<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
INGERSOLL-RAND COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(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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(4) Date Filed:
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<PAGE>
[LOGO]
World Headquarters
_________________________________
Ingersoll-Rand Company
Woodcliff Lake, New Jersey
07675-8738
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Ingersoll-Rand Company will be held on
Wednesday, May 5, 1999, at 11:00 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 four directors of the Third Class to hold office for three
years and one director of the Second Class to hold office for two years.
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for 1999.
3. 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 March 8, 1999 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 19, 1999
<PAGE>
INGERSOLL-RAND COMPANY
P.O. BOX 8738
WOODCLIFF LAKE, NEW JERSEY 07675
PROXY STATEMENT
1999 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 May 5, 1999. It and this Proxy
Statement are being sent to shareholders beginning on or about March 19, 1999.
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 March 8, 1999. There were
outstanding and entitled to vote on such date 164,944,923 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 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.
1. ELECTION OF DIRECTORS
It is intended that the proxies will be voted for the election of Herbert L.
Henkel, H. William Lichtenberger, James E. Perrella and Tony L. White as
directors of the Third Class for a term of three years and Peter C. Godsoe as a
director of the Second Class for a term of two years. 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
1
<PAGE>
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:
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 66 years old, became a director of the Company in
1986. His current term expires in 2000. Member of Audit, Finance and
Compensation and Nominating Committees.
PETER C. GODSOE
Mr. Godsoe has been Chairman of the Board and Chief Executive Officer of The
Bank of Nova Scotia since 1995. From 1993 to 1995 he served as Deputy Chairman
of the Board, President and Chief Executive Officer of The Bank of Nova Scotia.
He is also a director of Empire Company Limited. Mr. Godsoe, who is 60 years
old, became a director of the Company in September 1998. He is a candidate for a
two-year term. Member of Audit and Finance Committees.
HERBERT L. HENKEL
Mr. Henkel has been elected President and Chief Operating Officer and a
director of the Company, effective April 5, 1999. From 1987 until March 1999 he
held several executive positions with Textron Inc. (a multi-industry company
with operations in aircraft, automotive, industrial and finance), including
serving as Vice President of Textron responsible for the Textron Industrial
Products segment from 1993 to 1998, and as Chief Operating Officer of Textron
from July 1998 to March 1999. He is a director of Kollmorgen Corporation. Mr.
Henkel, who is 50 years old, is a candidate for a three-year term.
CONSTANCE J. HORNER
Mrs. Horner has been a Guest Scholar at The Brookings Institution since
1993. She 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
director of Foster Wheeler Corporation, Pfizer Inc. and The Prudential Insurance
Company of America. Mrs. Horner, who is 57 years old, became a director of the
Company in 1994. Her current term expires in 2001. 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 63 years old, became a director of the Company in 1995. He is a candidate for
a three-year term. Member of Audit, Compensation and Nominating, and Finance
Committees.
2
<PAGE>
THEODORE E. MARTIN
Mr. Martin was President and Chief Executive Officer of Barnes Group, Inc.,
a manufacturer and distributor of precision springs and custom metal parts, from
1995 until his retirement in December 1998. From 1990 until 1995, he held
several executive positions with Barnes Group, Inc. and served as a director of
that company from 1993 until December 1998. He is also a director of RJR Nabisco
Holdings Corporation and Unisys Corporation. Mr. Martin, who is 59 years old,
became a director of the Company in 1996. His current term expires in 2000.
Member of Corporate Affairs and Finance 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 Becton Dickinson and Company, Milacron, Inc. and Rio Algom Limited.
Mr. Perrella, who is 63 years old, became a director of the Company in 1992. He
is a candidate for a three-year term.
ORIN R. SMITH
Mr. Smith has been Chairman and Chief Executive Officer of Engelhard
Corporation, a provider of specialty chemical products, engineered materials and
industrial commodities management services for various industries, since 1995.
He previously served as President and Chief Executive Officer and a director of
Engelhard Corporation from 1984 to 1995. He is also a director of The
Perkin-Elmer Corporation, The Summit Bancorporation and Vulcan Materials
Company. Mr. Smith, who is 63 years old, became a director of the Company in
1995. His current term expires in 2001. Member of Audit, Compensation and
Nominating, and Corporate Affairs Committees.
