... 1,098
T.F. McBride.................................................... 73,309(b)
W.G. Mulligan................................................... 262,366(b)
J.E. Perrella................................................... 257,403(b)(d)
J.E. Phipps..................................................... 500
D.E. Procknow................................................... 1,000
C.E. Ritchie.................................................... 400
O.R. Smith...................................................... 1,000
R.J. Swift...................................................... 500
J.F. Travis..................................................... 175,512(b)(e)
All directors, nominees and executive officers as a group (28
persons)...................................................... 1,635,332(b)(f)
</TABLE>
---------------
(a) Unless otherwise indicated, all shares were held directly. No director,
nominee or executive officer of the Company owns as much as 1% of the
outstanding Common Stock.
(b) Includes shares held by the trustee under the Company's Savings and Stock
Investment Plan and Retirement Account Plan for the benefit of executive
officers as follows: P.L. Bergren, 2,887 shares; T.F. McBride, 7,205
shares; W.G. Mulligan, 11,752 shares; J.E. Perrella, 28,027 shares; J.F
Travis, 14,392 shares; and all executive officers as a group, 114,044
shares.
Also included are shares which executive officers and Mr. Black (who
previously had served as the Company's Chairman and Chief Executive
Officer) had the present right to acquire under the Company's Incentive
Stock Plans as follows: P.L. Bergren, 25,000 shares; T.H. Black, 130,000
shares;
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<PAGE> 7
T.F. McBride, 30,000 shares; W.G. Mulligan, 194,000 shares; J.E. Perrella,
170,000 shares; J.F. Travis, 140,000 shares; and all directors and
executive officers as a group, 1,145,000 shares.
(c) Includes 13,500 shares of Common Stock owned by Mr. Black's wife and Mr.
Black disclaims beneficial ownership of such shares.
(d) Includes 7,800 shares of Common Stock owned by a family foundation of which
Mr. Perrella and his wife are the trustees and Mr. Perrella disclaims
beneficial ownership of such shares.
(e) Includes an aggregate of 3,000 shares owned by members of Mr. Travis'
family and Mr. Travis disclaims beneficial ownership of all such shares.
(f) All directors, nominees and executive officers as a group beneficially
owned approximately 1.53% of the outstanding Common Stock. This includes an
aggregate of 25,588 shares of Common Stock owned by members of the families
of such individuals or by a family foundation, as to which such directors
and executive officers disclaim beneficial ownership.
Chase Manhattan Bank, N.A., 4 Chase Metro Tech Center, Brooklyn, New York
11245, has notified the Company that, as trustee for the Company's Savings and
Stock Investment Plan and Retirement Account Plan, it held as of February 28,
1995, an aggregate of 5,735,528 shares of Common Stock, representing
approximately 5.43% of the outstanding Common Stock, for the benefit of
participants in such plans.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held nine meetings during 1994. Each incumbent
director attended 75% or more of the total number of meetings of the Board and
the Committees of which he or she was a member.
Directors who are not employees of the Company receive an annual retainer
of $27,000, and $1,000 for attendance at each Board or Committee meeting, except
that Committee chairmen receive $1,500 per Committee meeting. In addition, the
Incentive Stock Plan of 1995, if adopted by the shareholders at the Annual
Meeting, will provide annually to each non-employee director options to purchase
1,500 shares of the Company's Common Stock.
A director who is not a participant in any of the Company's other
retirement plans and who retires as a director at age 70 (the mandatory
retirement age for directors either elected after September 1, 1994 or who had
not as of such date attained age 70; the mandatory retirement age for other
directors being 72) with ten or more years of service (five years for directors
whose mandatory retirement age is 72), will receive annually during such
individual's lifetime a fee equal to the annual retainer in effect as of the
date of such individual's retirement. A pro rata amount of such annual retainer
will be paid if such director's service is between five and ten years.
The Audit Committee held four meetings during 1994. The functions of this
Committee are to recommend to the Board the public accounting firm to be
appointed the Company's independent auditors, to review the scope of the audit
and the findings of the independent auditors, to review with Company officers
the internal audit department activities and any actions taken in response to
recommendations of the independent auditors, to make appropriate periodic
reports to the Board relating to the Committee's activities and to render such
advice and recommendations in connection with the foregoing matters as it deems
necessary.
The Compensation and Nominating Committee held four meetings during 1994.
The functions of this Committee are to establish the Company's executive
compensation policies, to review the compensation of officers and key employees,
to recommend or approve changes in compensation within the limits of the
Committee's authority, to review and recommend changes in the Company's employee
benefit programs and management succession plans and to recommend to the Board
nominees for election as directors and officers and for appointment to the
committees of the Board. The Committee also administers and supervises the
Company's Incentive Stock Plans and the Management Incentive Unit Plan.
While the Compensation and Nominating Committee does not actively solicit
names of candidates for nomination to the Board, it will review and consider any
proposed nominations submitted in writing by the
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shareholders of the Company. Shareholders may submit such recommendations to the
Secretary of the Company.
The Corporate Affairs Committee held two meetings during 1994. The
functions of this Committee are to review the Company's policies on public
issues having broad social significance, the implementation of those policies,
and the Company's conduct of its business as a responsible corporate citizen.
The Finance Committee held four meetings during 1994. The functions of this
Committee are to direct the investment policies of all retirement plans of the
Company and its subsidiaries (including the Company's Savings and Stock
Investment Plan), and to review the Company's annual finance plan, proposed
borrowings and securities issuances, and dividend and cash management policies.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE
The Company's executive compensation program is administered by the
Compensation and Nominating Committee of the Board of Directors (the
"Compensation Committee"), which is composed of the individuals listed below,
each of whom is an independent non-employee director. The Compensation Committee
has responsibility for the Company's executive officer compensation program,
including the approval of salary increases and annual bonuses, and the granting
of stock options (and associated stock appreciation rights), stock awards and
Management Incentive Units ("MIUs"), in accordance with the terms of the
respective plans governing such grants, to executive officers who are not also
directors of the Company. It also has responsibility for making recommendations
to the members of the Board of Directors who have not participated in the
executive compensation program regarding salary increases, the payment of annual
bonuses, and the granting of stock options (and associated stock appreciation
rights), stock awards and MIUs to executive officers who also are directors of
the Company.
Compensation Policies Applicable to Executive Officers
The Compensation Committee's executive officer compensation policies are
based on the belief that the interests of the Company's executive officers
should be aligned with those of the Company's shareholders. The policies relate
compensation to both short-term (annual) and long-term financial performance of
the Company, as well as to long-term shareholder returns, and incorporate a
pay-at-risk component to achieve these ends.
The objectives which guide policy development are to (a) provide a total
compensation package that will attract, motivate and retain as senior management
exceptionally talented individuals who are essential for building shareholder
value on a long-term basis, (b) establish annual incentives for senior
management that are directly tied to the overall financial performance of the
Company, and (c) create long-term incentives to focus executives on managing
from the viewpoint of an owner with an equity stake in the business, thereby
aligning executive compensation with the values realized by the Company's
shareholders. While many compensation determinations are based upon objective
criteria, certain of such determinations include subjective elements.
The Compensation Committee periodically reviews and evaluates its executive
officer compensation practices against the practices of approximately 50
industrial and service companies with annual revenues in the $3 billion to $6
billion range, using survey data compiled and analyzed by an outside consulting
firm engaged by the Compensation Committee. Data from other compensation surveys
is also considered. The companies included in these compensation surveys are not
the same as those comprising the Standard & Poor's Machinery-Diversified Index
referred to below under the caption "Performance Graph," although some of the
companies comprising such Index are included in the compensation surveys.
Salary increases normally are granted annually to executive officers by the
Compensation Committee based upon individual performance, the Compensation
Committee's evaluation of general U.S. industry salary trends derived from
surveys and various business publications and the salaries paid for comparable
positions in
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the surveyed corporations referred to above. Weighting of these salary
determination factors varies because each salary determination is based upon an
individual's particular circumstances.
Executive officers with direct responsibility for operations may receive
annual bonuses under the terms of written performance agreements established
early each year. The current agreements provide that a bonus equal to 30-40% of
salary will be payable if their respective group operations meet certain
pre-established operating income and asset management targets, and an additional
40-50% of salary (to a maximum of 80% of salary) will be payable for
substantially exceeding those targets. In addition, a discretionary bonus of up
to 20% of salary may be payable based upon subjective criteria applicable to the
respective operations managed by these executive officers. The total bonus may
be increased by up to 25% based on the Company's achievement of a
pre-established earnings per share objective during the particular year.
Other executive officers, including those responsible for staff functions,
may receive annual bonuses based upon both the Company's and their individual
performance during such year. The determination of the amount of any bonus
payable to these other executive officers is subjective. In fixing such bonus
awards, the Compensation Committee considers not only the Company's earnings per
share performance in the particular year compared to the preceding year and to
the earnings per share goal established at the start of the particular year, but
also the individual's contribution to such performance. In addition, the general
economic environment in which the Company operated during such year is taken
into account.
The Omnibus Budget Reconciliation Act of 1993 includes a provision that
disallows, effective January 1, 1994, a federal income tax deduction for
compensation, other than certain performance-based compensation, in excess of $1
million annually paid by the Company to any individual named in the Summary
Compensation Table. In response to that provision, the Compensation Committee
recommended to the Board of Directors the adoption, subject to shareholder
approval, of the Senior Executive Performance Plan, which is more fully
described in Item 3 of this Proxy Statement. If such plan is adopted at the
Annual Meeting, it is the intention of the Compensation Committee and the Board
of Directors to continue the existing annual incentive compensation program
described above, subject to the limitations prescribed by the Senior Executive
Performance Plan.
