-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NKoIhFQqIQJmuUYFcxFlpYSs+Bvihj2zwMY9PiLTq14/4go9ZUbQbauQZgh+TfPy +B+HV3rNRiHD6SoG9sivFg== 0001160497-02-000005.txt : 20020415 0001160497-02-000005.hdr.sgml : 20020415 ACCESSION NUMBER: 0001160497-02-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 20020313 FILED AS OF DATE: 20020313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INGERSOLL RAND CO LTD CENTRAL INDEX KEY: 0001160497 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16831 FILM NUMBER: 02574244 BUSINESS ADDRESS: STREET 1: 200 CHESTNUT RIDGE RD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 BUSINESS PHONE: 2015730123 MAIL ADDRESS: STREET 1: 200 CHESTNUT RIDGE RD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 10-K 1 tenk01.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-985 INGERSOLL-RAND COMPANY LIMITED (Exact name of registrant as specified in its charter) BERMUDA N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Clarendon House 2 Church Street Hamilton HM 11, Bermuda (Address of principal executive offices) Registrant's telephone number, including area code: (441)295-2838 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Class A Common Shares, Par Value $1.00 per Share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X] The aggregate market value of common stock held by nonaffiliates on March 4, 2002 was $8,968,446,161 based on the closing price of such stock on the New York Stock Exchange. The number of common A shares outstanding as of March 4, 2002 was 168,307,565. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for the fiscal year ended December 31, 2001. With exception of those portions which are incorporated by reference into Parts I, II and IV of this Form 10- K Annual Report, the 2001 Annual Report to Shareholders is not to be deemed filed as part of this report. Portions of the registrant's proxy statement to be filed within 120 days of the close of the registrant's fiscal year in connection with the registrant's Annual General Meeting of Shareholders to be held May 1, 2002 are incorporated by reference into Part III of this Form 10-K. PART I Item 1. BUSINESS Effective December 31, 2001, Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited or the company) became the successor to Ingersoll-Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization (the reorganization). IR-New Jersey was organized in 1905. The reorganization was accomplished through a merger of a newly- formed merger subsidiary into IR-New Jersey. IR-New Jersey, the surviving company, continues to exist as an indirect, wholly- owned subsidiary of IR-Limited. IR-Limited and its subsidiaries will continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries. The reorganization has been accounted for as a reorganization of entities under common control and accordingly it did not result in any changes to the consolidated amounts of assets, liabilities, and shareholders' equity. During 2001, the company continued the restructuring program and productivity initiatives that were initiated in 2000, which includes such actions as employee severance, plant rationalizations, organizational realignments consistent with the company's market-based structure and the consolidation of back- office processes. In response to continued weakness in its major end markets, the company initiated a second phase of restructuring and productivity initiatives in the fourth quarter of 2001 focused on reducing general and administrative expenses and is expected to cost $150 million and be completed by the end of 2002. The programs have resulted in the closure of 20 plants and a workforce reduction of more than 3,900 employees. Charges for restructuring and productivity initiatives for 2001 totaled $216.9 million. During 2001, the consolidated financial statements were restated to report Dresser-Rand Company (Dresser-Rand) on a fully- consolidated basis since the February 2000 acquisition of the remaining 51%. Previously, the company reported the results and net assets of Dresser-Rand as assets held for sale. The company owned 49% of Dresser-Rand in 1999 and accounted for it under the equity method. In 2001, the company acquired twelve entities for cash of $158.3 million and treasury stock of $15.3 million. The major acquisitions by segment are as follows: Climate Control O Grenco Transportkoeling B.V., based in the Netherlands, a transport refrigeration sales and service business. O National Refrigeration Services, Inc. (NRS), based in Atlanta, Georgia, a leading provider of commercial refrigeration products and services for food storage, distribution and display throughout the United States. O Taylor Industries Inc., based in Des Moines, Iowa and an affiliated business, Taylor Refrigeration (Taylor), distributes, installs and services refrigeration equipment, food service equipment and electric doors. Engineered Solutions O Nadella S.A., based in France, supplies precision needle bearings for automotive and industrial applications. Nadella was previously 50% owned by the company. Infrastructure O Superstav spol. s.r.o., based in the Czech Republic, and Earth Force America, Inc. based in South Carolina, both of which are manufacturers of compact tractor loader backhoes. Security and Safety O Kryptonite Corporation, based in Massachusetts, a leading manufacturer of locks for recreational and portable security applications. O ITO Emniyet Kilit Sistemleri A., based in Turkey, a leading manufacturer and distributor of locks, cylinders and keys. The company adopted Emerging Issues Task Force Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" in the fourth quarter of 2001. Upon adoption, financial statements for all periods presented have been restated to comply with the income statement classification of reseller finance costs and cooperative advertising programs, which resulted in decreases to net sales of $28.6 million, $24.0 million, and $23.6 million, decreases in cost of goods sold of $13.1 million, $15.8 million, and $17.7 million, increases in selling and administrative expenses of $18.5 million, $21.3 million, and $13.7 million, and decreases in interest expense of $34.0 million, $29.5 million, and $19.6 million in 2001, 2000, and 1999, respectively. The company is a leading provider of security and safety, climate control, industrial solutions and infrastructure products. In each of these markets, the company offers a diverse product portfolio that includes well-recognized industrial and commercial brands. During 2001, the company expanded its Industrial Solutions Sector to include Dresser-Rand, renamed its Bearings and Components Segment to Engineered Solutions and aggregated its tools and related production equipment operations, previously reported as part of the Industrial Products Segment, in the Air and Productivity Solutions Segment. Club Car has been added to the Infrastructure Segment. Climate Control focuses on markets requiring refrigerant-gas compression technology and services to provide gas pressure for distribution to end users or to maintain a refrigeration cycle for protecting food and other perishables. Climate Control includes Themo King and Hussmann. Hussmann experiences the greatest demand for its products in the third and fourth quarters of the year. This demand results from the customers' seasonal construction cycles and the desire to complete stores prior to the year-end holiday season. Climate Control products include: Thermo King transport temperature control units for truck trailers, small trucks, seagoing containers and air conditioning for buses, and Hussmann refrigerated display cases for supermarkets, delicatessens and other commercial and institutional refrigeration applications. Industrial Solutions is composed of a diverse group of businesses focused on providing solutions to enhance customers' industrial efficiency. Industrial Solutions consists of the following three segments, Air and Productivity Solutions, Dresser-Rand, and Engineered Solutions. Air and Productivity Solutions is engaged in the design, manufacture, sale and service of air compressors, fluid products, microturbines, and industrial tools. Dresser-Rand is engaged in the design, manufacture, sale and service of gas compressors, gas and steam turbines, and generators. Engineered Solutions is engaged in the design, manufacture, sale and service of precision bearing products and motion control components and assemblies. It includes both Automotive and Industrial Engineered Solutions and was formerly known as Bearings and Components. Infrastructure supplies products and services for all types of construction projects, industrial and commercial development, and golf and utility vehicles. Products include Bobcat skid-steer loaders and compact hydraulic excavators, Blaw-Knox and ABG pavers, Ingersoll-Rand compactors, drilling equipment, portable power products, and Club Car golf and utility vehicles. Security and Safety manufactures and markets architectural hardware and access-control products and service to customers seeking to enhance productivity and security for residential, commercial and institutional buildings. Products include locks and locksets, door closers, exit devices, steel doors and frames, power-operated doors, architectural columns and biometric and electronic access control technologies. Products Principal products of the company include the following: Air balancers Golf cars Air compressors & accessories Hoists Air dryers Hydraulic breakers Air logic controls Lubrication equipment Air motors Microturbines Air and electric tools Material handling equipment Asphalt compactors Needle roller bearings Asphalt pavers Paving equipment Automated dispensing systems Piston pumps Automatic doors Pneumatic breakers Automotive components Pneumatic cylinders Ball bearings Pneumatic valves Bath fittings and accessories Portable compressors Biometric access control Portable generators systems Portable light towers Blasthole drills Portable security products Compact hydraulic excavators Refrigerated display cases Compact tractor-loader- Refrigeration systems backhoes Road-building machinery Construction equipment Rock drills Diaphragm pumps Rock stabilizers Door closers and controls Roller bearings Door locks, latches & Rotary drills locksets Rough-terrain material Doors and door frames (steel) handlers Drilling equipment and Skid-steer loaders accessories Soil compactors Electrical security products Spray-coating systems Electronic access control Telescopic material handlers systems Transport temperature Engine-starting systems control systems Exit devices Turbo machinery Extrusion pump systems Utility vehicles Fastener-tightening