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 1994. He previously
held several executive positions with Foster Wheeler Corporation, including
serving as its President and Chief Operating Officer from 1992 to 1994. He is
also a director of Public Service Enterprise Group Incorporated. Mr. Swift, who
is 54 years old, became a director of the Company in 1995. His current term
expires in 2000. Member of Audit and Compensation and Nominating Committees.
TONY L. WHITE
Mr. White has been Chairman, President and Chief Executive Officer of The
Perkin-Elmer Corporation, a developer, manufacturer and marketer of life science
systems and analytical instruments used by a variety of industries, since 1995.
He previously held numerous positions with Baxter International Inc., including
serving as an Executive Vice President from 1993 to 1995. He is also a director
of C. R. Bard, Inc. Mr. White, who is 52 years old, became a director of the
Company in 1997. He is a candidate for a three-year term. Member of Audit and
Corporate Affairs Committees.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of February 28, 1999, the beneficial
ownership of the Company's Common Stock by (i) each of the directors and nominee
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 DEFERRED
OF SHARE
COMMON STOCK UNITS
NAME (A)(B) (C)
- -------------------------------------------------------------- -------------- ----------
<S> <C> <C>
D. W. Devonshire.............................................. 103,733 --
J. P. Flannery................................................ 3,750 10,100
P. C. Godsoe.................................................. 1,000 585
H. L. Henkel.................................................. -- --
C. J. Horner.................................................. 3,057 4,758
B. D. Jellison................................................ 202,548 27,047
H. W. Lichtenberger........................................... 8,250 5,425
S. T. Martin.................................................. 75,412(d) 8,796
T. E. Martin.................................................. 3,010 4,251
J. E. Perrella................................................ 1,024,419(e) 139,088
O. R. Smith................................................... 8,250 7,821
R. J. Swift................................................... 7,500 3,646
J. F. Travis.................................................. 554,491(f) 103,724
T. L. White................................................... 3,000 3,984
All directors and executive officers as a group
(16 persons)................................................ 2,275,127(g) 328,084
</TABLE>
- ------------------------
(a) Unless otherwise indicated, all shares are held directly. No director 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 Leveraged Employee
Stock Ownership Plan and Savings and Stock Investment Plan for the benefit
of executive officers as follows: D.W. Devonshire, 333 shares; B.D.
Jellison, 8,968 shares; S. T. Martin, 5,256 shares; J.E. Perrella, 45,175
shares; J.F. Travis, 24,061 shares; and all executive officers as a group,
91,714 shares. Also included are shares which directors and executive
officers had the present right to acquire under the Company's Incentive
Stock Plans as follows: D. W. Devonshire, 90,000 shares; J.P. Flannery,
2,250 shares; C.J. Horner, 2,250 shares; B.D. Jellison, 192,500 shares; H.W.
Lichtenberger, 6,750 shares; S.T. Martin, 62,500 shares; T.E. Martin, 2,250
shares; J.E. Perrella, 880,000 shares; O.R. Smith, 6,750 shares; R.J. Swift,
6,750 shares; J.F. Travis, 495,000 shares; T.L. White, 2,250 shares; and all
directors and executive officers as a group, 1,978,100 shares.
(c) In the case of non-employee directors these amounts represent shares earned
and vested under the Director Deferral Plan (referred to below under the
caption "Board of Directors and Committees"). In the case of executive
officers these amounts represent (i) shares earned and vested under the
Company's Executive Deferred Compensation and Stock Bonus Plan (the
"Executive Deferral Plan") and (ii) shares in respect of vested stock awards
deferred at the election of the executives.
(d) Includes 3,897 shares owned by Mr. Martin's wife and Mr. Martin disclaims
beneficial ownership of such shares.
(e) Includes 33,494 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.
4
<PAGE>
(f) Includes an aggregate of 12,075 shares owned by members of Mr. Travis'
family and Mr. Travis disclaims beneficial ownership of all such shares.
(g) The shares of Common Stock beneficially owned by all directors and executive
officers as a group aggregated approximately 1.36% of the total outstanding
Common Stock. This includes an aggregate of 49,466 shares of Common Stock
owned by members of the families of such individuals or by family
foundations, as to which such directors and executive officers disclaim
beneficial ownership.