The Company's executive officer compensation program provides for a
substantial component of total executive officer compensation to reflect the
returns realized by shareholders and the degree to which future performance
targets are met. This equates the long-term interests of the Company's executive
officers with those of the Company's shareholders and is accomplished through
the following long-term incentive programs:
(a) Stock options with tandem stock appreciation rights under the
Incentive Stock Plan of 1990 (the "1990 Plan") generally have been granted
annually at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant, and are exercisable over the
period beginning one year from the date of grant until the tenth
anniversary of the grant. If approved at the 1995 Annual Meeting, the
Incentive Stock Plan of 1995 (the "1995 Plan") will provide for a
continuation of this program.
(b) Stock awards payable in the Company's Common Stock periodically
have been granted under the 1990 Plan to executive officers and other key
employees of the Company. Awards to executive officers normally are
distributed upon vesting in three annual installments and are conditioned
on continued employment with the Company. The stock awards provide that
one-half of each award will be paid only in the event the Company achieves
predetermined earnings per share objectives during the installment payout
period. The objective for each year is established early in the year by a
majority of the members of the Board of Directors who do not participate in
the compensation program. In the event such earnings per share objectives
are not met, payouts are made only at the discretion of the members of the
Board of Directors who do not participate in the executive compensation
program. This program will also be continued under the 1995 Plan if it is
adopted by the shareholders.
(c) MIUs under the Management Incentive Unit Plan (the "MIU Plan")
have been granted to executive officers during the course of their
employment with the Company. This program recognizes the performance of
individuals who have a high potential for growth in the future management
of the
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<PAGE> 10
Company. The number of MIUs granted to a particular individual is based
upon the position responsibility of such individual within the Company,
such individual's tenure in such position and with the Company, and an
evaluation of the potential of such individual for future growth. Weighting
of the factors used in determining MIU grants varies because each grant is
based upon an individual's particular circumstances. Under the MIU Plan,
when cash dividends are paid on the Company's Common Stock, a participant
is paid a cash amount equal to one-half of the dividends such participant
would have received had the participant owned one share of Common Stock for
each MIU granted to the participant. The remaining one-half of each cash
dividend is credited to an account for the participant and is converted
into so-called Common Stock equivalents (i.e., a unit or units equal to the
number of shares of the Company's Common Stock which the cash would have
been able to purchase on the open market, based on the then current per
share price). Dividends are credited on such Common Stock equivalents which
also are held in the participant's MIU account. Amounts credited as Common
Stock equivalents become vested after five years. Common Stock equivalents
entitle the holder to receive upon retirement, as defined in the MIU Plan,
cash equal to the fair market value of one share of Common Stock for each
Common Stock equivalent credited to the participant's account.
The number of stock options and stock awards granted are based upon the
position responsibility of each recipient and the long-term incentive practices
of the surveyed corporations referred to above. These factors are periodically
reevaluated by the Compensation Committee. The Compensation Committee seeks to
provide long-term incentive compensation for a particular position within the
third quartile of practices of the surveyed corporations referred to above for
equivalent positions. The Compensation Committee uses these guidelines in making
its award grant determinations. New awards of both stock options and stock
grants are issued without regard to the options or awards previously granted or
still outstanding.
The Company's Savings and Stock Investment Plan (the "Savings Plan"), in
which all United States employees who are not members of collective bargaining
units may participate, furthers the goal of aligning the long-term interests of
all Company employees and the shareholders by providing that all Company
matching contributions, which during 1994 equaled up to 3% of a participant's
annual compensation (as defined in the Savings Plan), are invested solely in the
Company Stock Fund maintained under the Savings Plan.
1994 Chief Executive Officer Compensation
The Compensation Committee recommended (and the Board of Directors
approved) a 6.7% salary increase to $560,000 for Mr. Perrella, effective June 1,
1994. This increase was given to bring Mr. Perrella's salary level above the
minimum of the salary range set for the Company's chief executive officer. This
range is set relative to chief executives of the surveyed corporations referred
to above.
In addition, the Compensation Committee recommended that the Board approve
a bonus to Mr. Perrella in respect of 1994 in an amount equal to 125% of his
1994 year-end salary. This recommendation, as well as the Board's subsequent
award of that bonus, was based upon the Company's 1994 operating results, which
exceeded 1993 and which exceeded the 1994 earnings goal, and Mr. Perrella's
contribution to these results.
During 1994, Mr. Perrella was also awarded stock options (with associated
stock appreciation rights) in respect of 80,000 shares of the company's Common
Stock which are exercisable beginning on May 5, 1995, at an exercise price of
$34.94 per share. In addition, on September 7, 1994, consistent with the
guidelines described above (i.e., based upon his position responsibility and the
long-term incentive practices of the surveyed corporations referred to above),
Mr. Perrella was granted a stock award totalling 45,000 shares, which are
distributable upon vesting in accordance with the Company's stock award program.
1994 Compensation of Other Named Executive Officers
During 1994, in accordance with the policies stated above, the executive
officers named in the Summary Compensation Table, other than Mr. Perrella, were
granted salary increases averaging approximately 11.6%, including increases
granted in connection with the promotions of two such individuals. Bonus awards
to Messrs. Travis and Bergren were granted pursuant to performance agreements of
the type described above.
8
<PAGE> 11
Since in 1994 the groups for which Messrs. Travis and Bergren were responsible
exceeded their respective operating income and asset management goals and the
Company achieved certain pre-established profit objectives, these individuals
were awarded bonuses averaging approximately 109% of salary. Messrs. Mulligan
and McBride, who did not have performance agreements for 1994, were awarded
bonuses averaging approximately 57% of salary, in line with Company performance
and the evaluation of their individual contributions to the Company's results.
The named executive officers were also granted stock options in respect of
the Company's Common Stock and (other than Mr. Mulligan) stock awards, as
indicated in the Summary Compensation Table and under the captions "Stock
Options and Stock Appreciation Rights" and "Long-Term Incentive Plan Awards," in
accordance with the practices referred to above.
Summary
The Compensation Committee believes the compensation program for the
Company's executive officers is competitive with, and falls within the third
quartile relative to, the compensation programs provided to similarly situated
officers in the surveyed corporations. The Compensation Committee believes the
bonus payments made to the executive officers named in the Summary Compensation
Table below in respect of the year 1994 are appropriate and commensurate with
the Company's 1994 financial and strategic performance and their respective
individual achievements during the year. Based on information the Compensation
Committee has been provided by consultants relative to the compensation
practices of surveyed corporations, it believes the stock incentive compensation
opportunities provided to these officers, in the form of stock awards and stock
options with tandem stock appreciation rights, are also appropriate and are
awarded in a manner fully consistent with the Company's strategy of basing a
substantial component of total executive officer compensation on the total
returns realized by the Company's shareholders.
COMPENSATION AND NOMINATING COMMITTEE
Joseph P. Flannery, Chairman
Donald J. Bainton
Donald E. Procknow
Cedric E. Ritchie
9
<PAGE> 12
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ended December 31, 1992, 1993 and
1994, the cash compensation paid by the Company and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to the individuals
named below:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------------------- PAYOUTS
OTHER RESTRICTED SECURITIES --------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(B) (#)(C) ($)(D) (E)
------------------------ ----- -------- -------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.E. Perrella........... 1994 $545,417 $700,000 $ 0 $ 853,136 80,000 $325,346 $ 55,249
Chairman of the Board, 1993 433,333 420,000 0 146,652 70,000 194,250 42,879
President and Chief 1992 325,000 286,010 0 119,726 60,000 49,613 33,957
Executive Officer
W.G. Mulligan........... 1994 336,667 180,000 0 19,244 40,000 166,650 18,134
Executive Vice 1993 316,667 115,000 0 18,355 40,000 142,450 21,787
President 1992 297,500 98,325 0 17,696 40,000 49,613 23,978
J.F. Travis............. 1994 280,000 333,625 0 493,431 40,000 90,900 29,244
Executive Vice 1993 222,500 237,635 111,571(a) 5,966 30,000 77,700 185,322
President 1992 204,667 145,835 0 5,752 30,000 24,806 34,873
T.F. McBride............ 1994 286,667 180,000 0 340,960 35,000 132,941 20,014
Senior Vice President 1993 259,167 125,000 0 7,882 30,000 77,700 17,474
and Chief Financial 1992 222,250 95,000 0 7,599 25,000 33,075 16,352
Officer
P.L. Bergren............ 1994 196,667 239,750 0 188,674 30,000 68,175 12,437
Vice President 1993 176,250 69,540 13,083(a) 4,100 25,000 19,425 42,396
1992 147,853 50,000 0 83,523 20,000 16,538 7,714
</TABLE>
---------------
(a) These amounts represent that portion of relocation benefit payments to
Messrs. Travis and Bergren which compensated them for the income taxes payable
in respect of the relocation compensation. The relocation benefit amounts are
reflected in the column headed "All Other Compensation."
(b) The amounts reflected as Restricted Stock Awards are composed of (i)
the portion of stock awards granted under the Incentive Stock Plan to be issued
subject to the continuation of employment of the named executives, and (ii) the
crediting of Common Stock equivalents to the accounts of such executives under
the MIU Plan. The 1994 amount for Mr. Travis also includes a stock award granted
in January 1994, which was based upon the performance of the Company in that
year.