systems Waterjet-cutting systems Fluid-handling equipment Water-well drills Gas compressors Winches These products are sold primarily under the company's name and also under other names including ABG, Blaw-Knox, Bobcat, Club Car, Datum, Dresser-Rand, Dor-O-Matic, Fafnir, Falcon, Glynn-Johnson, Hussmann, Johnstone, LCN, Legge, Monarch, Montabert, Normbau, Schlage, Steelcraft, Thermo King, Torrington, Von Duprin and Zimmerman. During the past three years, the division of the company's sales between capital goods and expendables has been in the approximate ratio of 67 percent and 33 percent, respectively. The company generally defines as expendables those products which are not capitalized by the ultimate user. Examples of such products are parts sold for replacement purposes, power tools and needle bearings. Additional information on the company's business and financial information about industry segments is presented in the consolidated financial statements. Distribution The company's products are distributed by a number of methods which the company believes are appropriate to the type of product. Sales are made in the U.S. through branch sales offices and through distributors and dealers across the United States. Non-U.S. sales are made through numerous subsidiary sales and service companies with a supporting chain of distributors in over 100 countries. Working Capital The products manufactured by the company must usually be readily available to meet rapid delivery requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the company's major competitors. Customers No material part of the company's business is dependent upon a single customer or very few customers, the loss of any one of which would have a material adverse effect on the company's operations. Competitive Conditions The company's products are sold in highly competitive markets throughout the world against products produced by both U.S. and non-U.S. corporations. The principal methods of competition in these markets relate to price, quality and service. The company believes that it is one of the leading manufacturers in the world of a broad line of air compression systems, anti-friction bearings, construction equipment, transport temperature control products, refrigerated display merchandisers, refrigeration systems and controls, air tools, golf cars and utility vehicles. In addition, the company believes it is a leading supplier in U.S. markets for locks, other door hardware products, skid-steer loaders and asphalt paving equipment. Operations by Geographic Area Sales to customers outside the United States accounted for approximately 37 percent of the consolidated net sales in 2001. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not have a significant effect on the company's non-U.S. operations. Raw Materials The company manufactures many of the components included in its products. The principal raw materials required for the manufacture of the company's products are purchased from numerous suppliers, and the company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future. Backlog The company's approximate backlog of orders at December 31, 2001, believed by it to be firm, was $321.2 million for Climate Control, $153.4 million for Air and Productivity Solutions, $300.2 million for Engineered Solutions, $760.1 million for Dresser-Rand, $170.1 million for Infrastructure and $72.6 million for Security and Safety as compared to $306.5 million, $144.0 million, $329.7 million, $557.5 million, $198.5 million and $77.5 million respectively, at December 31, 2000. These backlog figures are based on orders received. While the major portion of the company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead time and are often subject to revision, deferral, cancellation or termination. The company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months. Research and Development The company maintains extensive research and development facilities for experimenting, testing and developing high quality products. The company employs approximately 1,900 professional employees for its research and development activities. The company spent $215.4 million in 2001, $198.2 million in 2000 and $186.2 million in 1999 on research and development. Patents and Licenses The company owns numerous patents and patent applications and is licensed under others. While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them. In the company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses. Environmental Matters The company continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities. During 2001, the company spent approximately $2.0 million on capital projects for pollution abatement and control, and an additional $7.8 million for environmental remediation expenditures at sites presently or formerly owned or leased by the company. It should be noted that these amounts are difficult to estimate because environmental improvement costs are generally a part of the overall improvement costs at a particular plant. Therefore, the accurate estimate of which portion of an improvement or a capital expenditure relates to an environmental improvement is difficult to ascertain. The company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain. The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off- site waste disposal at federal Superfund and state remediation sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has not assumed it will bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties' financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future. Although uncertainties regarding environmental technology, state and federal laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies, and the company does not discount its liability or assume any insurance recoveries. Employees There are approximately 56,000 employees of the company throughout the world, of whom approximately 32,000 work in the United States and 24,000 outside the United States. The company believes relations with its employees are good. Item 2. PROPERTIES Manufacturing and assembly operations are conducted in 65 plants in the United States; 7 plants in Canada; 33 plants in Europe; 17 plants in Asia and 8 plants in Latin America. The company also maintains various warehouses, offices and repair centers throughout the world. Substantially all plant facilities are owned by the company and the remainder are under long-term lease. The company believes that its plants and equipment have been well maintained and are generally in good condition. Facilities under long-term lease are included below and are not significant to each operating segment's total number of plants or square footage. Climate Control's manufacturing locations are as follows: Approximate Number of Plants Square Footage United States 13 4,220,000 Non-U.S. 18 4,548,000 Total 31 8,768,000 Air and Productivity Solutions manufacturing facilities are as follows: Approximate Number of Plants Square Footage United States 10 1,882,000 Non-U.S. 11 1,706,000 Total 21 3,588,000 Engineered Solutions manufacturing facilities are as follows: Approximate Number of Plants Square Footage United States 14 3,423,000 Non-U.S. 13 2,240,000 Total 27 5,663,000 Dresser-Rand's manufacturing facilities are as follows: Approximate Number of Plants Square Footage United States 3 2,464,000 Non-U.S. 7 2,738,000 Total 10 5,202,000 Infrastructure's manufacturing facilities are as follows: Approximate Number of Plants Square Footage United States 11 3,210,000 Non-U.S. 7 1,069,000 Total 18 4,279,000 Security and Safety's manufacturing facilities are as follows: Approximate Number of Plants Square Footage United States 14 2,071,000 Non-U.S. 9 750,000 Total 23 2,821,000 Item 3. LEGAL PROCEEDINGS In the normal course of business, the company is involved in a variety of lawsuits, claims and legal proceedings, including proceedings for off-site waste disposal cleanups under federal Superfund and similar state laws. In the opinion of the company, pending legal matters, are not expected to have a material adverse effect on the results of operations, financial condition, liquidity or cash flows. See also the discussion under Item 1 - Environmental Matters. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On December 14, 2001 the company's shareholders were asked to vote on the change of the company's place of incorporation from New Jersey to Bermuda. The shareholders approved the proposal by a vote of 113,915,706 (89%) to 14,332,195 (11%), with 1,309,232 shares that abstained from voting The company has approximately 168 million shares outstanding. The following information is included in accordance with the provision of Part III, Item 10. Date of Service as Principal Occupation and an Executive Other Information Name and Age Officer for Past Five Years Herbert L. Henkel (53) 4/5/99 Chairman of Board (since May 2000) and Chief Executive Officer (since October 1999), President and Director (since April 1999);(Chief Operating Officer April 1999 - October 1999; Textron, President, February 1999 - March 1999 and Chief Operating Officer, 1998 - March 1999; President of Textron's Industrial Products Segment 1994- 1998) Gordon A. Mapp (55) 6/14/00 Senior Vice President, Sector President, Climate Control (since June 2000) (President, Air Solutions Group and Industrial Productivity-Vice President, 1999-2000; President, Air Compressor Group 1998-1999, Vice President and General Manager, North American Division, Thermo King 1993-1998) Patricia Nachtigal (55) 11/2/88 Director of the Board (since 1/1/02), Senior Vice President (since June 2000) and General Counsel (Vice President 1988-2000) Michael D. Radcliff (51) 1/15/01 Senior Vice President, President, Global Business Services, and Chief Technology Officer (since January 2001); (Owens Corning, Vice President and CIO, and President and CEO of Integrex (an Owens Corning subsidiary) 1994 - 2000) Donald H. Rice (57) 2/1/96 Senior Vice President (since 2001), Global Business Services and Human Resources, (2000- 2001)(Vice President, Human Resources, 1995-2000) Randy P. Smith (52) 2/3/00 Senior Vice President (since June 2000) and Sector President, Security and Safety (since February 2000); (Vice President, February 2000 - June 2000 Textron Fastening Systems, President 1998-2000, Emerson Electric, President 1993-1998) John E. Turpin (55) 1/8/01 Senior Vice President and Sector President, Industrial Solutions (since January 2001); (The Stanley Works, Vice President, Operational Excellence, 1997-2000, Vice President, Operations, 1995-1997) Christopher P. Vasiloff (50) 11/1/01 Senior Vice President and Sector President, Infrastructure Sector (since November 2001); (President, Portable Power, Infrastructure Sector, 2000-2001; Vice President and General Manager Portable Compressor Division and Rotary Recip. Compressor Division, Air Compressor Group, 1996-2000) Steven R. Shawley (49) 6/1/98 Vice President and Controller (Controller 1998-1999, Thermo King Business Unit Controller 1994-1998) No family relationship exists between any of the above-listed executive officers of the company. All officers are elected to hold office for one year or until their successors are elected and qualify. