<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[LOGO]
World Headquarters
_________________________________
Ingersoll-Rand Company
Woodcliff Lake, New Jersey 07675-8738
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Ingersoll-Rand Company will be held on
Wednesday, May 3, 2000, 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 three directors of the First Class to hold office for three
years.
2. To act upon the reapproval of the Company's Senior Executive
Performance Plan.
3. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for 2000.
4. 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 6, 2000 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 17, 2000
<PAGE>
INGERSOLL-RAND COMPANY
P.O. BOX 8738
WOODCLIFF LAKE, NEW JERSEY 07675
PROXY STATEMENT
2000 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 3, 2000. It and this Proxy
Statement are being sent to shareholders beginning on or about March 17, 2000.
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 Shareholder Communications Inc. 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 6, 2000. There were
outstanding and entitled to vote on such date 162,153,472 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 Joseph P.
Flannery, Theodore E. Martin and Richard J. Swift as directors of the First
Class for a term of three 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 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.
1
<PAGE>
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 Arvin Industries, Inc., K Mart
Corporation, Newmont Mining Corporation and The Scotts Company. Mr. Flannery,
who is 67 years old, became a director of the Company in 1986. He is a candidate
for a three-year term. Member of Audit, Compensation and Nominating, and Finance
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 61 years
old, became a director of the Company in 1998. His current term expires in 2001.
Member of Audit and Finance Committees.
HERBERT L. HENKEL
Mr. Henkel has been President and Chief Executive Officer of the Company
since October 1999. From April to October 1999, he served as President and Chief
Operating Officer of the Company. 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 and Pitney-Bowes, Inc.
Mr. Henkel, who is 51 years old, became a director of the Company in 1999. His
current term expires in 2002.
CONSTANCE J. HORNER
Mrs. Horner has been a Guest Scholar at The Brookings Institution since
1993. From 1993 to 1998 she was also a Commissioner of the United States
Commission on Civil Rights. 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 58 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 of Praxair, Inc., an industrial gases
company, since 1992 and was also the Chief Executive Officer of Praxair, Inc.
from 1992 until March 2000. He previously served as a Vice President of Union
Carbide Corporation ("Union Carbide") from 1986 to 1990, and as 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 Arch Chemicals, Inc. Mr. Lichtenberger, who is 64 years old, became
a director of the Company in 1995. His current term expires in 2002. 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 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 PE Corporation,
Nabisco Group Holdings Corporation and Unisys Corporation. Mr. Martin, who is 60
years old, became a director of the Company in 1996. He is a candidate for a
three-year term. Member of Corporate Affairs and Finance Committees.
JAMES E. PERRELLA
Mr. Perrella has been Chairman of the Board of the Company since 1993. Prior
to October 1999, he was also Chief Executive Officer of the Company and prior to
April 1999, he was also President of the Company. He is also a director of Arvin
Industries, Inc., Becton Dickinson and Company, Bombardier Inc., Milacron, Inc.
and Rio Algom Limited. Mr. Perrella, who is 64 years old, became a director of
the Company in 1992. His current term expires in 2002.
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 PE
Corporation, The Summit Bancorporation and Vulcan Materials Company. Mr. Smith,
who is 64 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 55 years old, became a director of the Company in 1995. He is a candidate for
a three-year term. Member of Audit and Compensation and Nominating Committees.
TONY L. WHITE
Mr. White has been Chairman, President and Chief Executive Officer of PE
Corporation, a developer, manufacturer and marketer of life science systems and
genomic information products 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 53 years old, became a director of the
Company in 1997. His current term expires in 2002. 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 29, 2000, the beneficial
ownership of the Company's Common Stock by (i) each of the directors and
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 DEFERRED
OF SHARE
COMMON STOCK UNITS
NAME (A)(B) (C)
- ---- ------------ --------
<S> <C> <C>
D. W. Devonshire...................................... 42,296 19,700
J. P. Flannery........................................ 3,750 12,066
P. C. Godsoe.......................................... 3,000 2,129
H. L. Henkel.......................................... 37,166 39,206
C. J. Horner.......................................... 3,066 6,724
B. D. Jellison........................................ 167,527 33,440
H. W. Lichtenberger................................... 12,500 7,390
S. T. Martin.......................................... 74,849(d) 8,873
T. E. Martin.......................................... 5,260 5,852
J. E. Perrella........................................ 985,265(e) 197,961
N. J. Pishotti........................................ 23,133 7,702
O. R. Smith........................................... 10,500 9,755
R. J. Swift........................................... 9,750 5,382
T. L. White........................................... 5,250 5,593
All directors and executive officers as a group
(16 persons)........................................ 1,568,028(f) 377,152
</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, 629 shares; H. L. Henkel,
833 shares; B.D. Jellison, 9,280 shares; S. T. Martin, 5,526 shares; J.E.