The following table sets forth each shareholder which, as of February 28,
1999, is known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock of the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP CLASS
- ----------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Chase Manhattan Corporation.................................................. 10,053,623(a) 6.10%
One Chase Manhattan Plaza
New York, New York 10081
FMR Corp..................................................................... 13,859,050(b) 8.40%
82 Devonshire Street
Boston, Massachusetts 02109
Mellon Bank Corporation...................................................... 9,498,854(c) 5.76%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
</TABLE>
- ------------------------
(a) These shares are held as trustee under a Master Trust Agreement covering
certain Company employee benefit plans for the benefit of participants in
such plans.
(b) FMR Corp. has sole investment power as to all except 600 of such shares. In
addition, as to 1,262,040, FMR Corp. has sole voting power.
(c) Of these shares Mellon Bank Corporation has (i) sole voting power as to
6,351,345 shares, (ii) shared voting power as to 294,660 shares, (iii) sole
investment power as to 8,838,476 shares and (iv) shared investment power as
to 450,984 shares.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held eight meetings during 1998. 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
$30,000 and $1,000 for attendance at each Board or Committee meeting, except
that Committee chairs receive $2,000 per Committee meeting. In addition, each
non-employee director is annually granted options to purchase 2,250 shares of
the Company's Common Stock.
Under the Company's Directors Deferred Compensation and Stock Award Plan
(the "Director Deferral Plan"), each non-employee director is credited annually
with units representing 600 shares of the Company's Common Stock, such credit
being made to an account maintained for each non-employee director (a "Deferred
Compensation Account"). The Director Deferral Plan also permits non-employee
directors to defer all or a portion of the retainer and meeting fees to which
they are entitled. The Company makes a supplemental contribution equal to 20% of
the retainer and meeting fees so deferred and all such amounts are credited to
the director's Deferred Compensation Account. Each director is fully vested in
amounts credited to the director's Deferred Compensation Account, except that
the Company's 20% supplemental contributions in respect of deferred fees are not
vested until five years after crediting or, if earlier, the cessation of the
director's service on the Board of Directors by reason of death or normal
retirement (i.e., age 70 or 15 years of Board service). All distributions under
the Director Deferral Plan are made in the form of shares of Company Common
Stock equal to the number of units credited to the director's Deferred
Compensation Account.
The Audit Committee held four meetings during 1998. 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 seven meetings during 1998.
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 shareholders of the Company.
Shareholders may submit such recommendations to the Secretary of the Company.
The Corporate Affairs Committee held two meetings during 1998. 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
compliance by Company personnel with ethical and legal standards.
The Finance Committee held four meetings during 1998. 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.
6
<PAGE>
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, 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, 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. Compensation policies
also 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 members of
senior management that are directly tied to the overall financial performance of
the Company and to their respective individual performances 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 returns realized by the Company's shareholders. While many
compensation determinations are based upon objective criteria, certain of such
determinations include subjective elements.
The objectives described above are generally accomplished through a mix of
compensation components, targeted degrees of competitiveness and direct linkages
to Company financial performance. The value of the variable compensation
components (annual cash incentive payments plus stock options and stock awards)
is directly linked to the financial performance of the Company and to the value
of the Company's Common Stock. Thus, alignment of the interests of the
shareholders and of the executives is achieved.
The Compensation Committee periodically reviews and evaluates its executive
officer compensation practices against the practices and pay levels of other
similar companies. These comparisons are conducted continuously throughout the
year through a variety of methods such as direct analysis of peer company proxy
statements, compilation of survey data published by several outside consulting
firms, and customized compensation surveys performed by outside consulting
firms. The companies included in these compensation surveys are not necessarily
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 the surveyed corporations referred to above. Weighing of these
salary determination factors varies because each salary determination is based
upon an individual's particular circumstances.
7
<PAGE>
Executive officers with direct responsibility for business unit operations
may receive annual bonuses under the terms of written performance agreements
established early each year. The agreements for 1998 provided that a bonus equal
to 35-50% of salary would be payable if their respective group operations met
certain pre-established operating income and asset management targets, and an
additional 30-45% of salary (to a maximum of 80% of salary) would be payable for
substantially exceeding those targets. In addition, a discretionary bonus of up
to 20% of salary would be payable based upon subjective criteria applicable to
the respective operations managed by these executive officers. The total bonus
could 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 each 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 as are the prevailing pay levels for similar positions in similar
companies.