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the principal market for the company's common stock and related shareholder matters are as follows: Quarterly share prices and dividends for the Class A common shares are shown in the following tabulation. The common shares are listed on the New York Stock Exchange. Common Stock High Low Dividend 2001 First quarter $48.84 $37.75 $0.17 Second quarter 50.28 38.20 0.17 Third quarter 45.20 30.41 0.17 Fourth quarter $45.66 $32.50 $0.17 2000 First quarter $57.75 $34.13 $0.17 Second quarter 51.38 39.38 0.17 Third quarter 48.75 31.88 0.17 Fourth quarter $44.81 $29.50 $0.17 The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800)524-4458) is the transfer agent, registrar and dividend reinvestment agent. On March 5, 2001, as part of the consideration for the acquisition of Taylor Industries, the company issued 352,812 shares of the company's common stock. These shares were previously held as treasury stock and had not been registered. There are no significant restrictions on the payment of dividends. The approximate number of record holders of Class A common shares as of February 28, 2002 was 10,495. Item 6. SELECTED FINANCIAL DATA Selected financial data for the five years ended December 31, is as follows (in millions except per share amounts): 2001 2000 1999 1998 1997 Net sales $ 9,682.0 $9,597.6 $7,819.0 $7,517.6 $6,355.1 Earnings from continuing operations 246.2 546.2 563.1 481.6 367.6 Total assets 11,063.7 11,052.6 8,390.4 7,918.1 8,026.7 Long-term debt 2,900.7 1,540.4 2,113.3 2,166.0 2,528.0 Shareholders' equity 3,916.6 3,481.2 3,073.2 2,721.8 2,357.7 Basic earnings per share: Continuing operations $1.49 $3.39 $3.44 $2.94 $2.25 Discontinued operations - 0.76 0.17 0.17 0.08 Diluted earnings per share: Continuing operations $1.48 $3.36 $3.40 $2.91 $2.23 Discontinued operations - 0.76 0.17 0.17 0.08 Dividends per common share 0.68 0.68 0.64 0.60 0.57 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During 2001, the following significant events occurred that affect year-to-year comparisons: Effective December 31, 2001, Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited or the company) became the successor to Ingersoll- Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization (the reorganization). The reorganization was accomplished through a merger of a newly-formed merger subsidiary into IR-New Jersey. IR-New Jersey, the surviving company, continues to exist as an indirect, wholly-owned subsidiary of IR-Limited. IR- Limited and its subsidiaries continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries. The reorganization has been accounted for as a reorganization of entities under common control and accordingly it did not result in any changes to the consolidated amounts of assets, liabilities, and stockholders' equity. During 2001, the consolidated financial statements were restated to report Dresser-Rand Company (Dresser-Rand) on a fully-consolidated basis since the February 2000 acquisition of the remaining 51%. Previously, the company reported the results and net assets of Dresser- Rand as assets held for sale. The company owned 49% of Dresser-Rand in 1999 and accounted for it under the equity method. During 2001, the company expanded its Industrial Solutions Sector to include Dresser-Rand, renamed its Bearings and Components Segment, to Engineered Solutions and aggregated its tools and related production equipment operations, previously reported as part of the Industrial Products Segment, in the Air and Productivity Solutions Segment. Club Car has been added to the Infrastructure Segment. All segment data presented reflects the new segment structure. In 2001, the company acquired twelve entities for cash of $158.3 million and treasury stock of $15.3 million. The major acquisitions by segment are as follows: Climate Control O Grenco Transportkoeling B.V., based in the Netherlands, a transport refrigeration sales and service business. National Refrigeration Services, Inc. (NRS), based in Atlanta, Georgia, a leading provider of commercial refrigeration products and services for food storage, distribution and display throughout the United States. O Taylor Industries Inc., based in Des Moines, Iowa and an affiliated business, Taylor Refrigeration (Taylor), distributes, installs and services refrigeration equipment, food service equipment and electric doors. Engineered Solutions O Nadella S.A., based in France, supplies precision needle bearings for automotive and industrial applications. Nadella was previously 50% owned by the company. Infrastructure O Superstav spol. s.r.o., based in the Czech Republic, and Earth Force America, Inc. based in South Carolina, both of which are manufacturers of compact tractor loader backhoes. Security and Safety O Kryptonite Corporation, based in Massachusetts, a leading manufacturer of locks for recreational and portable security applications. O ITO Emniyet Kilit Sistemleri A., based in Turkey, a leading manufacturer and distributor of locks, cylinders and keys. The company adopted Emerging Issues Task Force Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" in the fourth quarter of 2001. Upon adoption, financial statements for all periods presented have been restated to comply with the income statement classification of reseller finance costs and cooperative advertising programs, which resulted in decreases to net sales of $28.6 million, $24.0 million and $23.6 million, decreases in cost of goods sold of $13.1 million, $15.8 million and $17.7 million, increases in selling and administrative expenses of $18.5 million, $21.3 million and $13.7 million, and decreases in interest expense of $34.0 million, $29.5 million and $19.6 million in 2001, 2000 and 1999, respectively. During 2001, the company continued the restructuring program and productivity initiatives that were initiated in 2000, which include such actions as employee severance, plant rationalizations, organizational realignments consistent with the company's market-based structure and the consolidation of back-office processes. In response to continued weakness in its major end markets, the company initiated a second phase of restructuring and productivity initiatives in the fourth quarter of 2001 focused on reducing general and administrative expenses and is expected to cost $150 million and be completed by the end of 2002. The programs have resulted in the closure of 20 plants and a workforce reduction of more than 3,900 employees. Charges for restructuring and productivity initiatives for full-year 2001 totaled $216.9 million. Results of Operations Net earnings for 2001 were $246.2 million, or diluted earnings per share of $1.48 as compared to $669.4 million and $4.12 per share, and $591.1 million and $3.57 per share in 2000 and 1999, respectively. All dollar amounts are in millions. 2001 2000 1999 Restructure Restructure Reported and other Adjusted Reported and other Adjusted Reported Results Charges Results Results Charges Results Results Sales $9,682.0 $ - $9,682.0 $9,597.6 $ - $9,597.6 $7,819.0 Cost of goods sold 7,611.5 85.9 7,525.6 7,141.4 25.1 7,116.3 5,673.2 Selling and administrative expenses 1,454.2 47.4 1,406.8 1,279.6 29.3 1,250.3 1,066.1 Restructuring charges 93.1 93.1 - 87.2 87.2 - - Operating income $ 523.2 $(226.4) $ 749.6 $1,089.4 $(141.6) $1,231.0 $1,079.7 Operating margin 5.4% 7.7% 11.4% 12.8% 13.8%
Cost of goods sold, and selling and administrative expenses in 2001 and 2000 include other charges for productivity investments. Productivity investments consist of costs for equipment moving, facility redesign, employee relocation and retraining, and systems enhancements. Charges for productivity investments are expensed as incurred. Productivity investments were incurred by all business segments. Additionally in 2001, $9.5 million was included in selling and administrative expenses for costs associated with the reincorporation in Bermuda. Revenues 2001 vs. 2000: Revenues for 2001 increased by approximately 1%, compared to 2000. Excluding acquisitions, revenues declined by approximately 8%. The poor economic conditions have significantly impacted several of the company's end markets, and most major business segments have experienced lower demand. Excluding acquisition activity, revenues decreased in every segment. 2000 vs. 1999: Revenues for 2000 increased by approximately 23% when compared with 1999. This increase includes the favorable effect of the Hussmann acquisition, as well as the inclusion of Dresser-Rand. Cost of Goods Sold 2001 vs. 2000: Cost of goods sold in 2001 was 78.6% of sales as compared to 74.4% in 2000. Excluding productivity investments, the ratio was 77.7% compared to 74.1%. The increase in the ratio of cost of goods sold to sales was due to reduced volume, unfavorable product mix, plant inefficiencies related to restructuring, and the full year inclusion of Hussmann, which historically has had a higher ratio than the other operations of the company. Additionally, cost of goods sold in 2001 includes a $25 million benefit from payments received from the U.S. Customs for antidumping claims. 2000 vs. 1999: Cost of goods sold in 2000 was 74.4% of sales as compared to 72.6% in 1999. Excluding productivity investments, the ratio was 74.1% in 2000. The increase in the ratio of cost of goods sold to sales was mainly due to the inclusion of Hussmann. Selling and Administrative Expenses 2001 vs. 2000: Selling and administrative expenses were 15.0% of sales in 2001 as compared to 13.3% for 2000. Adjusted selling and administrative expenses were 14.5% of sales in 2001 as compared to 13.0% in 2000. The increase in the ratio reflects acquisitions of sales and service businesses that historically maintain higher ratios than the company's, and lower sales volumes by almost all segments. 