Perrella, 45,788 shares; N.J. Pishotti, 1,433 shares; and all executive
officers as a group, 70,560 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, 41,667 shares; J.P.
Flannery, 2,250 shares; H. L. Henkel, 33,333 shares; C.J. Horner, 2,250
shares; B.D. Jellison, 157,167 shares; H.W. Lichtenberger, 9,000 shares;
S.T. Martin, 61,667 shares; T.E. Martin, 4,500 shares; J.E. Perrella,
843,333 shares; N. J. Pishotti, 10,000 shares; O.R. Smith, 9,000 shares;
R.J. Swift, 9,000 shares; T.L. White, 4,500 shares; and all directors and
executive officers as a group, 1,333,484 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 37,394 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) The shares of Common Stock beneficially owned by all directors and executive
officers as a group aggregated approximately 1% of the total outstanding
Common Stock. This includes an aggregate of 41,291 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 29,
2000, 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................................. 9,459,027(a) 5.83%
270 Park Avenue
New York, New York 10017
FMR Corp.................................................... 19,359,084(b) 11.94%
82 Devonshire Street
Boston, Massachusetts 02109
</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 1,386,480, FMR Corp. has sole voting power.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held eight meetings during 1999. 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 1999. The Committee's
functions are to review the annual audited financial statements with management
and the independent accountants, to consider and approve, if appropriate,
recommendations for major changes to the Company's auditing and accounting
practices, to recommend to the Board the public accounting firm to be appointed
the Company's independent accountants and to review the performance of such
firm, to review the scope of the audit and the findings of the independent
accountants, satisfy itself as to the independence of the independent
accountants and insure the receipt of their annual independence statement, to
make appropriate periodic reports to the Board relating to the Committee's
activities and to perform such other activities the Committee deems necessary
consistent with its charter, the Company's By-laws and governing law.
The Compensation and Nominating Committee held four meetings during 1999.
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 1999. 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 1999. 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 non-employee members of the
Board of Directors 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 investment returns. Executive
officer compensation policies provide that executive pay be both contingent and
variable with company financial and operational performance.
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 1999 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 "Performance Plan")
limits the bonuses which may be awarded to participants in the Performance Plan,
who consist of the chief executive officer plus the four other highest
compensated executive officers (as determined under Securities Exchange Act
regulations). Bonuses to Performance Plan participants are limited to their
respective allocated shares of the Performance Plan's 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. Currently, 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.
(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
certain awards to Messrs. Henkel and Devonshire as part of their initial
employment arrangements with the Company), distribution of 100% of the
shares awarded to executive officers is contingent upon the Company's
achievement of predetermined earnings per share objectives. 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. 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 personal and
professional growth. 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
8
<PAGE>
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). Amounts credited as Common Stock
equivalents become vested after five years and are payable upon retirement
in 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.
1999 CHIEF EXECUTIVE OFFICER COMPENSATION
During 1999, Mr. Perrella was awarded stock options in respect of 160,000
shares of the Company's Common Stock, at an exercise price of $49.09 per share,
consistent with the guidelines described above (i.e., based upon his position
responsibility and long-term incentive practices of the surveyed corporations
referred to above).
In addition, the Compensation Committee recommended that, in accordance with
the Performance Plan, the Board approve a bonus to Mr. Perrella in respect of
1999 in an amount equal to 143% of his 1999 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 1999 operating results,
which, for the sixth consecutive year exceeded the Company's earnings per share
goals and produced a 16% increase in net earnings over 1998, establishing a
record for the Company.