The shares issuable after December 31, 1994 to the named executives under
outstanding stock awards which are subject to continued employment and the years
of vesting of such awards are as follows:
<TABLE>
<CAPTION>
YEAR OF VESTING
------------------------------------
NAME 1995 1996 1997 1998
------------------------------------------------------- ----- ----- ----- ------
<S> <C> <C> <C> <C>
J.E. Perrella.......................................... 9,600 4,500 6,750 11,250
W.G. Mulligan.......................................... 5,500 0 0 0
J.F. Travis............................................ 5,100 2,000 3,000 5,000
T.F. McBride........................................... 3,900 1,800 2,700 4,500
P.L. Bergren........................................... 1,500 1,000 1,500 2,500
</TABLE>
Dividend equivalents are paid in respect of such shares prior to their
vesting. The issuance of the balance of the shares subject to the stock awards
is contingent upon the attainment of earnings per share goals established by the
Board of Directors (see footnote (d) below).
10
<PAGE> 13
The aggregate number and fair market value as of December 31, 1994 of all
Common Stock equivalents credited to the accounts of the named executives under
the MIU Plan and the shares subject to outstanding stock awards issuable
contingent upon the continued employment of the named executives are as follows:
<TABLE>
<CAPTION>
FAIR MARKET
NAME # SHARES VALUE
----------------------------------------------------------------- -------- -----------
<S> <C> <C>
J.E. Perrella.................................................... 40,090 $ 1,262,835
W.G. Mulligan.................................................... 20,075 632,363
J.F. Travis...................................................... 17,962 565,803
T.F. McBride..................................................... 17,050 537,075
P.L. Bergren..................................................... 7,548 237,762
</TABLE>
(c) Where applicable, share amounts are adjusted to reflect the two-for-one
stock split paid on June 1, 1992 in the form of a 100% stock dividend.
(d) The amounts reflected in this column represent the value of the
performance portion of stock awards distributed to the named executives. The
shares subject to the performance portion of the stock awards are distributable
if the Company achieves earnings per share goals established early each year.
(e) The amounts reflected in this column represent (i) Company
contributions for the account of the named executive officers to the Company's
Savings Plan and Retirement Account Plan, as well as amounts credited to the
accounts of such executive officers under the related supplemental plans, which
provide benefits which would have been provided under the applicable
tax-qualified plans but for Internal Revenue Code restrictions on such benefits,
(ii) dividend equivalents paid to the named executive officers in respect of the
performance portion of stock awards (see footnote (d) above), and (iii) for 1992
and 1993, relocation benefits paid to two of the named executive officers. For
1994 such amounts were as follows:
<TABLE>
<CAPTION>
RETIREMENT ACCOUNT
SAVINGS PLAN PLAN (INCLUDING
(INCLUDING SUPPLEMENTAL SUPPLEMENTAL PLAN) DIVIDEND
NAME PLAN) CONTRIBUTIONS CONTRIBUTIONS EQUIVALENTS
--------------------------------------- ----------------------- ------------------ -----------
<S> <C> <C> <C>
J.E. Perrella.......................... $28,963 $ 19,308 $ 6,978
W.G. Mulligan.......................... 13,550 3,000 1,584
J.F. Travis............................ 15,529 10,353 3,362
T.F. McBride........................... 12,350 4,854 2,810
P.L. Bergren........................... 7,986 2,662 1,789
</TABLE>
11
<PAGE> 14
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables contain information for the year 1994 concerning the
grants to, and exercises by, the executive officers named above, of stock
options and tandem stock appreciation rights ("SARs") under the Incentive Stock
Plan of 1990 and the value of such options and rights held by such executive
officers as of December 31, 1994:
OPTION/SAR GRANTS IN 1994
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT
OPTIONS/SARS GRANTED TO EXERCISE OR DATE
GRANTED EMPLOYEES BASE EXPIRATION VALUE
NAME (#)(A) IN 1994 PRICE($/SH) DATE ($)(B)
------------------------------ ------------ ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
J.E. Perrella................. 80,000 8.30% $ 34.94 5/3/04 $ 946,400
W.G. Mulligan................. 40,000 4.15 34.94 5/3/04 473,200
J.F. Travis................... 40,000 4.15 34.94 5/3/04 473,200
T.F. McBride.................. 35,000 3.63 34.94 5/3/04 414,050
P.L. Bergren.................. 30,000 3.11 34.94 5/3/04 354,900
</TABLE>
---------------
(a) All options and SARs become fully exercisable on May 4, 1995.
(b) Grant date value is based on the Black-Scholes option pricing model
adapted for use in valuing executive stock options. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The grant date values were determined
based in part upon the following assumptions:
<TABLE>
<S> <C>
Expected volatility................................................. 0.3047
Risk-free rate of return............................................ 6.89%
Dividend yield...................................................... 2.44%
Time of exercise (expected)......................................... 6 years
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND DECEMBER 31, 1994 OPTION/SAR VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER NUMBER OF UNEXERCISED IN-THE-MONEY
OF SHARES OPTIONS/SARS AT OPTIONS/SARS AT
UNDERLYING VALUE 12/31/94(#) 12/31/94($)
OPTIONS/SARS REALIZED ---------------------------- ----------------------------
NAME EXERCISED(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.E. Perrella.......... 0 $ 0 170,000 80,000 $ 302,400 $ 0
W.G. Mulligan.......... 0 0 194,000 40,000 872,360 0
J.F. Travis............ 0 0 140,000 40,000 602,900 0
T.F. McBride........... 5,000 42,188 30,000 35,000 0 0
P.L. Bergren........... 0 0 25,000 30,000 0 0
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS
As described above in the Report of the Compensation and Nominating
Committee, the Company, as part of its executive officer compensation program,
has awarded shares of Company Common Stock under the Incentive Stock Plan of
1990 to executive officers and other key employees. One-half of such awards is
contingent upon the individual's continuing employment with the Company and
one-half is contingent upon the
12
<PAGE> 15
Company's earnings per share performance during the payout period. The following
table reflects the performance portion of stock awards granted during 1994 to
the executive officers named above:
LONG-TERM INCENTIVE PLAN AWARDS IN 1994
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
NUMBER OF PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OR UNTIL NON-STOCK PRICE BASED PLANS
OTHER RIGHTS MATURATION -----------------------------------------
NAME (#) OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
--------------------------- ---------------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
J.E. Perrella.............. 22,500 (a) -- 22,500 22,500
W.G. Mulligan.............. 0 -- -- -- --
J.F. Travis................ 10,000 (a) -- 10,000 10,000
T.F. McBride............... 9,000 (a) -- 9,000 9,000
P.L. Bergren............... 5,000 -- -- 5,000 5,000
</TABLE>
---------------
(a) The shares subject to these stock awards are issuable in three
installments in the years 1996-1998 based upon the earnings per share
performance of the Company during the years 1995-1997.
RETIREMENT PLANS
The Company and its subsidiaries maintain a number of defined benefit
pension plans for their officers and other employees. The pension plans provide
for fixed benefits in the event of retirement at a specified age and after a
specified number of years of service. All of the executive officers of the
Company named above are participants in the Company's Pension Plan Number One
(the "Pension Plan"). Under the Pension Plan, for service prior to 1987, the
annual benefit payable upon normal retirement at age 65 is based upon the
highest average annual compensation rate (i.e., salary and bonus as reflected in
the Summary Compensation Table) for any 60 consecutive months during the last
120 months of employment multiplied by years of credited service, less an offset
for Social Security benefits. Pension Plan participants who were at least 55
years of age on December 31, 1986, or whose age plus credited years of service
with the Company totalled at least 80 on that date (which includes, of the
executive officers named above, only Mr. Mulligan), continue to have their
benefits determined under this formula. For all other Pension Plan participants,
a benefit determined under this formula is calculated using compensation and
credited service prior to 1987. Benefits with respect to service after 1986 are
being calculated under a formula equal to 1.50% of each year's compensation
(i.e., salary and bonus as reflected in the Summary Compensation Table) less a
Social Security offset for that year.
As indicated above, Mr. Mulligan continues to have his retirement benefits
determined under the formula in effect prior to 1987. The following table
illustrates approximate annual pensions for retirements in 1995 under the
Pension Plan (and under the nonqualified supplemental pension plan which
provides Pension Plan benefits in excess of the limitations prescribed under the
Internal Revenue Code of 1986, as amended) using the formula in effect prior to
1987, computed as a straight life annuity and based on the indicated
assumptions, but without any deduction for individual Social Security benefits:
<TABLE>
<CAPTION>
HIGHEST AVERAGE ANNUAL APPROXIMATE ANNUAL PENSION
COMPENSATION FOR ANY UPON RETIREMENT AT AGE 65
PERIOD OF 60 CONSECUTIVE -------------------------------------------------------------------------------------
MONTHS DURING LAST 120 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
MONTHS OF EMPLOYMENT OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
--------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$400,000..................... $ 90,000 $ 120,000 $ 150,000 $ 180,000 $ 210,000 $ 240,000
500,000..................... 112,500 150,000 187,500 225,000 262,500 300,000
600,000..................... 135,000 180,000 225,000 270,000 315,000 360,000
For each additional
$50,000.................... 11,250 15,000 18,750 22,500 26,250 30,000
</TABLE>
At December 31, 1994, Mr. Mulligan had 42 years of credited service and his
current covered compensation under the Pension Plan (and the related
supplemental plan) is $464,320.
Assuming their employment continues until age 65, at their respective
current compensation levels and using the formula in effect at December 31,
1994, the estimated annual pension benefit payable to Messrs. Perrella, Travis,
McBride and Bergren, computed on the same basis, would be $230,617, $133,454,
$100,461 and $96,109, respectively.