2000 vs. 1999: Selling and administrative expenses were 13.3% of sales in 2000 as compared to 13.6% for 1999. Adjusted selling and administrative expenses were 13.0% of sales in 2000. Restructure In 2000, the company began a program to restructure its worldwide operations. The costs associated with this program included severance, plant rationalizations, organizational realignments consistent with the company's market-based structure and the consolidation of back office processes. Due to continued weakness in its major end markets, the company initiated a second phase of restructuring in the fourth quarter of 2001 that will focus on reducing general and administrative expenses. Restructure expense, primarily related to severance, was $93.1 million in 2001 as compared to $87.2 million in 2000. Operating Income 2001 vs. 2000: Operating income for 2001 decreased by approximately 52% compared to 2000. Excluding restructure and other charges, operating income decreased by approximately 39% from comparable 2000 results. Comparable operating income margins also declined dramatically. 2000 vs. 1999: Operating income for 2000 increased slightly compared to 1999. Excluding restructure and other charges, operating income for 2000 increased by approximately 14% over 1999 due to the inclusion of Hussmann and Dresser-Rand. Interest Expense 2001 vs. 2000: Interest expense for 2001 totaled $253.0 million, a decrease from 2000's total of $255.3 million. Lower average interest rates, combined with a reduction in outstanding debt were offset by a full year of interest associated with the debt incurred to purchase Hussmann. 2000 vs. 1999: Interest expense of $255.3 million for 2000 was significantly higher than the $183.5 million in 1999 due to the impact of the debt incurred to purchase Hussmann and Dresser-Rand. Other Income (Expense) Other income (expense), net, includes foreign exchange activities, equity in earnings of partially owned affiliates, and other miscellaneous income and expense items. 2001 vs. 2000: In 2001, other income (expense), net, aggregated $6.8 million of net expense, as compared with $35.8 million of net income in 2000. Included in 2001 is $25 million in benefits from payments from U.S. Customs for antidumping claims associated with Engineered Solutions for years prior to 2001, partially reduced by one-time costs related to settlements of contract disputes. Additionally, 2001 includes increases in other normal miscellaneous expenses, which were partially offset by an $8.8 million gain on the sale of stock received in connection with the sale of Dresser-Rand's compression services business. Included in 2000 is a $50.4 million gain on the sale of Dresser-Rand's compression services business, which was partially offset by foreign exchange losses. 2000 vs. 1999: In 2000, other income (expense), net, aggregated $35.8 million of net income, as compared with $3.1 million of net income in 1999. During 2000, the $50.4 million gain on the sale of the compression services business of Dresser-Rand, offset by higher foreign exchange losses, resulted in the increase. Minority Interests The company's charges for minority interests are composed of two items: (1) charges associated with the company's equity-linked securities, and (2)interests of minority owners (less than 50%) in consolidated subsidiaries of the company. 2001 vs. 2000: Minority interests decreased from $39.3 million in 2000, to $20.1 million in 2001, mainly as a result of the conversion of equity-linked securities into approximately 8.3 million common shares in May 2001. This eliminated the charges associated with the securities. Additionally, earnings from consolidated entities in which the company has a majority ownership declined. 2000 vs. 1999: Minority interests charges increased from $29.1 million in 1999 to $39.3 million in 2000 due to higher earnings in entities in which the company has the majority ownership, while charges for equity-linked securities were comparable. Provision for Income Taxes As a result of the reorganization and subsequent incorporation in Bermuda, as well as other tax planning strategies, the company had a net tax benefit of $2.9 million for the year ended December 31, 2001. This compared to a provision of $284.4 million, and an effective tax rate of 34% for 2000 and a provision of $307.1 million, and an effective tax rate of 35% for 1999. As a result of the reincorporation from New Jersey to Bermuda, the company recorded a one time tax benefit of $59.8 million related to the utilization of previously limited foreign tax credits and net operating loss carryforwards in certain non-U.S. jurisdictions. The reincorporation is expected to provide annual tax savings of approximately $40 million to $60 million beginning in 2002. Also in 2001, the company realized a benefit of approximately $18.5 million related to prior year foreign sales corporation benefits. The effective tax rate for 2002 is expected to be approximately 20%. Discontinued Operations 2000: Earnings from discontinued operations, net of tax, were $123.2 million for 2000. This represents the Ingersoll-Dresser Pump Company (IDP) operating loss of $1.6 million in 2000, and an after-tax gain of $124.8 million recorded on the sale of IDP. 1999: Earnings from discontinued operations, net of tax, for 1999 amounted to $28.0 million. This represents the company's 51% interest in IDP, net of appropriate taxes. Outlook The direction of the world economy during 2002 is very difficult to predict. There are many conflicting opinions about the prospects and timing of a recovery. In 2001 the company saw declines in virtually all of its key end markets, and expects to see declining markets for the first half of 2002 with a stabilization and slow gradual recovery in the second half of the year. First half 2002 revenues are forecasted to decrease 3% to 4% compared to last year, while second half revenues are expected to be up slightly compared with 2001. Overall, the company sees 2002 revenues declining by 1% to 3% compared to 2001. Some of the key components expected to affect 2002 include major benefits from restructuring programs and from tax savings associated with the reincorporation in Bermuda, increased insurance and pension expenses, investment spending on new products and growth initiatives, results of new goodwill and intangible asset accounting and uncertain volume. The first half of 2002 will be challenging. A gradual improvement in the North American economy coupled with tax and restructuring benefits are expected to generate favorable year-over-year earnings comparisons in the second half of 2002. Review of Business Segments During 2001, the company expanded its Industrial Solutions Sector to include Dresser-Rand, renamed its Bearings and Components Segment to Engineered Solutions and aggregated its tools and related production equipment operations, previously reported as part of the Industrial Products Segment, in the Air and Productivity Solutions Segment. Club Car has been added to the Infrastructure Segment. The modification resulted from a change in the management reporting structure which occurred during the fourth quarter of 2001. Reportable segments have been restated to reflect these changes. The following table summarizes costs for restructure and productivity investments by segment, for 2001 and 2000, in millions: 2001 2000 Productivity Productivity Restructure Investments Restructure Investments Climate Control $31.7 $ 32.1 $ 3.6 $ 6.9 Industrial Solutions Air and Productivity Solutions 16.2 21.6 16.5 6.0 Dresser-Rand 2.1 7.1 11.0 4.4 Engineered Solutions 19.6 15.3 11.5 1.3 Infrastructure 5.7 12.5 11.4 9.3 Security and Safety 3.0 25.2 15.1 8.9 Corporate 14.8 10.0 18.1 17.6 Total $93.1 $123.8 $87.2 $54.4 Climate Control Climate Control is engaged in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers. It includes the market leading brands of Thermo King and Hussmann. All dollar amounts are in millions. 2001 2000 1999 Sales $2,438.2 $2,002.4 $1,202.6 Operating income, reported $ 21.7 $ 206.3 $ 166.5 Operating margin, reported 0.9% 10.3% 13.8% Operating income, before restructure and other charges $ 85.5 $ 216.8 $ 166.5 Operating margin, before restructure and other charges 3.5% 10.8% 13.8% 2001 vs. 2000: Climate Control revenues increased approximately 22% due to the full year inclusion of Hussmann as well as the 2001 acquisitions of NRS and Taylor. The increase due to acquisitions was substantially offset by lower Thermo King revenues, which resulted from deterioration of worldwide markets, especially the U.S. truck and trailer market. Operating income and margins decreased primarily due to declining revenues in higher margin product lines, pricing pressure in the container business, lower margins on acquired businesses and reduced spending by major U.S. supermarket chains. 2000 vs. 1999: Revenues increased by approximately 67% due to the acquisition of Hussmann in June 2000. Excluding Hussmann, operating income and margins decreased due to a severe decline in the North American truck and trailer market and continued weak truck and trailer results in Europe. However, the bus air conditioning and sea-going container business improved substantially. Industrial Solutions Industrial Solutions is composed of a diverse group of businesses focused on providing solutions to enhance customers' industrial efficiency. Industrial Solutions consists of the following three segments; Air and Productivity Solutions, Dresser-Rand, and Engineered Solutions. Air and Productivity Solutions Air and Productivity Solutions is engaged in the design, manufacture, sale and service of air compressors, fluid products, microturbines and industrial tools. All dollar amounts are in millions. 2001 2000 1999 Sales $1,308.0 $1,412.9 $1,381.4 Operating income, reported $ 52.7 $ 162.5 $ 159.3 Operating margin, reported 4.0% 11.5% 11.5% Operating income, before restructure and other charges $ 90.5 $ 185.0 $ 159.3 Operating margin, before restructure and other charges 6.9% 13.1% 11.5% 2001 vs. 2000: Air and Productivity Solutions' revenues decreased by approximately 7% primarily due to declining U.S. industrial activity, which was partially offset by continued strong growth in aftermarket service revenues. Operating income and margins also decreased due to lower demand for medium and large compressors used in industrial applications, as well as increased spending on development of the PowerWorks microturbine. 2000 vs. 1999: Revenues increased by approximately 2%. Excluding restructure and other charges, operating income and margins were higher due to an increased emphasis on the aftermarket business and ongoing cost and expense reduction activity, offset by spending on development of the PowerWorks microturbine. Dresser-Rand Dresser-Rand is engaged in the design, manufacture, sale and service of gas compressors, gas and steam turbines, and generators. All dollar amounts are in millions. 