In April 1999, Mr. Henkel joined the Company as Chief Operating Officer,
before being promoted to Chief Executive Officer in October. Mr. Henkel's
starting annual salary was $750,000. As part of his initial compensation
package, Mr. Henkel was granted stock options and stock awards as reflected in
the tables under the captions "Stock Options" and "Long-Term Incentive Plan
Awards" below.
In connection with his promotion to Chief Executive Officer effective
October 1, 1999, Mr. Henkel's annual salary was increased to $850,000. This
promotional increase of 13.3% placed his salary at approximately 9.2% below the
median salary level for chief executive officers of comparable companies. Upon
his promotion to Chief Executive Officer, Mr. Henkel also received an award of
50,000 stock options, on October 1, 1999.
In addition, the Compensation Committee recommended that the Board approve a
bonus to Mr. Henkel in an amount equal to 118% of his 1999 year-end salary. This
recommendation, as well as the
9
<PAGE>
Board's subsequent award of that bonus, was based upon Mr. Henkel's
contributions to the Company's 1999 operating results.
1999 COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
During 1999, in accordance with the policies stated above, the executive
officers named in the Summary Compensation Table, other than Messrs. Perrella
and Henkel, were granted salary increases averaging approximately 13.2%. Bonus
awards to Messrs. Devonshire, Jellison, Martin and Pishotti were granted
pursuant to performance agreements of the type described above. Since the
operations or functions for which Messrs. Devonshire, Jellison, Martin and
Pishotti were responsible exceeded their respective 1999 operating income, cost
improvement and asset management goals and the Company achieved certain
pre-established profit objectives, these individuals were awarded bonuses
averaging approximately 94.3% of year-end salary. Where applicable, the bonus
awards were in accordance with the Performance Plan.
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 1999 are appropriate and
commensurate with the Company's 1999 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, 1997, 1998 and
1999, 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
-------------------------------------- ----------------------------- ----------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS PAYOUTS
POSITION YEAR ($) ($) ($)(A) ($)(B) (#)(C) ($)(D)
- --------------------- -------- --------- --------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
J.E Perrella......... 1999 1,050,000 1,500,000(g) -- 386,803(g) 160,000 1,112,344(h)
Chairman of the 1998 958,333 1,500,000(g) -- 220,104(g) 160,000 286,031(h)
Board (f) 1997 840,000 1,282,000(g) -- 187,508(g) 135,000 405,000(h)
H.L. Henkel.......... 1999 581,731 1,000,000(g) 177,334 3,651,744(g) 350,000 --
President & Chief
Executive
Officer (i)
D.W. Devonshire...... 1999 485,000 430,000 10,822 -- 35,000 266,963(h)
Executive Vice 1998 438,462 390,000 28,696 298,500 90,000 --
President & Chief
Financial
Officer (j)
B.D. Jellison........ 1999 355,000 368,177 -- 12,554 65,000 266,963(h)
Executive Vice 1998 294,417 239,500 -- 11,714 50,000 81,065(h)
President 1997 228,833 291,250(g) -- 36,246(g) 45,000 77,746(h)
S.T. Martin.......... 1999 355,000 325,000 -- 11,444 65,000 266,963
Executive Vice 1998 295,833 292,820(g) -- 27,644(g) 50,000 49,755(h)
President 1997 241,667 240,920(g) -- 22,747(g) 37,500 105,789
N.J. Pishotti........ 1999 298,333 296,663 -- 1,869 30,000 222,469
Vice President 1998 277,750 255,500 -- -- 30,000 58,125
1997 249,250 260,905(g) 4,684 5,307(g) 27,000 89,500
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($)(E)
- --------------------- ------------
<S> <C>
J.E Perrella......... 161,100
Chairman of the 157,017
Board (f) 117,360
H.L. Henkel.......... 251,854
President & Chief
Executive
Officer (i)
D.W. Devonshire...... 55,064
Executive Vice 482,735
President & Chief
Financial
Officer (j)
B.D. Jellison........ 37,789
Executive Vice 40,083
President 27,436
S.T. Martin.......... 36,055
Executive Vice 34,002
President 25,461
N.J. Pishotti........ 28,873
Vice President 30,546
38,630
</TABLE>
- ------------------------
(a) These amounts represent that portion of relocation benefit payments which
compensated the named executive officers for the income taxes payable in
respect of relocation compensation. The relocation benefit amounts are
reflected in the column headed "All Other Compensation."