The Company's Senior Executive Performance Plan (the "SEPP") limits the
bonuses which may be awarded to participants in the SEPP, who consist of the
chief executive officer plus the four other highest compensated executive
officers (as determined under Securities Exchange Act regulations). Bonuses to
SEPP participants are limited to their respective allocated shares of the SEPP's
Performance Bonus Pool for the year in question.
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 under the Company's Incentive Stock Plans 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. Beginning with
those granted in 1999, options granted to executive officers become
exercisable in three equal annual installments beginning one year from the
date of grant and expire on the tenth anniversary of the grant. Options
granted to executive officers prior to 1999 generally became fully
exercisable one year after the date of grant.
(b) Stock awards payable in the Company's Common Stock periodically have
been granted under the Company's Incentive Stock Plans to executive officers
and other key employees of the Company. Awards to executive officers
normally are distributed upon vesting in three annual installments. Under
the terms of all awards granted to executive officers since 1997 (other than
the award of 8,000 shares to Mr. Devonshire as part of his initial
employment arrangements with the Company), distribution of 100% of the
shares awarded to executive officers are contingent upon the Company's
achievement of predetermined earnings per share objectives. The objective
for each year is established early in the year by 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.
(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 Company.
The number of MIUs granted to a particular individual is based upon the
position
8
<PAGE>
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 personal and professional growth.
Weighing 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
dividend 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.
(d) The Executive Deferred Compensation and Stock Bonus Plan (the
"Executive Deferral Plan") enables and encourages eligible executives to
defer receipt of all or part of their Company annual cash bonus in exchange
for Company Common Stock equivalents in an amount equal to 120% of the
deferred amount. Vesting of the 20% supplemental amount is generally subject
to the completion of five years of employment following the date of
deferral. The Executive Deferral Plan is designed to increase stock
ownership by executives and, as a condition of participation, executives
agree to prescribed stock ownership guidelines which are expressed as
multiples of their annual salary based on their roles and job levels.
Distributions are in the form of Company Common Stock.
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 total opportunity, comprised of salary, annual incentives and long-term
incentives, for executive officers at approximately the 75(th) percentile of the
pay levels for equivalent positions as determined through the survey processes
discussed above. 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.
1998 CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee recommended, and the Board of Directors approved,
a 10.5% salary increase effective December 1, 1998, for Mr. Perrella. This
increase brought Mr. Perrella's salary level to $1,050,000, approximating the
estimated average salary of the chief executives of the surveyed corporations
referred to above.
In addition, the Compensation Committee recommended that, in accordance with
the SEPP, the Board approve a bonus to Mr. Perrella in respect of 1998 in an
amount equal to 143% of his 1998 year-end salary. This recommendation, as well
as the Board's subsequent award of that bonus, was based upon Mr. Perrella's
contributions to the Company's 1998 operating results, which, for the fifth
consecutive year exceeded the Company's earnings per share goals and produced a
34% increase in net earnings over 1997, establishing a record for the Company.
During 1998, Mr. Perrella was also awarded stock options in respect of
160,000 shares of the Company's Common Stock which became fully exercisable in
February 1999, at an exercise price of $42.31 per share, 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).
9
<PAGE>
1998 COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
During 1998, in accordance with the policies stated above, the executive
officers named in the Summary Compensation Table, other than Messrs. Perrella
and Devonshire, were granted salary increases averaging approximately 21.25%.
Bonus awards to Messrs. Travis, Devonshire, Jellison and Martin were granted
pursuant to performance agreements of the type described above. Since in 1998
the operations or functions for which Messrs. Travis, Devonshire, Jellison, and
Martin were responsible exceeded their respective operating income, cost
improvement and asset management goals and the Company achieved certain
pre-established profit objectives, these individuals were awarded bonuses
averaging approximately 100% of salary. Where applicable, the bonus awards were
in accordance with the SEPP.