2001 2000 Sales $881.3 $834.0 Operating income, reported $ 21.4 $ 4.6 Operating margin, reported 2.4% 0.6% Operating income, before restructure and other charges $ 30.6 $ 20.0 Operating margin, before restructure and other charges 3.5% 2.4% 2001 vs. 2000: Dresser-Rand revenues increased by approximately 6% due to increased volume. Operating income and margins were also up, reflecting the increased volume and cost reductions from restructuring actions. Prior to February 2000, the company only owned 49% of Dresser-Rand and carried its investment on an equity basis. Engineered Solutions Engineered Solutions is engaged in the design, manufacture, sale and service of precision bearing products and motion control components and assemblies. It includes both Automotive and Industrial Engineered Solutions. This segment was formerly known as Bearings and Components. All dollar amounts are in millions. 2001 2000 1999 Sales $1,077.8 $ 1,185.4 $1,239.5 Operating income, reported $ 78.0 $ 159.8 $ 145.8 Operating margin, reported 7.2% 13.5% 11.8% Operating income, before restructure and other charges $ 112.9 $ 172.6 $ 145.8 Operating margin, before restructure and other charges 10.5% 14.6% 11.8% 2001 vs. 2000: Engineered Solutions' revenues decreased by approximately 9% due to lower volumes in the U.S. automotive and industrial equipment markets. Operating income and margins also decreased as a result of lower volumes. Operating income in 2001 includes a $25 million benefit from payments received from the U.S. Customs for antidumping claims. 2000 vs. 1999: Revenues decreased approximately 4% due to lower volumes in the automotive market as a result of a downturn in the production of light trucks and sport-utility vehicles. Operating income and margins increased due to significant ongoing cost and expense reduction activities, as well as higher aftermarket revenues. Infrastructure Infrastructure is engaged in the design, manufacture, sale and service of skid-steer loaders, mini-excavators, electric and gasoline powered golf and utility vehicles, portable compressors and light towers, road construction and repair equipment, and a broad line of drills and drill accessories. It includes Bobcat, Club Car, Portable Power, Road Development and Specialty Equipment. All dollar amounts are in millions. 2001 2000 1999 Sales $2,570.3 $ 2,752.5 $2,707.3 Operating income, reported $ 219.7 $ 389.7 $ 416.9 Operating margin, reported 8.5% 14.2% 15.4% Operating income, before restructure and other charges $ 237.9 $ 410.4 $ 416.9 Operating margin, before restructure and other charges 9.3% 14.9% 15.4% 2001 vs. 2000: Infrastructure revenues decreased by approximately 7% along with dramatic declines in operating income and margins, as a result of significantly reduced demand from large U.S. rental companies and new equipment dealers who are aggressively managing inventory, as well as weaker North American Road Development. Operating margins also declined due to aggressive pricing and terms offered by competitors. 2000 vs. 1999: Revenues increased by approximately 2%. Bobcat's revenue improvement due to volume gains was offset by lower sales in the rest of Infrastructure. Portable Power revenues declined as slowness in national rental accounts occurred, while Road Development revenues declined as a result of U.S. market softness. Security and Safety Security and Safety is engaged in the design, manufacture, sale and service of locks, door closers, exit devices, door control hardware, doors and frames, decorative hardware, and electronic and biometric access control systems. All dollar amounts are in millions. 2001 2000 1999 Sales $1,406.4 $ 1,410.4 $1,288.2 Operating income, reported $ 230.8 $ 271.6 $ 248.4 Operating margin, reported 16.4% 19.3% 19.3% Operating income, before restructure and other charges $ 259.0 $ 295.6 $ 248.4 Operating margin, before restructure and other charges 18.4% 21.0% 19.3% 2001 vs. 2000: Security and Safety revenues remained constant, reflecting lower commercial and residential demand, offset by higher electronic solutions' revenues. Operating income was also lower, however margins remained strong. Lower operating income margins were affected by increased development spending in the electronic security solutions business. 2000 vs. 1999: Revenues increased approximately 10% due to continuing strength in both the commercial and residential markets. Excluding restructure and other charges, operating income and margins were also higher. In addition to higher volumes, increased profitability was due to productivity improvements and the successful assimilation of acquisitions in 2000. Liquidity and Capital Resources The following table contains several key measures used by management to gauge the company's financial performance. All dollar amounts are in millions. 2001 2000 1999 Operating cash flow $601.6 $ 737.0 $854.7 Working capital $336.8 $(992.3) $964.1 Current ratio 1.1 0.8 1.6 Debt-to-total capital ratio 48% 49% 44% Average working capital to net sales 0.2% (2.9)% 9.3% Average days outstanding in receivables 54.2 56.3 49.0 Average months' supply of inventory 2.7 2.5 2.3 Note: 1999 working capital includes $582.8 million in assets held for sale. The company's primary source for liquidity has been operating cash flow, supplemented by commercial paper. The company's ability to borrow at a cost effective rate under the commercial paper program is contingent upon maintaining an investment grade credit rating. Additionally, the company has other short-term borrowing alternatives should the need arise. At December 31, 2001, the company had $2.5 billion in U.S. credit lines available. The company has improved its liquidity by refinancing $1.4 billion of short-term debt in 2001 with long-term, fixed rate debt at rates ranging from 5.75% to 6.25%. Due to this the company is less exposed to interest rate volatility and refinancing risk. The company continues to utilize a program to securitize accounts receivable to increase liquidity. During 2001, the company had sold approximately $1,439 million under this program, with $275 million outstanding at December 31, 2001. In May 2001, equity-linked securities in the amount of $402.5 million of Ingersoll-Rand Financing I, a Delaware statutory business trust of IR-New Jersey, were exchanged for 8.3 million shares of common stock issued by IR-New Jersey in accordance with common stock purchase contracts issued by IR-New Jersey. Following the completion of these transactions, $32.5 million of securities remain outstanding and are included in long-term debt. The securities bear a distribution rate of 6.29% per annum and will mature in May 2003. During 2000, the company acquired Hussmann for $1.7 billion in cash, sold IDP for $775 million in cash, and acquired full ownership of Dresser-Rand for $543 million. The acquisitions of Hussmann and Dresser-Rand were financed principally by issuing short-term commercial paper and from internally generated cash. The following table summarizes the company's contractual cash obligations by required payment periods, in millions: Payments due Long-term Operating Total contractual by period debt leases cash obligations 2002 $ 192.3 $ 77.9 $ 270.2 2003 838.3 58.6 896.9 2004 573.2 39.7 612.9 2005 207.2 24.7 231.9 2006 588.2 19.4 607.6 Thereafter 694.5 36.3 730.8 Total $3,093.7 $256.6 $3,350.3 Financial Reporting Release No. 60, which was recently released by the Securities and Exchange Commission, requires all registrants to include a discussion of "critical" accounting policies or methods used in the preparation of financial statements. The notes to the financial statements include a summary of significant accounting policies and methods used in the preparation of the consolidated financial statements and the following reviews the more critical accounting policies and methods used by the company: O Revenue recognition - The company recognizes revenue on sales of product at the time the goods are shipped and title has passed to the customer or when the services are performed. Provisions for discounts and rebates to the customers and other adjustments are provided for at the time of sale as a reduction to revenue. O Depreciation and amortization - The company depreciates property, plant and equipment and amortizes goodwill and other intangible assets using primarily straight-line methods over the estimated remaining useful lives. Beginning on January 1, 2002, with the adoption of a new accounting standard, the company will no longer be required to amortize a substantial portion of its goodwill and other intangible assets. O Hedging instruments - The effective portion of the change in the fair value of cash flow hedges are temporarily recorded in other comprehensive income, then recognized in earnings along with the effects of the hedged item. The company does not use derivatives for speculative purposes. A transition adjustment, of $1.2 million, after tax, was recorded in equity upon adoption of SFAS 133 and has been reclassed to earnings during the year. Ending equity includes $1.5 million related to cash flow hedges. The various instruments utilized are summarized later in Management's Discussion and Analysis. O Employee benefit plans - The company provides a range of benefits to employees and retired employees, including pensions, post-retirement, post-employment and health care benefits. The company records annual amounts relating to these plans based on calculations, which include various actuarial assumptions, including discount rates, assumed rates of returns, compensation increases, turnover rates and health care cost trend rates. The company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. The effect of the modifications is generally recorded or amortized over future periods. The company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on input from its actuaries and information as to assumptions used by other employers. O Commitments and contingencies - The company is involved in various litigations, claims and administrative proceedings, including environmental matters, arising in the normal course of business. The company has recorded reserves in the financial statements related to these matters which are developed based on consultation with legal counsel and internal and external consultants and engineers, depending on the nature of the reserve. Subject to the uncertainties inherent in estimating future costs for these types of liabilities, the company believes its estimated reserves are reasonable and does not believe the liability with respect to these matters would have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. O Accrued liabilities - The company has accrued liabilities for product liability claims, workers compensation matters and product warranty issues. The