(b) The amounts reflected as Restricted Stock Awards are composed of the
following: (i) the portion of stock awards granted to Mr. Devonshire in 1998
and Mr. Henkel in 1999 to be issued subject to their continued employment
with the Company, (ii) the crediting of Common Stock equivalents to the
accounts of the named executives under the MIU Plan, (iii) amounts credited
under the Executive Deferral Plan equal to 20% of the cash bonuses deferred
by the named executives, and (iv) the crediting of additional Common Stock
equivalents to accounts of the named executives under the Executive Deferral
Plan arising from the reinvestment of dividend equivalents under that plan.
11
<PAGE>
The aggregate number and fair market value as of December 31, 1999 of all
the Common Stock equivalents credited to the accounts of the named
executives under the MIU Plan and the number of shares issuable contingent
upon the continued employment of the named executives are as follows:
<TABLE>
<CAPTION>
FAIR MARKET
NAME # SHARES VALUE ($)
- ---- -------- -----------
<S> <C> <C>
J.E. Perrella........................................... 30,105 1,657,657
H.L. Henkel............................................. 63,300 3,485,456
D.W. Devonshire......................................... -- --
B.D. Jellison........................................... 4,494 247,451
S.T. Martin............................................. 4,007 220,635
N.J. Pishotti........................................... 490 26,981
</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 established earnings per share goals. 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 and 66,300 shares
awarded to Mr. Henkel, in each case in connection with their employment by
the Company).
(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), (iii) relocation benefits paid to the named
executive officers, and (iv) a special bonus award paid in 1998 to
Mr. Devonshire in connection with the commencement of his employment with
the Company. For 1999 such amounts were as follows:
<TABLE>
<CAPTION>
SAVINGS PLAN
(INCLUDING
SUPPLEMENTAL
PLAN AND LESOP DIVIDEND RELOCATION
NAME CONTRIBUTIONS) ($) EQUIVALENTS ($) BENEFITS ($)
- ---- ------------------ --------------- ------------
<S> <C> <C> <C>
J.E. Perrella........................ 127,500 33,600 --
H.L. Henkel.......................... 17,452 21,070 213,332
D.W. Devonshire...................... 35,000 8,064 12,000
B.D. Jellison........................ 29,725 8,064 --
S.T. Martin.......................... 27,991 8,064 --
N.J. Pishotti........................ 22,153 6,720 --
</TABLE>
(f) Mr. Perrella was also President of the Company until April 1999, and Chief
Executive Officer until October 1999.
(g) 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 1997 1998 1999
- ---- -------- -------- ----------
<S> <C> <C> <C>
J.E. Perrella............................... $769,200 $750,000 $1,500,000
H.L. Henkel................................. -- -- 1,000,000
D.W. Devonshire............................. -- -- --
B.D. Jellison............................... 150,000 -- --
S.T. Martin................................. 72,087 87,846 --
N.J. Pishotti............................... 26,090 51,100 --
</TABLE>
(h) Receipt of these amounts has been deferred at the election of the
executives.
(i) Mr. Henkel joined the Company in April 1999 as Chief Operating Officer, and
was elected Chief Executive Officer effective October 1999.
(j) Mr. Devonshire joined the Company in January 1998 as Senior Vice President
and Chief Financial Officer, and was elected an Executive Vice President,
effective January 1, 2000.
STOCK OPTIONS
The following tables contain information for the year 1999 concerning the
grants to, and exercises by, the executive officers named above, of stock
options under the Company's Incentive Stock Plans and the value of such options
held by such executive officers as of December 31, 1999:
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/SARS OPTIONS/SARS EXERCISE OR GRANT DATE
GRANTED GRANTED TO EMPLOYEES IN BASE EXPIRATION VALUE
NAME (#)(A) 1999 PRICE ($)/(SH) DATE ($)(B)
- ---- ------------ ----------------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
J.E. Perrella............... 160,000 5.38 49.09 2/2/09 2,131,744
H.L. Henkel................. 200,000 6.73 51.09 3/11/09 3,119,000
100,000 3.36 51.09 3/11/09 1,423,500
50,000 1.68 53.63 9/30/09 864,855
D.W. Devonshire............. 35,000 1.18 49.09 2/2/09 466,319
B.D. Jellison............... 65,000 2.19 49.09 2/2/09 866,021
S.T. Martin................. 65,000 2.19 49.09 2/2/09 866,021
N.J. Pishotti............... 30,000 1.01 49.09 2/2/09 399,702
</TABLE>
- ------------------------
(a) All options became exercisable in three equal annual installments beginning
on the first anniversary of the date of grant, except that options in
respect of 200,000 shares awarded to Mr. Henkel become exercisable on
January 1, 2004.