13
<PAGE> 16
OTHER POST-EMPLOYMENT ARRANGEMENTS
The Company has entered into an arrangement with all of the executive
officers named above whereby the Company is obligated to pay certain annual
benefits for a ten-year period commencing upon retirement at age 65, so long as
their employment with the Company is not terminated by the Company for cause (as
defined) and so long as they meet certain non-competition obligations. In the
event of death, the benefits are payable to the individual's estate to the
extent not already paid. The annual benefits payable to each of such individuals
are as follows: Mr. Perrella, $125,000; Mr. Mulligan, $65,000; Mr. Travis,
$65,000; Mr. McBride, $65,000; and Mr. Bergren, $45,000. Under this arrangement,
the Company is a beneficiary of life insurance policies on such executives and,
based on actuarial assumptions, the life insurance proceeds receivable by the
Company will defray the costs associated with this program.
The Company has also adopted a program which provides the executive
officers named above with life insurance coverage ranging from one times annual
earnings (as defined) to two times annual earnings (increased in certain
instances to account for income tax obligations payable in respect of such
supplemental coverage).
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with all of the executive officers
named above other than Mr. Bergren, each of which provides that if the
particular executive officer continues to be employed by the Company following
any change in control (defined to include the acquisition by any person of 20%
or more of the voting power of the Company's stock or the adoption of any
shareholder proposal to change more than one-third of the Company's directors)
the executive's compensation and employment benefits shall continue without
reduction. The executive shall be eligible for and participate in all Company
benefit plans and programs at levels no less favorable than were in effect
immediately prior to the change in control. Further, the agreements provide that
upon a change in control all amounts due each such executive officer under the
MIU Plan shall become fully vested and all amounts thereafter credited shall
vest immediately. In the event of the termination following a change in control
of the executive's employment by the Company or its successor or, in some cases,
voluntary termination, the executive shall receive for a period of up to three
years following the executive's termination date the executive's annual base
salary as in effect on such termination date. Also, during such three-year
period the executive will receive an annual bonus equal to the executive's
average annual bonus for the five full fiscal years preceding the date of the
change in control, less an offset for the amount of any supplemental pension
benefits received during the period, as explained below. All stock options or
stock appreciation rights held by the executive shall become exercisable at any
time after the date of the executive's termination, and 100% of all stock awards
shall be paid in cash within 30 days of termination. Upon termination, the
executive will also receive supplemental pension benefits determined by granting
the executive credit for the lesser of five additional years of service or the
number of full years remaining to the executive's 65th birthday for all pension
plan purposes, which benefit will equal the amount which would be due the
executive at age 65, unreduced for early payment but reduced by any benefits to
which the executive may then be entitled under all Company pension plans without
such additional credited service.
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares for the five years ended December 31, 1994,
the cumulative total shareholder return on the Company's Common Stock with the
cumulative total return on the Standard & Poor's 500 Stock Index and with the
cumulative total return on the Standard & Poor's Machinery-Diversified Index.
The graph assumes that $100 was invested on December 31, 1989 in each of the
Company's Common Stock, the Standard & Poor's 500 Stock Index and the Standard &
Poor's Machinery-Diversified Index and assumes the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD INGERSOLL- S&P
(FISCAL YEAR COVERED) RAND S&P 500 MACHINERY
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 76.20 96.89 86.26
1991 115.57 126.28 102.55
1992 124.92 135.88 104.65
1993 167.24 149.52 154.93
1994 140.55 151.55 150.84
</TABLE>
TRANSACTIONS WITH MANAGEMENT
Since January 1, 1994, the Company and its subsidiaries have engaged in
transactions in the ordinary course of business with, or have used products or
services of, a number of organizations in which the Company's directors have
interests. The amounts involved have in no case been material in relation to the
business of the Company and its subsidiaries and the Company believes that they
have not been material in relation to the businesses of such other organizations
or to the individual directors concerned. It is expected that the Company and
its subsidiaries may continue to engage in similar transactions with such
organizations in the future.
15
<PAGE> 18
2. ADOPTION OF INCENTIVE STOCK PLAN OF 1995
The Board of Directors is submitting to the shareholders for their approval
the Incentive Stock Plan of 1995 (the "1995 Plan"). With certain modifications,
the 1995 Plan is intended to continue the incentive arrangements established by
the Incentive Stock Plan of 1990 (the "1990 Plan").
The Company has had shareholder approved incentive compensation programs in
existence since 1959 as a means of providing long-term incentives to key
executives of the Company and its subsidiaries. The Board believes that these
plans have proved to be an important means of attracting, holding and motivating
key employees. Under the 1990 Plan, no new awards of stock incentives may be
made after April 30, 1995, and, accordingly, the Board has adopted the 1995 Plan
to succeed the 1990 Plan.
The closing price of the Common Stock on the composite tape on February 28,
1995 was $31.875.
DESCRIPTION OF THE PLAN
The Company's 1990 Plan authorized the grant of up to 6,000,000 shares of
Common Stock for stock options, stock appreciation rights and stock awards. The
1995 Plan will continue major features of the 1990 Plan authorizing the grant
through April 30, 2000, of up to 6,000,000 of such stock incentives, which
represents approximately 5.68% of the outstanding shares as of February 28,
1995. Shares not issued because of the termination of individual stock
incentives, or for other reasons, can be reused under the 1995 Plan.
The 1995 Plan permits the grant of stock incentives to key employees as
determined by a committee of disinterested independent directors which, as
indicated below under the caption "Administration and Amendment", is expected to
be the Compensation Committee. Approximately 150 employees are currently
considered eligible for the grant of stock incentives. It is not possible to
state the value or number of shares subject to any particular stock incentive to
be granted to key employees, since these matters will be determined by the
Compensation Committee in the future based on the guidelines described above
under the caption "Election of Directors -- Executive Compensation -- Report of
the Compensation and Nominating Committee". It is expected, therefore, that key
employees will continue to be granted stock incentives on a basis generally
comparable to prior grants. During 1994, all current executive officers as a
group were granted options (with associated stock appreciation rights) with
respect to an aggregate of 437,000 shares of Common Stock at an exercise price
of $34.94, and all employees as a group were granted options (or stock
appreciation rights) with respect to an aggregate of 964,050 shares at a
weighted average exercise price of $34.96. In addition, stock awards were
granted to all current executive officers as a group covering an aggregate of
187,500 shares of Common Stock and to all employees as a group covering an
aggregate of 205,260 shares of Common Stock. Information concerning stock
incentives granted to the executive officers named in the Summary Compensation
Table is set forth under the caption "Election of Directors -- Executive
Compensation."
The 1995 Plan also adds provisions which will grant annually to directors
of the Company who are not officers or employees (the "Outside Directors")
options to purchase 1,500 shares of Common Stock. All current directors as a
group will therefore be granted options to purchase an aggregate of 13,500
shares annually.
The 1995 Plan is summarized below. This summary, however, is qualified in
its entirety by reference to the text of the 1995 Plan, a copy of which is
annexed to this Proxy Statement as Appendix A.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Stock options and stock appreciation rights are forms of stock incentives
which are exercisable only after completion of at least 12 months of employment
after the date of grant. Neither options nor stock appreciation rights may be
granted at less than fair market value of the Common Stock on the date of grant.
The term of an option or a stock appreciation right cannot exceed ten years. As
under the 1990 Plan, the 1995 Plan also permits the cancellation of an option or
a stock appreciation right with the consent of the holder by paying a sum equal
to any excess of the fair market value over the option price, or transferring to
the holder shares with
16
<PAGE> 19
a fair market value equal to such excess, or combining a payment in cash with a
transfer of shares. It is not possible to amend an option or a stock
appreciation right to lower the exercise price, but both Plans permit granting a
new option or stock appreciation right at a lower price.
Stock appreciation rights entitle the holder to receive the difference
between the fair market value of the Common Stock at the time of exercise and
the fair market value at the time the rights were granted. Payment may be made,
in the sole discretion of the Compensation Committee, in shares of Common Stock,
in cash or in part Common Stock and part cash. Stock appreciation rights may be
granted either independently or in conjunction with options, and may carry
dividend equivalents which, as more fully discussed below under the caption
"Dividend Equivalents," entitle the holder of the stock appreciation rights to
payments equal to the cash dividends paid on shares equal to the number subject
to stock appreciation rights.
Options and stock appreciation rights generally terminate upon the holder's
termination of employment. However, if termination is the result of death,
disability or retirement, an option or right may be exercised for up to three
years following such termination, and the Compensation Committee may similarly
extend the period for exercise up to three years following termination for other
reason. Neither the 1990 Plan nor the 1995 Plan permits the exercise of options
or rights under any circumstances once they have expired.
Shares purchased under an option must be paid for in full at the time of
the exercise. However, such shares shall be paid for upon such terms as the
Compensation Committee may permit, including cash, secured or unsecured debt, or
by exchange for other property, including shares of Common Stock. Consequently,
if an optionee also holds Common Stock having a fair market value greater than
the option price, the optionee may be permitted to exchange the shares the
optionee holds for a greater number under the option.
OUTSIDE DIRECTOR STOCK OPTIONS
As indicated above, the 1995 Plan adds provisions pursuant to which each
Outside Director will annually be granted options to purchase 1,500 shares of
Common Stock. These grants will be made on the date of the first Board of
Directors meeting following each year's annual meeting of shareholders. The
exercise price will be equal to the fair market value of the Common Stock on the
date of grant. The options granted to Outside Directors will be fully vested on
the date of grant and will become exercisable one year from the date of grant.
The term of all Outside Director options shall be ten years from the date of
grant. If the Outside Director retires or resigns, no options issued to such
Outside Director shall be exercisable more than five years following such
retirement or resignation and no options shall be exercisable more than three
years after an Outside Director's death.