company has recorded reserves in the financial statements related to these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of reserve. The company believes its estimated reserves are reasonable. O Allowance for doubtful accounts and inventory reserves - The company has provided an allowance for doubtful account receivables and inventory reserves based upon its knowledge of its end markets, customer base and products. The preparation of all financial statements includes the use of estimates and assumptions that affect a number of amounts included in the company's financial statements. If actual amounts are ultimately different from previous estimates, the revisions are included in the company's results for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between the company's estimates and actual amounts in any year, have not had a significant impact on the consolidated financial statements. The average short-term borrowings outstanding, excluding current maturities of long-term debt, were $997.9 million in 2001, compared to $1,352.1 million in 2000. The weighted average interest rate during 2001 and 2000 was 5.5% and 6.6%. The maximum amounts outstanding during 2001 and 2000 were $1,505.8 million and $2,533.8 million, respectively. The company had $1.25 billion in U.S. short-term credit lines and $1.25 billion in long-term credit lines at December 31, 2001, all of which were unused. Additionally, $1.0 billion of non-U.S. credit lines were available for working capital purposes, $786.5 million of which was unused at the end of the year. These facilities exceed projected requirements for 2002 and provide direct support for commercial paper and indirect support for other financial instruments, such as letters of credit and comfort letters. In 2001 and 2000, foreign currency translation adjustments decreased shareholders' equity by $45.9 million and $90.2 million, respectively. This was due to the strengthening of the U.S. dollar against other currencies in countries where the company has significant operations. Currency fluctuations in the euro and the British pound accounted for nearly all of the change. The company utilizes two wholly owned, special purpose subsidiaries to purchase accounts and notes receivable at a discount from the company on a continuous basis. These special purpose subsidiaries simultaneously sell an undivided interest in these accounts and notes receivable to a financial institution up to a maximum of $300.0 million in 2001 and $240.0 million in 2000. The agreements between the special purpose corporations and the financial institution do not have predefined expiration dates. The company is retained as the servicer of the pooled receivables. At December 31, 2001 and 2000, $275.0 million and $210.0 million of such receivables, respectively, remained uncollected. Capital expenditures were $200.6 million and $201.3 million in 2001 and 2000, respectively. The company continues investing to improve manufacturing productivity, reduce costs, and provide environmental enhancements and advanced technologies for existing facilities. The capital expenditure program for 2002 is estimated at approximately $200.0 million, including amounts approved in prior periods. Many of these projects are subject to review and cancellation at the option of the company without incurring substantial charges. There are no planned projects, either individually or in the aggregate, that represent a material commitment for the company. At December 31, 2001, 2000 and 1999, employment totaled 55,898, 56,688 and 46,062, respectively. The decrease from 2000 to 2001 was due to terminations from the company's restructuring program, which were partially offset by acquisitions. The increase from 1999 to 2000 was due to acquisitions during the year, which were partially offset by terminations under the company's restructuring program. Financial Market Risk The company is exposed to fluctuations in the price of major raw materials used in the manufacturing process, foreign currency fluctuations and interest rate charges. From time to time the company enters into agreements to reduce its raw material, foreign currency and interest rate risks. Such agreements hedge only specific transactions or commitments. To minimize the risk of counter party non-performance, such agreements are made only through major financial institutions with significant experience in such financial instruments. The company generates foreign currency exposures in the normal course of business. To mitigate the risk from foreign currency exchange rate fluctuations, the company will generally enter into forward currency exchange contracts or options for the purchase or sale of a currency in accordance with the company's policies and procedures. The company applies sensitivity analysis and value at risk (VAR) techniques when measuring the company's exposure to currency fluctuations. VAR is a measurement of the estimated loss in fair value until currency positions can be neutralized, recessed or liquidated and assumes a 95% confidence level with normal market conditions. The potential one-day loss, as of December 31, 2001, was $3.1 million and is considered insignificant in relation to the company's results of operations and shareholders' equity. The company maintains significant operations in countries other than the U.S.; therefore, the movement of the U.S. dollar against foreign currencies has an impact on the company's financial position. Generally, the functional currency of the company's non-U.S. subsidiaries is their local currency. The company manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through the use of forward exchange contracts and options. The company attempts, through its hedging activities, to mitigate the impact on income of changes in foreign exchange rates. At December 31, the contractual amounts of foreign currency contracts were: In millions 2001 2000 Buy Sell Buy Sell British pounds $ 14.0 $ 8.8 $ 59.5 $ 4.6 Canadian dollars 137.6 9.6 106.8 33.1 Euro and euro-linked currencies 23.0 185.6 75.8 157.7 Japanese yen 21.6 27.3 27.6 0.3 Other 12.2 18.7 7.4 27.3 Total $208.4 $250.0 $277.1 $223.0 Starting in late 1999, the company began purchasing on a limited basis, commodity derivatives to hedge the variable portion in supplier contracts of the costs of metals used in its products. Gains and losses on the derivatives are included in cost of sales in the same period as the hedged transaction. The following table summarizes commodity contracts by maturity: Commodity contracts 2002 2003 Total Aluminum Contract amount in millions $17.7 - $17.7 Contract quantity (in 000 lbs.) 28.9 - 28.9 Copper Contract amount in millions $ 8.3 - $ 8.3 Contract quantity (in 000 lbs.) 10.9 - 10.9 Zinc Contract amount in millions - $2.1 $ 2.1 Contract quantity (in 000 lbs.) - 5.5 5.5 Total Contract amount in millions $26.0 $2.1 $28.1 Contract quantity (in 000 lbs.) 39.8 5.5 45.3 With regard to interest rate risk, the effect of a hypothetical 1% increase in interest rates, across all maturities, would decrease the estimated fair value of the company's long-term debt at December 31, 2001, from $2,996.7 million to an estimated fair value of $2,889.6 million. Environmental Matters The company continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities. During 2001, the company spent approximately $2.0 million on capital projects for pollution abatement and control, and an additional $7.8 million for environmental remediation expenditures at sites presently or formerly owned or leased by the company. It should be noted that these amounts are difficult to estimate because environmental improvement costs are generally a part of the overall improvement costs at a particular plant. Therefore, an accurate estimate of which portion of an improvement or a capital expenditure relates to an environmental improvement is difficult to ascertain. The company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain. The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has not assumed it will bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties' financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future. Although uncertainties regarding environmental technology, U.S. federal and state laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies, and the company does not discount its liability or assume any insurance recoveries. New Accounting Standards The FASB issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", which became effective for the company on March 31, 2001. The statement revises the accounting standards for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. Adoption of SFAS No. 140 had no effect on the company's consolidated financial position, consolidated results of operations, or liquidity. For all business combinations subsequent to June 30, 2001, the company applied the provisions of SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." Under the provisions of these standards, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization, while all other intangible assets are to be amortized over their estimated useful lives. Amortization expense related to goodwill was $135.1 million in 2001, $135.3 million in 2000 and $102.3 million in 1999. Additional provisions of SFAS No. 141 and No. 142, including annual impairment testing for goodwill and intangible assets, became effective for the company on January 1, 2002. The company is currently determining the impact of adopting these provisions under the transition provisions of the statements, and anticipates that it may record an impairment charge. In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. The standard requires that legal obligations associated with the retirement of tangible long-lived assets be recorded at fair value when incurred and is effective January 1, 2003, for the company. The company is currently reviewing the provisions of SFAS No. 143 to determine the standard's impact upon adoption. In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued, which provides guidance on the accounting for the impairment or disposal of long-lived assets and was adopted January 1, 2002, by the company. Adoption of SFAS No. 144 did not have a material effect on the company's consolidated financial position or results of operations. The company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" and its amendments as of January 1, 2001. The statement requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives will be recognized in earnings or other comprehensive income, depending on the designated purpose of the derivative. The company recorded approximately $1.2 million after tax representing the cumulative effect adjustment as a decrease to accumulated other comprehensive income at January 1, 2001. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The information under the caption "Financial Market Risk" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) The consolidated financial statements and the report thereon of PricewaterhouseCoopers dated February 5, 2002, are included as Exhibit 13-The Annual Report to Shareholders for 2001. (b) The unaudited quarterly financial data for the two-year period ended December 31, is as follows (in millions except per share amounts): Net Cost of Operating Net 2001 sales goods sold income earnings First quarter $2,291.3 $1,787.3 $ 138.6 $ 49.3 Second quarter 2,459.3 1,933.3 162.4 62.9 Third quarter 2,374.9 1,865.0 115.5 33.9 Fourth quarter 2,556.5 2,025.9 106.7 100.1 Year 2001 $9,682.0 $7,611.5 $ 523.2 $246.2 2000 First quarter $2,163.2 $1,607.0 $ 258.7 $136.1 Second quarter 2,476.8 1,829.0 333.3 175.3 Third quarter 2,504.6 1,883.9 235.4 251.9 Fourth quarter 2,453.0 1,821.5 262.0 106.1 Year 2001 $9,597.6 $7,141.4 $1,089.4 $669.4 All amounts shown have been restated to reflect adoption of Emerging Issues Task Force Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" in the fourth quarter of 2001. 2001 2000 Basic Diluted Basic Diluted earnings earnings earnings earnings per per per per common common common common share share share share First quarter $0.31 $0.31 $0.84 $0.83 Second quarter 0.38 0.38 1.09 1.08 Third quarter 0.20 0.20 1.56 1.55 Fourth quarter 0.60 0.59 0.66 0.66 Year $1.49 $1.48 $4.15 $4.12 Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is (i) incorporated by reference in this Form 10-K Annual Report from pages 5 through 7, and 23 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 1, 2002, and (ii) included after Item 4 in Part I of this Form 10-K Annual Report. Item 11. EXECUTIVE COMPENSATION Information on executive compensation is incorporated by reference in this Form 10-K Annual Report from pages 9 through 19 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 1, 2002. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information on security ownership of directors and nominees, directors and officers as a group and certain beneficial owners is incorporated by reference in this Form 10-K Annual Report on pages 4 and 5 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 1, 2002. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated by reference in this Form 10-K Annual Report from page 23 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 1, 2002. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. and 2. Financial statements and financial statement schedules The financial statements, together with the reports thereon of PricewaterhouseCoopers dated February 5, 2002, and PricewaterhouseCoopers LLP, dated February 6, 2001 included as Exhibit 13 and the unaudited quarterly financial data included in Part II Item 8(b) are incorporated by reference in this Form 10-K Annual Report. The financial statement schedule listed in the accompanying index should be read in conjunction with the financial statements in such Annual Report to Shareholders for 2001. Separate financial statements for all 50 percent or less owned companies, accounted for by the equity method have been omitted because no individual entity constitutes a significant subsidiary. (b) Reports on Form 8-K A Current Report on Form 8-K (Item 5) dated February 6, 2001 reporting the Debt Securities Underwriting Agreement Standard Provisions relating to Registration Statement No. 333- 50902. A Current Report on Form 8-K (Item 5) dated February 9, 2001 reporting the filing of Exhibit 12 - Computation of the Ratio of Earnings to Fixed Charges and Exhibit 13 - Audited Financial Statements at and for the year ended December 31, 2000. A Current Report on Form 8-K/A (Item 5) dated February 9, 2001 amending the filing of Exhibit 23 - Consent of PricewaterhouseCoopers LLP. A Current Report on Form 8-K (Item 7) dated September 30, 2001 reporting on the Restated Consolidated Financial Statements reporting Dresser-Rand Company on a fully consolidated basis for the years ending December 31, 1997, 1998, 1999, 2000, and the first and second quarters of 2001 and the amended Exhibit 12 - Computations of Ratios of Earnings to Fixed Charges. A Current Report on Form 8-K (Item 7) dated October 16, 2001 reporting on the Press Release dated October 16, 2001 regarding Ingersoll- Rand's Board of Directors Approval of Change in Place of Incorporation to Bermuda. A Current Report on Form 8-K (Item 5) dated December 21, 2001 reporting on the $62 million received by the Torrington Company relating to the Continued Dumping and Subsidy Offset Act of 2000. A Current Report on Form 8-K (Item 5 and Item 7) dated December 31, 2001 reporting on the corporate reorganization of the Company resulting in its change in domicile from New Jersey to Bermuda under the name Ingersoll-Rand Company Limited. 3. Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this Form 10-K Annual Report. INGERSOLL-RAND COMPANY LIMITED INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a) 1 and 2) Form 10-K Consolidated Financial Statements: Reports of independent accountants * Consolidated balance sheet at December 31, 2001 and 2000 * For the years ended December 31, 2001, 2000 and 1999: Consolidated statement of income * Consolidated statement of shareholders' equity * Consolidated statement of cash flows * Notes to consolidated financial statements * Selected unaudited quarterly financial data ** Financial Statement Schedule: Reports of independent accountants on financial statement schedule See below Consolidated schedule for the years ended December 31, 2001, 2000 and 1999: Schedule II -- Valuation and Qualifying Accounts See below * See Exhibit 13 - Ingersoll-Rand Company Limited Annual Report to Shareholders for 2001. ** See Item 8 Financial Statements and Supplementary Data. Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of Ingersoll-Rand Company Limited: Our audit of the 2001 consolidated financial statements referred to in our report dated February 5, 2002, appearing in the 2001 Annual Report to Shareholders of Ingersoll-Rand Company Limited, the successor company to Ingersoll-Rand Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /S/ PricewaterhouseCoopers PricewaterhouseCoopers Hamilton, Bermuda February 5, 2002 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of Ingersoll-Rand Company Limited: Our audit of the 2000 and 1999 consolidated financial statements referred to in our report dated February 6, 2001, appearing in the 2001 Annual Report to Shareholders of Ingersoll-Rand Company Limited, the successor company to Ingersoll-Rand Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /S/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Florham Park, New Jersey February 6, 2001 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-66624) and S-8 (No. 333-67257, No. 333-35229, No. 333-00829, No. 333-19445, and No. 333-42133) of Ingersoll-Rand Company Limited, the successor company to Ingersoll-Rand Company, of our report dated February 5, 2002 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 5, 2002 relating to the financial statement schedule, which appears in this Form 10-K. /S/ PricewaterhouseCoopers PricewaterhouseCoopers Hamilton, Bermuda March 13, 2002 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-66624) and S-8 (No. 333-67257, No. 333-35229, No. 333-00829, No. 333-19445, and No. 333-42133) of Ingersoll-Rand Company Limited, the successor company to Ingersoll-Rand Company, of our report dated February 6, 2001 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 6, 2001 relating to the financial statement schedule, which appears in this Form 10-K. /S/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Florham Park, New Jersey March 13, 2002 SCHEDULE II INGERSOLL-RAND COMPANY LIMITED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 and 1999 (Amounts in millions) Additions charged to Balance at costs and Balance beginning expenses Deductions at end Description of year (*) (**) of year 2001 Doubtful accounts $ 48.5 $ 16.4 $ 10.6 $ 54.3 2000 Doubtful accounts $ 33.4 $ 22.3 $ 7.2 $ 48.5 1999 Doubtful accounts $ 35.4 $ 8.7 $ 10.7 $ 33.4 (*) "Additions" include foreign currency translation and business acquisitions. (**) "Deductions" include accounts and advances written off, less recoveries. INGERSOLL-RAND COMPANY LIMITED INDEX TO EXHIBITS (Item 14(a)) Description 2 Agreement and Plan of Merger, dated as of October 31, 2001, among Ingersoll-Rand Company Limited, Ingersoll-Rand Company and IR Merger Corporation. Incorporated by reference to Amendment No. 1 to Form S-4. Registration Statement No, 333- 71642, filed October 30, 2001. 3.1 Memorandum of Association of Ingersoll-Rand Company Limited. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001. 3.2 Amended and Restated Bye-Laws of Ingersoll-Rand Company Limited. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001. 4.1 Certificate of Designation, Preferences and Rights of Series A Preference Shares of Ingersoll-Rand Company Limited. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001. 4.2 Rights Agreement between Ingersoll-Rand Company Limited and The Bank of New York, as Rights Agent. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333- 71642, filed October 30, 2001. 4.3 Voting Agreement between Ingersoll-Rand Company Limited and Ingersoll-Rand Company. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333- 71642, filed October 30, 2001. 4.4 Indenture, dated as of August 1, 1986, between Ingersoll-Rand Company and The Bank of New York, as Trustee, as supplemented by first, second and third supplemental indentures. Incorporated by reference to Ingersoll-Rand Company's Form S- 3 Registration Statement No. 33-39474 as filed March 18, 1991 and to Form S-3 Registration Statement No. 333-50902 as filed November 29, 2000. 4.5 Fourth Supplemental Indenture, dated as of December 31, 2001, among Ingersoll-Rand Company Limited, Ingersoll-Rand Company and The Bank of New York, as trustee. Filed herewith. 4.6 Indenture, dated as of March 23, 1998, between Ingersoll-Rand Company and The Bank of New York, as trustee. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1998, filed March 30, 1999. 4.7 First Supplemental Indenture, dated as of March 23, 1998 between Ingersoll-Rand Company and The Bank of New York, as trustee. Incorporated by reference to Form 10-K of Ingersoll- Rand Company for the year ended December 31, 1998, filed March 30, 1999. 4.8 Second Supplemental Indenture, dated December 31, 2001, among Ingersoll Rand Company Limited, Ingersoll-Rand Company and The Bank of New York. Filed herewith. 