(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>
FEBRUARY 3, 1999 MARCH 12, 1999 OCTOBER 1, 1999
---------------- -------------- ---------------
<S> <C> <C> <C>
Expected volatility................................ 0.2919 0.2921 0.3378
Risk-free rate of return........................... 4.8% 5.16%* 6.01%
Dividend yield..................................... 1.3% 1.25% 1.19%
Time of exercise (expected)........................ 4 years 4.8 years* 4 years
</TABLE>
* Information in the table relates to the 200,000 share option grant to
Mr. Henkel. As to the 100,000 share option grant to Mr. Henkel, the
risk-free rate of return assumption is 5.14% and the assumed time of
exercise is four years.
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND DECEMBER 31, 1999 OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS/SARS AT OPTIONS/SARS AT
OPTIONS/ 12/31/99(#) 12/31/99 ($)
SARS VALUE REALIZED --------------------------- ---------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.E. Perrella............... 90,000 4,439,997 790,000 160,000 20,290,626 954,992
H.L. Henkel................. -- -- -- 350,000 -- 1,262,515
D.W. Devonshire............. 30,000 869,061 -- 95,000 -- 840,777
B.D. Jellison............... 57,000 2,599,750 135,500 65,000 2,775,281 387,966
S.T. Martin................. 22,500 541,291 40,000 65,000 510,000 387,966
N.J. Pishotti............... 57,000 1,274,624 -- 30,000 -- 179,061
</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. Distributions are
contingent upon the Company's earnings per share performance during the payout
period. The following table reflects the stock awards granted during 1999 to the
executive officers named above:
LONG-TERM INCENTIVE PLAN AWARDS IN 1999
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD UNTIL NON-STOCK PRICE BASED PLANS
SHARES, UNITS OR MATURATION ----------------------------------------
OTHER RIGHTS OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
---------------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
J.E.Perrella.................... -- -- -- -- --
H.L. Henkel..................... 43,000 (a) -- 43,000 --
D.W. Devonshire................. -- -- -- -- --
B.D. Jellison................... -- -- -- -- --
S.T. Martin..................... -- -- -- -- --
N.J. Pishotti................... -- -- -- -- --
</TABLE>
- ------------------------
(a) The shares subject to these stock awards are issuable in 2000-2001 based
upon the earnings per share performance of the Company during 1999-2000.
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
2000 under the Pension Plan and under the Elected Officers Supplemental
14
<PAGE>
Program computed as a straight life annuity, before the reductions specified in
footnote (a) below and based on the indicated assumptions:
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 BEFORE OFFSETS (A)
<TABLE>
<CAPTION>
FINAL AVERAGE 15 YEARS 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
700,000......................... 199,500 266,000 332,500 399,000 465,500 465,500
900,000......................... 256,500 342,000 427,500 513,000 598,500 598,500
1,100,000....................... 313,500 418,000 522,500 627,000 731,500 731,500
1,300,000....................... 370,500 494,000 617,500 741,000 864,500 864,500
1,500,000....................... 427,500 570,000 712,500 855,000 997,500 997,500
1,700,000....................... 484,500 646,000 807,500 969,000 1,130,500 1,130,500
1,900,000....................... 541,500 722,000 902,500 1,083,000 1,263,500 1,263,500
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, 1999 for the individuals named
above are as follows: Mr. Perrella, 38 years; Mr. Henkel, 12 years;
Mr. Jellison, 25 years; Mr. Martin, 38 years; Mr. Devonshire, 2 years; and
Mr. Pishotti, 5 years. Mr. Henkel's credited years of service exceed his actual
service pursuant to the provisions of his employment arrangements. The covered
compensation as of December 31, 1999 for each of such individuals under the
Elected Officers Supplemental Program is as follows: Mr. Perrella, $2,299,000;
Mr. Henkel, $1,850,000; Mr. Jellison, $608,138; Mr. Martin, $604,953;
Mr. Devonshire, $858,833; and Mr. Pishotti, $533,676.