STOCK AWARDS
The 1995 Plan will continue the provisions of the 1990 Plan permitting the
payment of incentive awards in shares of Common Stock. A stock award may, but
need not, be contingent, in whole or in part, upon continued service with the
Company or upon the attainment of certain pre-established Company performance
objectives such as earnings per share or return on shareholders equity. Stock
subject to an award may be transferred at the time the award is granted, or at
any time thereafter, or in installments and may be subject to forfeiture as the
committee administering the 1995 Plan may determine.
If the shares are not transferred at the time of grant, the Compensation
Committee may provide for the payment or crediting of dividend equivalents to
the holder. In lieu of transferring shares, the Company may elect to pay cash
equal to the then fair market value of the shares otherwise transferrable.
DIVIDEND EQUIVALENTS
Both the 1990 and 1995 Plans permit the granting of dividend equivalents in
connection with the grant of stock options, stock appreciation rights or stock
awards to key employees. A dividend equivalent is the right to receive,
immediately or on a deferred basis, an amount equivalent to all or part of the
dividends paid or payable on a share of Common Stock subject to a stock
incentive. Dividend equivalents may be awarded either at the time of grant of a
stock incentive or at any time thereafter. Dividend equivalents may be credited
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either in cash, shares of Common Stock or in Common Stock equivalents, valued at
fair market value. Common Stock equivalents entitle the holder to receive
amounts equivalent to dividends paid on Common Stock or appreciation in value of
Common Stock during the period the Common Stock equivalent is held, or both.
Amounts representing dividends paid on Common Stock equivalents may either be
paid in cash or may be credited in further Common Stock equivalents. As the 1990
Plan has been administered, dividend equivalents have been credited only with
regard to stock awards.
ADJUSTMENT AND CHANGE IN CONTROL PROVISIONS
The 1990 and 1995 Plans provide that in the event of a recapitalization,
split-up or consolidation of shares of Common Stock or other significant
corporate transaction involving the Company, shares subject to a stock incentive
shall be equitably adjusted as to number, classification, exercise price or fair
market value (in the case of stock appreciation rights) and date of exercise.
The 1990 and 1995 Plans also provide that under certain circumstances
involving a change in control of the Company, the holders of stock incentives
shall have the right to surrender such stock incentives in exchange for a cash
payment based upon the then current fair market value of the Common Stock.
ADMINISTRATION AND AMENDMENTS
The 1995 Plan will be administered by a committee of disinterested
independent directors. At present the Compensation Committee has been appointed
to administer the 1990 Plan and it is intended that the Compensation Committee
will administer the 1995 Plan. The Compensation Committee may exercise all of
the authority of the Company under the 1995 Plan except amending the Plan and
except that all determinations in respect of awards to any key employee who is
also a member of the Board of Directors shall be made, based upon the
recommendations of such Committee, by a committee consisting of all directors
who qualify both as "disinterested persons" under Rule 16b-3 under the
Securities Exchange Act of 1934 and as "outside directors" under Section 162(m)
of the Internal Revenue Code of 1986 (the "Code") and the regulations
promulgated thereunder.
The 1995 Plan may be amended by the Board at any time without shareholder
approval. No such amendment may, however, increase the total number of shares
that may be issued under the Plan, permit a person who is not a key employee or
Outside Director to be granted a stock incentive, or change the provisions of
the Plan relating specifically to the grant of options to Outside Directors.
ACCOUNTING TREATMENT
Under the terms of the 1995 Plan, the grant or exercise of an option does
not result in a charge against earnings. However, the excess of the fair market
value of the Common Stock over the grant price of stock appreciation rights is
charged against earnings. Compensation expense arising from stock awards is
measured by the market value of the Common Stock and is charged against earnings
for the period or periods in which the employee performs the services.
INCOME TAX CONSEQUENCES
Under present law, a participant who is granted a stock option will not be
subject to federal income tax at the time of grant, and the Company will not be
entitled to a tax deduction by reason of such grant. Upon exercise of a
non-qualified option (which all options granted under the 1990 Plan have been),
the excess of the share's fair market value on the exercise date over the option
price will be considered ordinary income. The Company is entitled to a tax
deduction at the same time and in the same amount, provided that the Company
complies with the applicable reporting requirements under the Code and the
regulations promulgated thereunder. Upon the exercise of an incentive stock
option (as defined in the Code), no taxable income will be recognized by the
participant and the Company is not entitled to a tax deduction by reason of such
exercise. However, if shares purchased pursuant to the exercise of an incentive
stock option are sold within two years from the date of grant or within one year
after the transfer of such shares to the participant, then the difference, with
certain adjustments, between the fair market value of the shares at the date of
exercise and
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the option prices will be considered ordinary income, and the Company will be
entitled to a tax deduction at the same time and in the same amount. In the
event of a sale of shares purchased upon exercise of either a nonqualified
option or an incentive stock option, any appreciation above or depreciation
below the fair market value at the date of exercise will generally qualify as
capital gain or loss. If shares purchased upon the exercise of a nonqualified
option are transferred to the participant subject to restrictions, then,
depending upon the nature of the restrictions, the income realized by the
participant and the Company's tax deduction may be deferred and measured by the
excess of the fair market value of the shares over the option price at the time
the restrictions lapse.
Stock appreciation rights, stock awards and dividend equivalents will not
result in taxable income upon grant unless the award is paid at the time of
grant. Generally, the above grants will be taxable to the participant as
compensation in the year when paid. The participant will recognize income in an
amount equal to the sum of the cash and the fair market value of any shares
received. The Company is entitled to a deduction at the same time and in the
same amount, provided that the Company complies with the applicable Code
withholding requirements. Any appreciation or depreciation on the sale of shares
after transfer to the participant will result in capital gain or loss, and the
Company will have no tax consequences with respect thereto.
Individual states and local tax authorities may also tax stock incentives
awarded under the 1995 Plan.
VOTES REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting, is required for the adoption of the 1995 Plan, provided that a majority
of the outstanding shares votes on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL AND YOUR PROXY
WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
3. APPROVAL OF SENIOR EXECUTIVE PERFORMANCE PLAN
Under the Omnibus Budget Reconciliation Act of 1993 (the "1993 Tax Act"), a
new provision was added to the Code which limits corporate federal income tax
deductions previously allowed for compensation of certain executive officers of
the Company, to the extent that each officer's compensation may exceed $1
million. This deduction limit includes not only base salary, but also long-term
incentive compensation and annual bonuses. The legislation, however, provides
for some specified exemptions if the compensation meets the requirements for
classification as "performance-based."
In view of the tax law changes, the Senior Executive Performance Plan (the
"Performance Plan"), the full text of which is annexed to this Proxy Statement
as Appendix B, is being proposed for adoption by the shareholders in order to
recognize and reward on an annual basis the Company's senior executive officers
for their contributions to the overall profitability of the Company, while
preserving the Company's tax deductions for annual bonus payments to such
executive officers.
DESCRIPTION OF THE PERFORMANCE PLAN
ELIGIBILITY AND DETERMINATION OF PERFORMANCE PLAN AWARDS
The Performance Plan participants include only the most senior executive
officers of the Company, those whose compensation is identified in the proxy
statement compensation tables and who are in office at the end of a fiscal year
(the "Executive Officers"). This group is currently five individuals.
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The Performance Plan sets a minimum performance goal of net income (as
defined in the Performance Plan) equal to a 6% return on equity (as defined in
the Performance Plan) before an award can be paid to any Executive Officer under
the Performance Plan. If that performance level is achieved in a fiscal year,
then up to 6% of net income in excess of the minimum performance goal is
available as a bonus pool to the Executive Officers. Unpaid bonus pool funds may
be carried over to subsequent years, provided that at no time shall such
carryover amount exceed an aggregate of $2,000,000.
The share of such bonus pool available to individual Executive Officers
will be established early in each year. It is also recognized, however, that
there is a need to evaluate executive performance on additional pre-established
performance factors, including Company performance by such measures as earnings
per share, the achievement of measurable individual performance objectives
established by the Compensation Committee in advance, and competitive pay
practices. Negative discretion may be used to reduce the potential maximum
award. Net income is defined in the Performance Plan as "the Company's
consolidated net earnings as reported in the Company's financial statements
included in its annual report to shareholders, before the after-tax effect of
(a) losses resulting from discontinued operations, (b) extraordinary gains or
losses (as defined by generally accepted accounting principles), (c) the
cumulative effect of changes in accounting principles, and (d) any other
unusual, non-recurring items of gain or loss which are separately identified and
quantified in the Company's reported financial statements."
The amount of any awards that may be payable to the Executive Officers
under the Performance Plan in future years cannot currently be determined. If
the Performance Plan had been in effect in 1994, the maximum awards payable to
the Executive Officers, before the application of the negative discretion
referred to above, would have been approximately $7,100,000 to all five
Executive Officers as a group and $2,130,000 to any one Executive Officer. The
Compensation Committee believes, however, that each of the Executive Officers
would have been awarded the same annual bonus award that was awarded to the
Executive Officers in February 1995. As described in the Summary Compensation
Table, all Executive Officers as a group received bonus awards in respect of
1994 performance of $1,633,375 and the highest award paid to any such Executive
Officer was $700,000.
ADMINISTRATION OF THE PLAN
The Performance Plan is to be administered by the Compensation Committee,
the members of which are elected annually by the Board of Directors. The
Compensation Committee shall have at least three members, each of which shall
qualify as an "outside director" under the 1993 Tax Act and the regulations
promulgated thereunder. The Compensation Committee shall have the power to
exercise all of the authority of the Company under the Performance Plan except
that all determinations in respect of awards to an Executive Officer who is also
a member of the Board of Directors shall be made, based upon the recommendation
of the Compensation Committee, by a committee consisting of all members of the
Board of Directors who qualify as "outside directors."