The named executive officers were also granted stock options in respect of
the Company's Common Stock, as indicated in the Summary Compensation Table and
under the caption "Stock Options", and stock awards as indicated under the
caption "Long-Term Incentive Plan Awards," in each case 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 approximately at the
75(th) percentile 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 1998 are appropriate and
commensurate with the Company's 1998 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, 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
H. William Lichtenberger
Orin R. Smith
Richard J. Swift
10
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ended December 31, 1996, 1997 and
1998, 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
--------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION --------------------------- ---------
------------------------------------------------ SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($)(A) ($)(B) (#)(C) ($)(D) ($)(E)
- -------------------------- --------- --------- ----------- ------------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.E Perrella.............. 1998 958,333 1,500,000(f) -- 220,104(f) 160,000 286,031(g) 157,017
Chairman of the Board, 1997 840,000 1,282,000(f) -- 187,508(f) 135,000 405,000(g) 117,360
President 1996 738,333 1,050,000(f) -- 236,450(f) 135,000 366,750 97,680
and Chief
Executive Officer
J.F. Travis............... 1998 544,167 742,500(f) -- 188,078(f) 105,000 317,813(g) 88,408
Vice Chairman(h) 1997 426,667 648,000(f) -- 147,311(f) 90,000 225,000(g) 61,133
1996 366,667 480,000(f) -- 321,115(f) 90,000 148,000 45,500
B.D. Jellison............. 1998 294,417 239,500 -- 11,714 50,000 81,065(g) 40,083
Executive Vice 1997 228,833 291,250(f) -- 36,246(f) 45,000 77,746(g) 27,436
President 1996 206,333 197,765(f) 80,696(f) 37,500 50,024(g) 16,077
S.T. Martin............... 1998 295,833 292,820(f) -- 27,644(f) 50,000 49,755(g) 34,002
Executive Vice 1997 241,667 240,920(f) -- 22,747(f) 37,500 105,789 25,461
President 1996 219,333 209,915(f) -- 55,487(f) 37,500 68,672 21,086
D.W. Devonshire........... 1998 438,462 390,000 28,696 298,500 90,000 -- 482,735
Senior Vice
President & Chief
Financial Officer (i)
</TABLE>
- ------------------------
(a) These amounts represent that portion of relocation benefit payments to Mr.
Devonshire which compensated him for the income taxes payable in respect of
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 the
following: (i) the portion of stock awards granted to Messrs. Travis and
Jellison in 1996 and to Mr. Devonshire in 1998 to be issued subject to the
continuation of employment of the named executives, (ii) the crediting of
Common Stock equivalents to the accounts of such executives under the MIU
Plan, (iii) amounts credited under the Executive Deferral Plan equal to 20%
of the cash bonuses deferred by the named executives and (iv) the crediting
of additional Common Stock equivalents to accounts of the named executives
under the Executive Deferral Plan arising from the reinvestment of dividend
equivalents under that plan. The 1996 amount for Mr. Travis also includes a
stock award which was based upon the performance of the Company in that
year.
11
<PAGE>
The aggregate number and fair market value as of December 31, 1998 of all
the Common Stock equivalents credited to the accounts of the named
executives under the MIU Plan and the number of shares 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......................................................... 26,279 1,241,683
J.F. Travis........................................................... 12,217 577,253
B.D. Jellison......................................................... 4,356 205,821
S.T. Martin........................................................... 3,501 165,422
D. W. Devonshire...................................................... 8,000 378,000
</TABLE>
(c) Where applicable, share amounts are adjusted to reflect the three-for-two
stock split paid in the form of a 50% stock distribution on September 2,
1997.
(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.
Distribution of 50% of shares subject to awards to executive officers prior
to 1998 were contingent on Company performance. Distributions of 100% of
shares subject to awards granted beginning in 1998 are contingent on Company
performance (other than the 8,000 shares awarded to Mr. Devonshire in
connection with his employment by the Company in 1998 and distributed to him
in January 1999).