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. Henkel, $125,000;
Mr. Devonshire, $65,000.; Mr. Jellison, $65,000; Mr. Martin, $65,000; and
Mr. Pishotti, $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).
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. Henkel providing him
with severance benefits if he is terminated without cause. The benefit amount
payable to Mr. Henkel will equal twice his annual salary plus his last bonus
plus distribution of 63,300 shares of Company stock under the provisions of a
stock award granted to Mr. Henkel.
15
<PAGE>
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 (as defined in such agreements), 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, 1999, 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, 1994 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>
DOLLARS INGERSOLL-RAND S&P 500 S&P MACHINERY (DIV.)
<S> <C> <C> <C>
1994 100 100 100
1995 114 137 123
1996 147 168 154
1997 203 224 196
1998 240 287 150
1999 283 347 173
</TABLE>
16
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Since January 1, 1999, 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 and written representations that no other reports were
required, for the year 1999 all Section 16(a) filing requirements were complied
with.
2. REAPPROVAL OF SENIOR EXECUTIVE PERFORMANCE PLAN
The Senior Executive Performance Plan (the "Performance Plan") was adopted
in 1995 and approved by shareholders in 1995 in accordance with
Section 162(m)("Section 162(m)") of the Internal Revenue Code. Section 162(m)
limits corporate federal income tax deductions allowed for compensation of the
executive officers of the Company listed in the Summary Compensation Table,
unless certain requirements are met.
Among the requirements is that the Performance Plan be disclosed to and
approved by a majority of shareholders at least every five years. Accordingly,
the following discussion sets forth the material terms of the Performance Plan
under which the Company has paid and proposes to pay performance-based annual
incentive awards to the named executive officers. The discussion is qualified in
its entirety by reference to the complete text of the Plan document as set forth
in Appendix A.
If the Plan is not reapproved by the shareholders, payments that would have
been made pursuant to the Performance Plan will not be made. The Compensation
Committee may consider other terms for incentive compensation awards whether or
not they qualify for deduction under Section 162(m).
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 six individuals.
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 is
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
17
<PAGE>
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. The amounts
awarded under the Performance Plan in respect of 1999 performance are shown in
the Summary Compensation Table.
ADMINISTRATION OF THE PLAN
The Performance Plan is administered by the Compensation Committee, the
members of which are elected annually by the Board of Directors. The
Compensation Committee is required to have at least three members, each of which
shall qualify as an "outside director" under Section 162(m) and the regulations
promulgated thereunder. The Compensation Committee has 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 are 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 determines.
AMENDMENT AND TERMINATION
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 Section 162(m) 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.
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 personal or by proxy, and entitled to vote at the Annual Meeting is
required for the reapproval of the Performance Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL AND YOUR PROXY
WILL BE SO VOTED UNLESS OTHERWISE SPECIFIED.
18
<PAGE>
3. 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, 2000. 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 2001 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 17,
2000, 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 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, 1999 is
enclosed with this Proxy Statement. For shareholders who are employees, the
Annual Report has been distributed at the Company's facilities.
Dated: March 17, 2000
19
<PAGE>
APPENDIX A
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, nonrecurring 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.
A-1
<PAGE>
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.
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.
A-2
<PAGE>
(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.
(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.
A-3
<PAGE>
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
Degan 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.
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.
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<PAGE>
INGERSOLL-RAND COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS MAY 3, 2000
The undersigned hereby appoints HERBERT L. HENKEL, 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
3, 2000, 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 17, 2000, 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 J.P. Flannery, T.E. Martin and
R.J. Swift.
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. REAPPROVAL OF THE COMPANY'S SENIOR EXECUTIVE PERFORMANCE PLAN.
The Board Recommends a Vote FOR Reapproval.
FOR / / AGAINST / / ABSTAIN / /
3. 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, 2 and 3.
Date _______________________ , 2000
Signature _________________________
Signature _________________________
Please sign exactly as name(s)
appear on this proxy. Executors,
administrators, trustees, etc.
should give full title.