FORM OF PERFORMANCE PLAN AWARD
Performance Plan awards may be made in the form of cash, deferred cash, or
any combination of such forms. Awards shall have such terms, including the
procedure for election of deferral, the length of the deferral period and the
interest to be credited during such deferral period, as the Compensation
Committee shall determine.
EFFECTIVE DATE, AMENDMENT AND TERMINATION
The Performance Plan shall be effective as of January 1, 1995, subject to
approval by the Company's shareholders. The Board of Directors of the Company
has the power to amend, suspend or terminate the Performance Plan at any time.
It is intended, however, that no proposed amendment which, under the 1993 Tax
Act or the rules promulgated thereunder, requires shareholder approval in order
to preserve the tax deductibility of payments under the Performance Plan will be
adopted without obtaining such shareholder approval.
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INCOME TAX CONSEQUENCES
Under current law, Performance Plan awards will be included for federal
income tax purposes in the recipient's income as taxable compensation in the
year paid, and the Company will receive a federal income tax deduction at the
same time and for the same amount.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast by the shareholders
present, in person or by proxy, and entitled to vote at the Annual Meeting is
required for the adoption of the Performance Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL AND YOUR PROXY
WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP as independent
accountants for the Company and its subsidiaries to examine the consolidated
financial statements of the Company for the fiscal year ending December 31,
1995. The appointment of Price Waterhouse LLP is subject to ratification by the
shareholders and a resolution for such ratification will be offered at the
Annual Meeting. Price Waterhouse LLP has been acting as independent accountants
for the Company and its subsidiaries for many years and, both by virtue of its
long familiarity with the Company's affairs and its ability, is considered best
qualified to perform this important function.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. They
will have an opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL AND YOUR PROXY
WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the notice
thereof. The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Annual Meeting other than those specifically referred to in the proxy and this
Proxy Statement. If any other matters are properly brought before the Annual
Meeting, it is the intention of the proxyholders to vote on such matters in
accordance with their judgment.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any proposal by a shareholder intended to be presented at the 1996 Annual
Meeting of Shareholders of the Company must be received at the Company's
principal executive offices at 200 Chestnut Ridge Road (P.O. Box 8738),
Woodcliff Lake, New Jersey 07675, Attn: Secretary, no later than November 16,
1995, for inclusion in the proxy materials relating to that meeting.
The Company's By-laws, as amended, set forth procedures to be followed by
shareholders who wish to nominate candidates for election to the Board in
connection with annual meetings of shareholders or pursuant to written
shareholder consents. All such nominations must be made following written notice
to the Secretary of the Company accompanied by certain background and other
information specified in the By-laws. In connection with any annual meeting,
written notice of a shareholder's intention to make such nominations must be
given to the Secretary not later than the date which is 90 days in advance of
the anniversary of the immediately preceding annual meeting or, if the date of
the annual meeting occurs more than 30 days before,
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or 60 days after, the anniversary of such immediately preceding annual meeting,
not later than the seventh day after the date on which notice of such annual
meeting is given.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders for the year ended December 31, 1994 is
enclosed with this Proxy Statement. For shareholders who are employees, the
Annual Report has been distributed at the Company's facilities.
Dated: March 15, 1995
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APPENDIX A
INGERSOLL-RAND COMPANY
INCENTIVE STOCK PLAN OF 1995
SECTION 1. PURPOSES: The purposes of the Plan are (a) to provide
additional incentives for Key Employees, by authorizing the payment of bonus or
incentive compensation in shares of Common Stock and by encouraging 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, (b) to enable the Company, by
offering incentives comparable to other organizations with which it competes in
connection with the employment of senior level individuals, to induce the
employment of the most highly-qualified individuals and the continued employment
of Key Employees, and (c) to enhance the Company's ability to attract and retain
highly-qualified individuals as directors of the Company.
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 or organization (other than the Company or a majority-owned
subsidiary of the Company) of which such specified person is an officer or
partner, or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (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 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), partnership or other entity which
is an Affiliate of such specified person.
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 of Directors.
Code: The Internal Revenue Code of 1986, as amended from time to time.
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Committee: Such committee or committees as shall be appointed by the Board
of Directors to administer the Plan pursuant to the provisions of Section 12.
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 10.
Common Stock Equivalents: Such of the rights and benefits of the actual
owner of shares of Common Stock as the Committee (or the Independent Directors
Committee in the case of grants to Key Employees who are also members of the
Board) 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 27, 1995 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 at the time of such nomination or
election, either by a specific vote or by approval of the proxy statement issued
by the Company on behalf of the Board in which such person is named as a nominee
for director; provided, however, that no individual shall be considered a
Continuing Director if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Act) or other actual or threatened solicitation of proxies
or consents other than by or on behalf of the Board (a "Proxy Contest"),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest.
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, the mean between the high and
low sales prices of a share of Common Stock on such date in New York Stock
Exchange Composite Transactions, as reported in The Wall Street Journal or
another newspaper of general circulation, or, if no such sales were made on such
date, on the next preceding date on which there were such sales so reported. 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 closing sales
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 not listed or admitted to trading on any national securities exchange,
the last quoted sales 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 Fair Market
Value shall be determined in good faith by the Continuing Directors.
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.
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Independent Directors Committee: The members of the Board who satisfy the
requirements to be both (a) "disinterested persons" within the meaning of Rule
16b-3 under the Act (or any successor rule or regulation), and (b) "outside
directors" within the meaning of Section 162(m) of the Code and the rules and
regulations promulgated thereunder (or any successor provision, rules or
regulations).
Key Employee: An employee of the Company or a Subsidiary, including an
officer or director who is an employee, who in the opinion of the Committee (or
the Independent Directors Committee, with respect to employees who are also
members of the Board), can contribute significantly to the growth and successful
operations of the Company or such Subsidiary. The granting of a Stock Incentive
to an employee pursuant to the Plan shall be deemed a determination that such
employee is a Key Employee.
Outside Director: A member of the Board (including an emeritus member) who
is not an officer or employee of the Company, a Subsidiary or Affiliate.
Option: An option to purchase a share of Common Stock.
Plan: The Incentive Stock Plan of 1995 herein set forth as the same may
from time to time be amended.
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, with the approval of the Committee (or the Independent Directors
Committee in the case of grants to employees who are also members of the Board),
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. As provided in
Section 5, Stock Awards may be designated as Employment Stock Awards or
Performance Stock Awards.
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 Committee may at any
time, and from time to time, grant Stock Incentives to, and only to, Key
Employees; provided, however, that a Stock Incentive may be granted to a Key
Employee who at the time of such grant is a member of the Board of Directors
only by the Independent Directors Committee based upon a recommendation of the
Committee.
(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) 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 10, 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 6,000,000 shares of Common Stock. No Key Employee
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shall be granted in the aggregate Stock Incentives (excluding Stock Awards)
relating to more than 15% of the aggregate number of shares of Common Stock
issuable or transferable under the Plan.
(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:
(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.
(b) 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 Committee
(or the Independent Directors Committee in the case of a grant to a Key Employee
who is also a member of the Board) 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 Committee (or the Independent Directors Committee, as the
case may be) 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 Committee (or the
Independent Directors Committee in the case of a grant to a Key Employee who is
also a member of the Board), 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.
(c) A Stock Award shall contain such terms and conditions as the
Committee (or the Independent Directors Committee in the case of a grant to a
Key Employee who is also a member of 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.
(d) 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 Committee (or the Independent Directors Committee in the case of a grant
to a Key Employee who is also a member of the Board) 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 Committee shall determine, provided the Stock Award is consistent
with the Plan and incorporates it by reference.
(e) All or part of a Stock Award may be designated as an Employment
Stock Award, as to which the shares so designated shall only be issued if the
Key Employee to whom such Stock Award has been granted meets the employment
terms and conditions specified by the Committee (or the Independent
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Directors Committee in the case of a grant to a Key Employee who is also a
member of the Board) at the time such Stock Award is granted.
(f) All or part of a Stock Award may be designated as a Performance
Stock Award, as to which the shares so designated shall only be issued if
certain pre-established performance goals are met during the term of the grant.
The Committee (or the Independent Directors Committee in the case of a grant to
a Key Employee who is also a member of the Board) may establish such performance
goals in writing at the time the Performance Stock Award is granted subject to
these performance restrictions or it may establish such goals early in each year
during the term of the grant, provided it indicates, at the time of grant, what
portion of the Performance Stock Award will be available to be earned each year
during the term of the award based on each year's performance goals. The
performance goals established by the Committee (or the Independent Directors
Committee, as the case may be) may be based, among other factors, upon the
attainment of specified earnings per share, return on asset or asset management
goals or upon the Company's total return to shareholder ranking relative to a
pre-established comparator group of companies. Shares subject to a Performance
Stock Award granted to any individual whose compensation from the Company is
covered by Section 162(m) of the Code shall be issued only after the Committee
(or the Independent Directors Committee in the case of a grant to a Key Employee
who is also a member of the Board) certifies in writing that the performance
goals have been met.
SECTION 6. OPTIONS: Stock Incentives in the form of Options shall be
subject to the following provisions:
(a) The price per share at which a share subject to an Option may be
purchased shall be determined by the Committee (or the Independent Directors
Committee in the case of an Option grant to a Key Employee who is also a member
of the Board), 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 Committee (or the
Independent Directors Committee, as the case may be) may determine on the date
such Option is granted, but no later than ten years from the date such Option is
granted. The Committee (or the Independent Directors Committee, as the case may
be) 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 it is
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 such optionee.