(e) The amounts reflected in this column represent (i) Company contributions for
the account of the named executive officers under the Company's Savings and
Stock Investment Plan (the "SSIP") (which includes contributions under the
Company's Leveraged Employee Stock Ownership Plan (the "LESOP")), as well as
amounts credited to the accounts of such executive officers under the
related supplemental plan, 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) a special bonus award and
relocation benefits payable to Mr. Devonshire in connection with the
commencement of his employment with the Company. For 1998 such amounts were
as follows:
<TABLE>
<CAPTION>
SAVINGS PLAN
(INCLUDING
SUPPLEMENTAL
PLAN AND LESOP RELOCATION
CONTRIBUTIONS DIVIDEND BENEFITS SPECIAL BONUS
NAME ($)) EQUIVALENTS ($) ($) ($)
- --------------------------- ----------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C>
J.E. Perrella.............. 112,017 45,000 -- --
J.F. Travis................ 59,608 28,800 -- --
B.D. Jellison.............. 29,283 10,800 -- --
S.T. Martin................ 23,202 10,800 -- --
D. W. Devonshire........... 22,154 10,800 149,781 300,000
</TABLE>
(f) Pursuant to the Executive Deferral Plan, annual cash bonuses have been
deferred in exchange for Company Common Stock equivalents equal to 120% of
the deferred amounts. Common Stock equivalents representing deferred cash
bonuses are included in the "Bonus" column, while the 20%
12
<PAGE>
additional amounts are included in the column captioned "Restricted Stock
Awards". The deferred cash bonus amounts for the executive officers named
above who elected deferrals were as follows:
<TABLE>
<CAPTION>
NAME 1996 1997 1998
- ------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
J.E. Perrella.......................................... $ 1,050,000 $ 769,200 $ 750,000
J.F. Travis............................................ 480,000 648,000 742,500
B.D. Jellison.......................................... 125,000 150,000 --
S.T. Martin............................................ 79,915 72,087 87,846
D. W. Devonshire....................................... -- -- --
</TABLE>
(g) Receipt of these amounts has been deferred at the election of the
executives.
(h) Mr. Travis retired from the Company in January 1999.
(i) Mr. Devonshire joined the Company in January 1998.
STOCK OPTIONS
The following tables contain information for the year 1998 concerning the
grants to, and exercises by, the executive officers named above, of stock
options under the Incentive Stock Plan of 1995 and the value of such options
held by such executive officers as of December 31, 1998:
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE EXPIRATION VALUE
NAME (#)(A) 1998 PRICE ($)/(SH) DATE ($)(B)
- ---------------------------------------- ------------- ------------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
J.E. Perrella........................... 160,000 6.56 42.31 2/3/08 1,301,232
J.F. Travis............................. 105,000 4.30 42.31 2/3/08 853,934
B.D. Jellison........................... 50,000 2.05 42.31 2/3/08 406,635
S.T. Martin............................. 50,000 2.05 42.31 2/3/08 406,635
D. W. Devonshire........................ 30,000 1.23 37.03 1/11/08 200,232
30,000 1.23 42.03 1/11/08 150,480
30,000 1.23 47.03 1/11/08 112,836
</TABLE>
- ------------------------
(a) All options became exercisable in February 1999, except that the options
granted to Mr. Devonshire with an exercise price of $37.03 became
exercisable in January 1999, and those with an exercise price of $42.03 and
$47.03 become exercisable in January 2000 and January 2001, respectively.
(b) Grant date value is based on the Black-Scholes option pricing model adapted
for use in valuing executive stock options. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The grant date values were determined
based in part upon the following assumptions:
<TABLE>
<CAPTION>
JANUARY 12, FEBRUARY 4,
1998 1998
--------------- ---------------
<S> <C> <C>
Expected volatility............................................................ 0.2433 0.2577
Risk-free rate of return....................................................... 5.25% 5.42%
Dividend yield................................................................. 1.62% 1.42%
Time of exercise (expected).................................................... 4 years 4 years
</TABLE>
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXCERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS/SARS AT OPTIONS/SARS AT
OPTIONS/ VALUE 12/31/98 (#) 12/31/98 ($)
SARS REALIZED ------------------------------ ---------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ------------- ------------- --------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
J.E. Perrella................. -- -- 720,000 160,000 15,811,241 790,000
J.F. Travis................... 45,000 1,352,813 390,000 105,000 8,223,122 518,438
B.D. Jellison................. -- -- 142,500 50,000 2,787,063 246,875
S.T. Martin................... 32,500 471,114 12,500 50,000 169,791 246,875
D.W. Devonshire............... -- -- -- 90,000 -- 469,683
</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 Company's Incentive Stock
Plans to executive officers and other key employees. For awards granted in 1998,
distributions are contingent upon the Company's earnings per share performance
during the payout period. The following table reflects the stock awards granted
during 1998 to the executive officers named above:
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE UNDER
NUMBER OF OR OTHER NON-STOCK PRICE BASED PLANS
SHARES, UNITS PERIOD UNTIL
OR MATURATION --------------------------------
OTHER RIGHTS OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
--------------- ----------------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
J.E.Perrella........................... -- -- -- -- --
J.F. Travis............................ -- -- -- -- --
B.D. Jellison.......................... 3,000 (a) -- 3,000 --
S.T. Martin............................ 3,000 (a) -- 3,000 --
D.W. Devonshire........................ 18,000 (a) -- 18,000 --
</TABLE>
- ------------------------
(a) The shares subject to these stock awards are issuable in 1999-2001 based
upon the earnings per share performance of the Company during 1998-2000.