(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 Committee (or the Independent Directors Committee in the
case of a grant to a Key Employee who is also a member of the Board).
(f) Unless otherwise determined by the Committee (or the Independent
Directors Committee in the case of a grant to a Key Employee who is also a
member of 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
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Committee, or the Independent Directors Committee in the case of a grant to a
Key Employee who is also a member of 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 Committee, or the Independent Directors Committee in the case of a grant
to a Key Employee who is also a member of 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
Committee (or the Independent Directors Committee in the case of a grant to a
Key Employee who is also a member of the Board) may approve, including cash,
secured or unsecured indebtedness, by exchange for other property (including
shares of Common Stock), by delivery of irrevocable instructions to a financial
institution to deliver promptly to the Company the portion of sale or loan
proceeds sufficient to pay the Option exercise price, or otherwise.
(h) The Committee (or the Independent Directors Committee in the case of
a grant to a Key Employee who is also a member of the Board) 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 Committee (or the Independent Directors
Committee in the case of grants to Key Employees who are also members of the
Board) shall deem advisable. Without limiting the foregoing, if so authorized by
the Committee (or the Independent Directors Committee, as the case may be) and
subject to such terms and conditions as are specified in the Option or by the
Committee (or the Independent Directors Committee, as the case may be), 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
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 Committee 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 Committee (or the Independent
Directors Committee in the case of a grant to a Key Employee who is also a
member of the Board):
(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 Rights, the Committee (or the Independent Directors
Committee in the case of a grant to a Key Employee who is also a member
of the Board) may provide that the period during which such Stock
Appreciation Rights 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 Committee (or the Independent Directors Committee, as the case
may be) at the time of the grant of the Stock Appreciation Rights but,
unless otherwise determined by the Committee (or the Independent
Directors Committee, as the case may be), 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 Committee (or the Independent Directors Committee, as the
case may be) 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
13, and in the case of Retirement, no later than three years after the
date of such Retirement. Unless otherwise determined by the Committee
(or the Independent Directors Committee in the case of a grant to a Key
Employee who is also a member of 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.
(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 determine, by action of the Committee
(or the Independent Directors Committee in the case of a grant to a Key
Employee who is also a member of the Board), to 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) If so directed by the Committee (or the Independent Directors
Committee in the case of a grant to a Key Employee who is also a member of the
Board) at any time and from time to time, the grant of
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Stock Appreciation Rights may provide for payment of Dividend Equivalents to
the holder of the Stock Appreciation Rights.
(f) 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
Committee (or the Independent Directors Committee in the case of a grant to a
Key Employee who is also a member of 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 Committee (or the Independent
Directors Committee in the case of a grant to a Key Employee who is also a
member of the Board) 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 (or the Independent Directors Committee in the
case of a grant to a Key Employee who is also a member of the Board) 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 Committee (or the Independent Directors Committee, as the case may be) 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.
SECTION 9. OUTSIDE DIRECTORS' OPTIONS:
(a) On the date of the first Board of Directors meeting after each
annual meeting of the shareholders (commencing with the Board of Directors
meeting after the 1995 annual meeting of shareholders), each Outside Director
shall automatically be granted Options to purchase 1,500 shares of Common Stock.
In the event an adjustment is made under the provisions of Section 10 in the
outstanding unexercised Options granted to Outside Directors hereunder, a
similar adjustment shall be made in the number of Options to be granted to
Outside Directors subsequent to the effectiveness of such adjustment.
(b) The price at which each share of Common Stock covered by Options
granted to Outside Directors may be purchased shall be the Fair Market Value of
the Common Stock on the date the Options are granted.
(c) Options granted to Outside Directors hereunder shall be fully vested
on the date of grant and shall become exercisable on the first anniversary of
such date of grant. Such Options may be exercised by the Outside Director during
the period that the Outside Director remains a member of the Board and for a
period of five years following retirement or resignation, provided that in no
event shall any such Option be exercisable more than ten years after the date of
grant.
(d) In the event of the death of an Outside Director, the Options shall
be exercisable only within the three years next succeeding the date of death,
and then only by the executor or administrator of the Outside Director's estate
or by the person or persons to whom the Outside Director's rights under the
Options shall pass by the Outside Director's will or the laws of descent and
distribution, provided that in no event shall the Option be exercisable more
than ten years after the date of grant.
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(e) Except as expressly provided in this Section 9, Options granted to
Outside Directors shall be subject to the terms and conditions of Section 6
regarding the terms of Options and to the other relevant provisions of the Plan.
SECTION 10. 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 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 Committee (or the Independent
Directors Committee in the case of grants to Key Employees who are also members
of the Board) may, in its discretion, make the adjustments described above in
this paragraph (a) of Section 10 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 conditions the receipt of benefits of a
Stock Incentive granted hereunder on the completion of a specified period of
employment by the holder thereof or on the attainment of certain performance
goals by the Company or any group, subsidiary or division thereof), in the event
of a Change in Control of the Company the holders of Stock Incentives
outstanding as of the date of the occurrence of the Change in Control of the
Company shall have the right to surrender such Stock Incentives within the
60-day period following the occurrence of the Change in Control of the Company
and to receive cash as consideration for such surrender in accordance with the
following:
(i) A holder of a Stock Award being surrendered shall be entitled
to the amount equal to the highest 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.
(ii) A holder of Options being surrendered shall be entitled to the
amount by which the highest 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 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 (as adjusted, if applicable under the terms of the Plan),
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.
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(iv) All payments to be made pursuant to this paragraph (b) of
Section 10 shall be made within ten days of the delivery of written
notice of such surrender by the holder to the Company.
SECTION 11. 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, 2000.
SECTION 12. ADMINISTRATION:
(a) The Plan shall be administered by the Committee which shall consist
of not less than three directors of the Company designated by the Board;
provided, however, that no director shall be designated as or continue to be a
member of the Committee, unless such director shall be (i) a "disinterested
person" within the meaning of Rule 16b-3 under the Act (or any successor rule or
regulation) and (ii) an "outside director" within the meaning of Section 162(m)
of the Code and the regulations promulgated thereunder (or any successor
provision, rules or regulations).
(b) The Committee shall have full authority to act for the Company under
the Plan, except (i) to the extent the Plan delegates such authority to the
Independent Directors Committee, (ii) the authority to amend or discontinue the
Plan, which power shall be solely that of the Board, or (iii) to change the
terms of any grant of Options to the Outside Directors from that provided for
herein. All actions of the Independent Directors Committee shall be based upon
recommendations of the Committee.
(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 (or
the Independent Directors Committee) under the Plan shall require the
affirmative vote of a majority of all the members of the Committee (or the
Independent Directors Committee, as the case may be). The Committee (or the
Independent Directors 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 (or the Independent Directors
Committee), and any such written determination shall be as fully effective as a
unanimous vote at a meeting.
(e) Members of the Committee and the Independent Directors 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 13. 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 Committee (or the Independent Directors Committee in the case of
grants to Key Employees who are also members of the Board) 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 subject to forfeiture upon failure to comply with conditions
and restrictions imposed in the grant of such Stock Incentives.
(b) The Committee (or the Independent Directors Committee in the case of
a grant to a Key Employee who is also a member of the Board) 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.
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(c) The Committee (or the Independent Directors Committee in the case of
a grant to a Key Employee who is also a member of the Board) may, in its
discretion, in the event of termination of employment with the consent of the
Company or the 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 with the consent of
the Company of an optionee or a Key Employee who is a holder of Stock
Appreciation Rights, other than by death, Retirement or Disability, the
Committee (or the Independent Directors Committee in the case of a grant to a
Key Employee who is also a member of the Board) may extend the period during
which such Options 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 Options or Stock Appreciation Rights.
(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 Committee (or the Independent Directors Committee in the case
of grants to Key Employees who are also members of the Board).
(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.
(h) No holder of a Stock Incentive (individually or as a member of a
group), and no beneficiary or other person claiming under or through such
holder, 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 such individual.
(i) The Company or a Subsidiary may, with the approval of the Committee,
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 Committee 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 Committee 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 Committee 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 Committee 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 Committee, on the date it is delivered by the Subsidiary, or
on such other date between such two dates, as the Committee 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 Committee 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 that if
such beneficiary shall be the executor or
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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 the lifetime of the
holder thereof only by the holder or by the holder'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 14. AMENDMENT OR DISCONTINUANCE OF PLAN:
(a) The Plan may be amended by the Board 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 in
paragraph (a) of Section 4, (ii) amends the provisions of paragraph (a) of
Section 12 with respect to the eligibility of the members of the Committee,
(iii) permits any person to be granted a Stock Incentive who is not at the time
of such grant a Key Employee or an Outside Director, (iv) amends any provision
of the Plan insofar as it applies specifically to Options granted or to be
granted to Outside Directors, (v) amends Section 11 to extend the term of the
Plan, or (vi) amends this Section 14.
(b) The Board may by resolution adopted by a majority of the entire
Board discontinue the Plan.
(c) No amendment or discontinuance of the Plan shall adversely affect
any Stock Incentive theretofore granted without the consent of the holder
thereof.
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APPENDIX B
INGERSOLL-RAND COMPANY
SENIOR EXECUTIVE PERFORMANCE PLAN
This is the Senior Executive Performance Plan (the "Plan") of
Ingersoll-Rand Company (the "Company"), for the payment of incentive
compensation to designated employees.