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 eligible to participate in the Company's Pension Plan
Number One (the "Pension Plan") and the Elected Officers Supplemental Program.
The following table illustrates approximate annual pensions for retirements in
1999 under the Pension Plan and under the Elected Officers Supplemental Program
computed as a straight life annuity, before the reductions specified in footnote
(a) below and based on the indicated assumptions:
14
<PAGE>
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 BEFORE OFFSETS (A)
<TABLE>
<CAPTION>
15 YEARS
FINAL AVERAGE OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 35 YEARS OF 40 YEARS OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
- ----------------------------------------------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$500,000....................................... $ 142,500 $ 190,000 $ 237,500 $ 285,000 $ 332,500 $ 332,500
600,000....................................... 171,000 228,000 285,000 342,000 399,000 399,000
700,000....................................... 199,500 266,000 332,500 399,000 465,500 465,500
800,000....................................... 228,000 304,000 380,000 456,000 532,000 532,000
900,000....................................... 256,500 342,000 427,500 513,000 598,500 598,500
1,000,000..................................... 285,000 380,000 475,000 570,000 665,000 665,000
1,100,000..................................... 313,500 418,000 522,500 627,000 731,500 731,500
For each additional $100,000................... 28,500 38,000 47,500 57,000 66,500 66,500
</TABLE>
- ------------------------
(a) Benefits payable to participants in the Pension Plan and the Elected
Officers Supplemental Plan are reduced by a portion of the Social Security
benefits to which such participants are entitled.
The credited years of service at December 31, 1998 for the individuals named
above are as follows: Mr. Perrella, 37 years; Mr. Travis, 40 years; Mr.
Jellison, 24 years; Mr. Martin, 37 years; and Mr. Devonshire, 1 year. The
covered compensation as of December 31, 1998 for each of such individuals under
the Elected Officers Supplemental Program is as follows: Mr. Perrella,
$2,047,333; Mr. Travis, $1,072,492; Mr. Jellison, $491,720; Mr. Martin,
$504,100; and Mr. Devonshire, $828,462.
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 normal retirement, so long as
their employment with the Company is not terminated by the Company for cause (as
defined), so long as they meet certain noncompetition obligations and, in
certain cases, so long as they retire from the Company at normal retirement age.
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. Travis, $100,000; Mr.
Jellison, $65,000; Mr. Martin, $65,000; and Mr. Devonshire, $65,000. 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).
In 1997, Mr. Perrella waived his right to receive approximately $567,000 of
distributions under the Elected Officers Supplemental Program. In connection
with this waiver, the Company entered into an arrangement under which it
purchased a life insurance policy on the life of Mr. Perrella, the proceeds of
which are payable to designees of Mr. Perrella. The cost of the life insurance
policy will not exceed the cost the Company would have incurred with respect to
the distributions waived by Mr. Perrella.
The Company has also entered into an agreement with Mr. Devonshire providing
him with a severance benefit if he is terminated without cause. The benefit
amount will equal two times his salary plus the amount of his last annual bonus
if termination occurs prior to January 12, 2000, and will equal his annual
salary plus his last annual bonus if termination occurs thereafter.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with each of the executive officers
named above which provide that if the employment of a particular executive
officer is terminated (by the Company or, under certain circumstances, by the
executive officer) within five years following a change in control of the
Company (defined to include the acquisition by any person of 20% or more of the
voting power of the
15
<PAGE>
Company's common stock or the disposition of substantially all the assets of the
Company), the executive will receive a lump sum severance payment from the
Company equal to three times the sum of (a) the executive's highest annual
salary from the date of the change in control to the date of termination plus
(b) the highest bonus awarded to the executive during the period beginning five
years prior to the change in control and ending on the date of termination. In
addition, the executive will receive an amount approximating the Company's
contribution which would have been made for such executive's account under the
SSIP (including the related supplemental plan) during the three years following
termination of employment and will be entitled during such three-year period to
continue to participate in the Company's welfare employee benefit programs. For
purposes of calculating the executive's retirement benefits, five years will be
added to both the executive's age and service with the Company. The agreements
further provide that if the payments described above constitute "excess
parachute payments" under applicable provisions of the Internal Revenue Code and
related regulations, the Company will pay the executive an additional amount
sufficient to place the executive in the same after-tax financial position the
executive would have been in if the executive had not incurred the excise tax
imposed under Section 4999 of the Internal Revenue Code in respect of excess
parachute payments.
PERFORMANCE GRAPH
The following graph compares for the five years ended December 31, 1998, 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, 1993 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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INGERSOLL-RAND S&P 500 S&P MACHINERY (DIV.)
<S> <C> <C> <C>
1993 100 100 100
1994 84 101 97
1995 96 139 120
1996 124 170 149
1997 171 227 197
1998 202 291 164
</TABLE>
[LOGO]
16
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Since January 1, 1998, 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of the
Company's common stock, to file reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. To the Company's knowledge, based solely on its review of such forms
received by the Company, or written representations that no other reports were
required, for the year 1998 all Section 16(a) filing requirements were complied
with.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers 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, 1999. The appointment of PricewaterhouseCoopers LLP is subject to
ratification by the shareholders and a resolution for such ratification will be
offered at the Annual Meeting. PricewaterhouseCoopers 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 PricewaterhouseCoopers 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 2000 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 20,
1999, 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 or who wish to bring other business before a shareholders'
meeting. All such nominations must be made following written notice to the
Secretary of the Company
17
<PAGE>
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, 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.
In order for a shareholder to bring other business before a shareholder
meeting, timely notice must be received by the Secretary of the Company within
the time limits described above. Such notice must include a description of the
proposed business, the reasons therefor, and other specified matters. These
requirements are separate from and in addition to the requirements a stockholder
must meet to have a proposal included in the Company's proxy statement. The
foregoing time limits also apply in determining whether notice is timely for
purposes of rules adopted by the Securities and Exchange Commission relating to
the exercise of discretionary voting authority.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders for the year ended December 31, 1998 is
enclosed with this Proxy Statement. For shareholders who are employees, the
Annual Report has been distributed at the Company's facilities.
Dated: March 19, 1999
18
<PAGE>
[LOGO]
<PAGE>
INGERSOLL-RAND COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS MAY 5, 1999
The undersigned hereby appoints JAMES E. PERRELLA, DAVID W. DEVONSHIRE 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 Wednesday, May
5, 1999, at 11:00 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 19, 1999, 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 P.C. Godsoe, H.L. Henkel, H.W.
Lichtenberger, J.E. Perrella and T.L. White.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE.
<PAGE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, enter
the nominee's name on the line below).
<TABLE>
<C> <S> <C>
1. ELECTION OF DIRECTORS
The Board Recommends a Vote FOR All Nominees FOR / /
Listed on the Reverse Side Hereof All Nominees
(except as marked to the contrary below)
<CAPTION>
1.
<C> <C>
WITHHOLD AUTHORITY / /
All Nominees
</TABLE>
(INSTRUCTION: to withhold authority to vote for an individual nominee, enter the
nominee's name on the line below).
- --------------------------------------------------------------------------------
2. RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP 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 and 2.
Date _______________________ , 1999
Signature _________________________
Signature _________________________
Please sign exactly as name(s)
appear on this proxy. Executors,
administrators, trustees, etc.
should give full title.