SECTION 1. DEFINITIONS:
As used in the Plan, the following terms have the following meanings:
Board: The Board of Directors of the Company.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The Compensation and Nominating Committee of the Board;
provided, however, that, notwithstanding any provision of the Plan to the
contrary, with respect to a participant who is a member of the Board the term
Committee shall mean all of the Outside Directors on the Board, all of whose
actions hereunder shall be based upon recommendations of the Compensation and
Nominating Committee of the Board.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Net Income: The Company's consolidated net earnings as reported in the
Company's financial statements included in its annual report to shareholders,
before the after-tax effect of (a) losses resulting from discontinued
operations, (b) extraordinary gains or losses (as defined by generally accepted
accounting principles), (c) the cumulative effect of changes in accounting
principles, and (d) any other unusual, non-recurring items of gain or loss which
are separately identified and quantified in the Company's reported financial
statements.
Outside Directors: The meaning ascribed to such term in Section 162(m)
of the Code and the regulations proposed or adopted thereunder.
Return on Equity: Net Income divided by the Company's quarterly average
common shareholders' equity for the fiscal year.
SECTION 2. OBJECTIVES:
The objectives of the Plan are to:
(a) recognize and reward on an annual basis the Company's senior
executive officers for their contributions to the overall profitability of the
Company; and
(b) qualify compensation under the Plan as "performance-based
compensation" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
SECTION 3. ADMINISTRATION: The Plan will be administered by the Committee.
The Committee shall contain at least three Outside Directors. Subject to the
provisions of the Plan, the Committee will have full authority to interpret the
Plan, to establish and amend rules and regulations relating to it, to determine
the terms and provisions for making awards and to make all other determinations
necessary or advisable for the administration of the Plan.
SECTION 4. PARTICIPATION: Participation in the Plan in any fiscal year
will be limited to individuals who on the last day of the Company's previous
fiscal year are (a) the chief executive officer of the Company (or person acting
in such capacity), or (b) among the four highest compensated officers (other
than the chief executive officer), each as determined pursuant to the executive
compensation disclosure rules under the Exchange Act.
B-1
<PAGE> 38
SECTION 5. DETERMINATION OF PERFORMANCE BONUS POOL: The total amount of
performance bonuses available for payout for any fiscal year shall be 6% of Net
Income that exceeds 6% of Return on Equity (the "Performance Bonus Pool"). In
the event that all of the Performance Bonus Pool applicable to any fiscal year
is not paid (or deferred under Section 7(b)), the unused portion shall be
carried over for allocation in any subsequent fiscal year, provided that the
maximum aggregate carryover at any time shall not exceed $2,000,000.
SECTION 6. DETERMINATION OF PARTICIPANTS' SHARES OF THE PERFORMANCE BONUS
POOL:
(a) The Committee shall have sole discretion to determine the share of
the Performance Bonus Pool available to each participant. In no event shall any
participant's share of the Performance Bonus Pool exceed 30% and all
participants' shares, in the aggregate, shall not exceed 100% of the Performance
Bonus Pool.
(b) The share of the Performance Bonus Pool available to each
participant shall be specified by the Committee no later than 90 days after the
commencement of the fiscal year for which the share is awarded and may be
determined by position or name and may be prorated for a partial year of
service.
(c) Final payouts are subject to the approval of the Committee and shall
occur as provided in Section 7 hereof. The Committee shall have the right to
reduce or cancel any payout that would otherwise be due to a participant if, in
its sole discretion, the Committee deems such action warranted based on other
circumstances relating to the performance of the Company or the participant.
SECTION 7. TIME AND FORM OF PAYMENT:
(a) Except as provided in paragraph (b) of this Section 7, awards will
be paid in cash as soon as practicable following the public announcement by the
Company of its financial results for the fiscal year and written certification
from the Committee that the goals described in Section 5 hereof have been
attained.
(b) A participant in the Plan may elect to defer payment of all or any
portion of a performance bonus award pursuant to the terms and conditions of any
deferral program adopted by the Committee. Such deferral program may provide for
a reasonable rate of interest or a return based on one or more predetermined
actual investments (whether or not the assets associated with the amount
originally deferred are actually invested in them).
SECTION 8. TERMINATION OF EMPLOYMENT: In the event of a participant's
termination of employment for any reason during a fiscal year, the Committee, in
its discretion, may provide that the participant (or his or her beneficiary)
receive, after the end of the fiscal year, all or any portion of the performance
bonus to which the participant would otherwise have been entitled.
SECTION 9. MISCELLANEOUS:
(a) Amendment and Termination of the Plan. The Committee with the
approval of the Board may amend, modify or terminate the Plan at any time and
from time to time. Notwithstanding the foregoing, no such amendment,
modification or termination shall affect the payment of a performance bonus for
a fiscal year already ended.
(b) No Assignment. Except as otherwise required by applicable law, no
interest, benefit, payment, claim or right of any participant under the Plan
shall be subject in any manner to any claims of any creditor of any participant
or beneficiary, nor to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any
attempt to take any such action shall be null and void.
(c) No Rights to Employment. Nothing contained in the Plan shall give
any person the right to be retained in the employment of the Company or any of
its affiliates or associated corporations or affect the right of any such
employer to dismiss any employee.
B-2
<PAGE> 39
(d) Beneficiary Designation. The Committee shall establish such
procedures as it deems necessary for a participant to designate a beneficiary to
whom any amounts would be payable in the event of the participant's death.
(e) Plan Unfunded. The entire cost of the Plan shall be paid from the
general assets of the Company. The rights of any person to receive benefits
under the Plan shall be only those of a general unsecured creditor, and neither
the Company, nor the Board nor the Committee shall be responsible for the
adequacy of the general assets of the Company to meet and discharge Plan
liabilities, nor shall the Company be required to reserve or otherwise set aside
funds for the payment of its obligations hereunder.
(f) Applicable Law. The Plan and all rights thereunder shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
B-3
<PAGE> 40
DIRECTIONS TO WOODCLIFF LAKE
FROM J.F. KENNEDY AIRPORT -
Take the Van Wyck Expressway North to the Grand Central Parkway West to Triboro
Bridge. Cross Triboro Bridge and take the Major Deegan Expressway North to the
George Washington Bridge. Cross the George Washington Bridge and take
Interstate Route 80 West to Garden State Parkway North to Exit 171.
Leave the Garden State Parkway at Exit 171, turn left at Glen Road, cross under
the Garden State Parkway and turn left on Chestnut Ridge Road south
approximately 3/4 of a mile to Ingersoll-Rand.
[1 Map of N.J. showing location of Woodcliff Lake, 1 Map showing detailed
travel route from major highways]
FROM LAGUARDIA -
Take the Grand Central Parkway West and follow the same route as described
above from J.F. Kennedy Airport.
FROM NEWARK -
Take the New Jersey Turnpike North to Interstate Route 80 West and follow the
same route as described above from J.F. Kennedy Airport.
FROM MANHATTAN -
Take the West Side Highway North to the Henry Hudson Parkway to the George
Washington Bridge. Then follow the same route as described above from J.F.
Kennedy Airport.
FROM THE NEW YORK THRUWAY -
Follow signs leading to the Garden State Parkway. The first exit southbound on
the Garden State Parkway connection is Schoolhouse Road. Turn left off the ramp
on Schoolhouse Road and travel one mile to Summit Avenue. Turn right on Summit
Avenue and proceed approximately one mile to Chestnut Ridge Road. Turn left on
Chestnut Ridge Road and continue south approximately two miles to
Ingersoll-Rand.
[LOGO] INGERSOLL-RAND
<PAGE> 41
INGERSOLL-RAND COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF SHAREHOLDERS APRIL 27, 1995
The undersigned hereby appoints JAMES E. PERRELLA, THOMAS F. MCBRIDE and
PATRICIA NACHTIGAL or any of them, with power of substitution, attorneys and
proxies to vote, as indicated on the reverse hereof, all shares of stock of
Ingersoll-Rand Company (the "Company") which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held at the Company's
executive offices, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey, on
Thursday, April 27, 1995, at 10:30 A.M., or at any adjournments thereof, with
all the powers the undersigned would possess, including cumulative voting
rights, if then and there personally present, upon the matters described in the
Notice of Annual Meeting of Shareholders and Proxy Statement, dated March 15,
1995, receipt of which is hereby acknowledged, and upon any other business that
may come before the meeting or any such adjournment.
The nominees for election as directors are Donald J. Bainton, Brendan T. Byrne,
Constance J. Horner, H. William Lichtenberger, Alexander H. Massad, Orin R.
Smith and Richard J. Swift.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE.
1. ELECTION OF DIRECTORS
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES LISTED ON THE REVERSE SIDE
HEREOF
FOR / / WITHHOLD AUTHORITY / /
All Nominees All Nominees
(except as marked to the contraty below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
ENTER THE NOMINEE'S NAME ON THE LINE BELOW).
--------------------------------------------------------------------------
2. APPROVAL OF INCENTIVE STOCK PLAN OF 1995.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF SENIOR EXECUTIVE PERFORMANCE PLAN.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL
/ / FOR / / AGAINST / / ABSTAIN
4. RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT
ACCOUNTANTS.
THE BOARD RECOMMENDS A VOTE FOR THE APPOINTMENT
/ / FOR / / AGAINST / / ABSTAIN
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder.
IF NO CONTRARY SPECIFICATIONS ARE MADE ABOVE, THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2, 3 AND 4.
Date , 1995
------------------------------
Signature
--------------------------------
Signature
--------------------------------
Please sign exactly as name(s) appear on
this proxy. Executors, administrators,
trustees, etc. should give full title.