4.9 Amended and Restated Declaration of Trust for Ingersoll-Rand Financing I, a Delaware statutory business trust, dated March 23, 1998. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1998, filed March 30, 1999. 4.10 Guarantee Agreement, dated as of March 23, 1998, between Ingersoll-Rand Company and The First National Bank of Chicago, as trustee. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1998, filed March 30, 1999. 4.11 Credit Agreement dated as of July 2, 2001, among Ingersoll- Rand Company, the banks listed therein, The Chase Manhattan Bank, as Administrative Agent, Citibank N.A., and Deutsche Banc Alex. Brown Inc., as Co-Syndication Agents, and The Bank of Nova Scotia and Bank of Tokyo-Mitsubishi Trust Company, as Co-Documentation Agents. Incorporated by reference to Form 10-Q for the quarter ended June 30, 2001 of Ingersoll-Rand Company, filed August 2, 2001. 4.12 Amendment and Waiver, dated as of November 28, 2001, and Ingersoll-Rand Company Limited, Ingersoll-Rand Company, JP Morgan Chase Bank, as Administrative Agent, Citibank N.A., and Deutsche Banc Alex. Brown Inc., as Co-Syndication Agents, and The Bank of Nova Scotia and Bank of Tokyo- Mitsubishi Trust Company, as Co-Documentation Agents. Filed herewith. 4.13 Credit Agreement, dated as of July 2, 2001, among Ingersoll- Rand Company, the banks listed therein, The Chase Manhattan Bank, as Administrative Agent, Citibank N.A., and Deutsche Banc Alex. Brown Inc., as Co-Syndication Agents, and The Bank of Nova Scotia and Bank of Tokyo-Mitsubishi Trust Company, as Co-Documentation Agents. Incorporated by reference to Form 10-Q for the quarter ended June 30, 2001 of Ingersoll-Rand Company, filed August 2, 2001. 4.14 Amendment and Waiver, dated as of November 28, 2001, among Ingersoll-Rand Company Limited, Ingersoll-Rand Company, JP Morgan Chase Bank, as Administrative Agent, Citibank N.A., and Deutsche Banc Alex. Brown Inc., as Co-Syndication Agents, and The Bank of Nova Scotia and Bank of Tokyo- Mitsubishi Trust Company, as Co-Documentation Agents. Filed herewith. 4.15 Ingersoll-Rand Company Limited and its subsidiaries are par ties to several long-term debt instruments under which in each case the total amount of securities authorized does not exceed 10% of the total assets of Ingersoll-Rand Company Limited and its subsidiaries on a consolidated basis. Pursuant to paragraph 4 (iii) of Item 601(b) of Regulation S-K, Ingersoll-Rand Company Limited agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. 10.1 Management Incentive Unit Plan of Ingersoll-Rand Company. Amendment to the Management Incentive Unit Plan, effective January 1, 1982. Amendment to the Management Incentive Unit Plan, effective January 1, 1987. Amendment to the Management Incentive Unit Plan, effective June 3, 1987. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.2 Reorganization Amendment to Management Incentive Unit Plan, dated December 31, 2001. Filed herewith. 10.3 Amended and Restated Director Deferred Compensation and Sto ck Award Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 2000, filed March 20, 2001. 10.4 First Amendment to Director Deferred Compensation and Stock Award Plan. Filed herewith. 10.5 Description of Bonus Arrangement for Sector Presidents of Ingersoll-Rand Company Limited. Filed herewith. 10.6 Description of Bonus Arrangement for Chairman, President and Staff Officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.7 Amended and Restated Change of Control Agreement with Chairman, dated as of October 1, 2001. Filed herewith. 10.8 Amended and Restated Form of Change of Control Agreement dated as of October 1, 2001, with selected executive officers of Ingersoll-Rand Company other than Chairman. Filed herewith. 10.9 Executive Supplementary Retirement Agreement for selected executive officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.10 Executive Supplementary Retirement Agreement for selected executive officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997. 10.11 Forms of insurance and related letter agreements with certain executive officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.12 Restated Supplemental Pension Plan of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingerso ll-Rand Company for the year ended December 31, 1995, filed March 29, 1996. 10.13 Reorganization Amendment to Supplemental Pension Plan, dated December 31, 2001. Filed herewith. 10.14 Supplemental Savings and Stock Investment Plan, effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.15 First Amendment to Supplemental Savings and Stock Investment Plan, dated December 31, 2001. Filed herewith. 10.16 Supplemental Retirement Account Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10.17 First Amendment to Supplemental Retirement Account Plan, dated December 31, 2001. Filed herewith. 10.18 Incentive Stock Plan of 1995. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix A of the Proxy Statement dated March 15, 1995. 10.19 Reorganization Amendment to Incentive Stock Plan of 1995, dated December 21, 2001. Filed herewith. 10.20 Senior Executive Performance Plan. Incorporated by reference to the Notice of 2000 Annual Meeting of Shareholders and Proxy Statement, dated March 7, 2000. See Appendix A of the Proxy Statement, dated March 7, 2000. 10.21 Amended and Restated Elected Officers Supplemental Plan. I ncorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1998, filed March 30, 1999. 10.22 First Amendment to Elected Officers Supplemental Plan, dated March 22, 1999. Filed herewith. 10.23 Second Amendment to Elected Officers Supplemental Plan, dated March 22, 1999. Filed herewith. 10.24 Third Amendment to Elected Officers Supplemental Plan, dated December 31, 2001. Filed herewith. 10.25 Amended and Restated Executive Deferred Compensation Plan. Incorporated by reference to Form 10-K for the year ended December 31, 2000. Filed March 20, 2001. 10.26 First Amendment to Executive Deferred Compensation Plan, dated December 31, 2001. Filed herewith. 10.27 Incentive Stock Plan of 1998. Incorporated by reference to Appendix A to the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement of Ingersoll-Rand Company, dated March 17, 1998. 10.28 Amendment of Incentive Stock Plan of 1998, dated May 2, 2001. Filed herewith. 10.29 Reorganization Amendment to Incentive Stock Plan of 1998, dated December 31, 2001. Filed herewith. 10.30 Composite Employment Agreement with Chief Executive Officer. Incorporated by reference to Form 10-K for the year ended December 31, 1999, filed March 30, 2000. 10.31 Employment Agreement with Michael Radcliff, Senior Vice President. Incorporated by reference to Form 10-K of Ingersoll-Rand for the year ended December 31, 2000. Filed March 20, 2001. 10.32 Employment Agreement with Randy Smith, Senior Vice President. Incorporated by reference to Form 10-K of Ingersoll- Rand for the year ended December 31, 2000. Filed March 20, 2001. 10.33 Employment Agreement with John Turpin, Senior Vice Preside nt. Incorporated by reference to Form 10-K of Ingersoll- Rand for the year ended December 31, 2000. Filed March 20, 2001. 12 Computations of Ratios of Earnings to Fixed Charges. Filed herewith. 13 Ingersoll-Rand Company Limited Annual Report to Shareholders for 2001. Filed herewith. Not deemed to be filed as part of this report except to the extent incorporated by reference. 21 List of Subsidiaries of Ingersoll-Rand Company Limited. Filed herewith. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INGERSOLL-RAND COMPANY LIMITED (Registrant) By /S/ Herbert L. Henkel Herbert L. Henkel Date March 13, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date Chairman President, Chief Executive Officer and Director (Principal /S/ Herbert L. Henkel Executive Officer) March 13, 2002 (Herbert L. Henkel) Vice President and Controller (Principal /S/ Steven R, Shawley Financial and Accounting (Steven R. Shawley) Officer) March 13, 2002 /S/ Ann C. Berzin Director March 13, 2002 (Ann C. Berzin) /S/ Joseph P. Flannery Director March 13, 2002 (Joseph P. Flannery) /S/ Peter C. Godsoe Director March 13, 2002 (Peter C. Godsoe) /S/ Constance J. Horner Director March 13, 2002 (Constance J. Horner) /S/ H. William Lichtenberger Director March 13, 2002 (H. William Lichtenberger) /S/ Theodore E. Martin Director March 13, 2002 (Theodore E. Martin) /S/ Patricia Nachtigal Director March 13, 2002 (Patricia Nachtigal) /S/ Orin R. Smith Director March 13, 2002 (Orin R. Smith) /S/ Richard J. Swift Director March 13, 2002 (Richard J. Swift) /S/ Tony L. White Director March 13, 2002 (Tony L. White) EX-4 3 exh4-5.txt FOURTH SUPPLEMENTAL INDENTURE EXHIBIT 4.5 INGERSOLL-RAND COMPANY LIMITED, INGERSOLL-RAND COMPANY, AND THE BANK OF NEW YORK, as Trustee FOURTH SUPPLEMENTAL INDENTURE Dated as of December 31, 2001 Supplementing and Amending the Indenture Dated as of August 1, 1986 FOURTH SUPPLEMENTAL INDENTURE, dated as of December 31, 2001, among Ingersoll-Rand Company Limited, a company organized and existing under the laws of Bermuda ("IR-Limited"), Ingersoll- Rand Company, a New Jersey corporation (the "Company"), and The Bank of New York, as trustee (the "Trustee"). Terms not defined herein shall have the meanings assigned to them in the Indenture. RECITALS WHEREAS, the Company and the Trustee are parties to an Indenture, dated as of August 1, 1986, as amended (the "Indenture"), providing for the issuance from time to time of the Company's unsecured debentures, notes or other evidences of indebtedness (herein and therein called the "Securities"), to be issued in one or more series as provided in the Indenture. WHEREAS, on December 31, 2001, a newly formed subsidiary of IR-Limited is expected to merge with and into the Company with the Company being the surviving corporation in the merger (the "Merger") and each outstanding share of common stock of the Company will be converted into one share of Class A common stock of IR-Limited. WHEREAS, in connection with the Merger, IR-Limited desires to guarantee all of the Company's obligations under the Indenture and the Securities. WHEREAS, Section 901 of the Indenture provides that the Company, when authorized by a Board Resolution, and the Trustee may enter into a supplemental indenture, without the consent of any Holder, to make provisions with respect to matters arising under the Indenture which shall not adversely affect the interests of the Holders of such Securities. WHEREAS, the Company and the Trustee have determined that this Fourth Supplemental Indenture complies with Section 901 of the Indenture and does not require the consent of any Holders and, on the basis of the foregoing, the Trustee has determined that this Fourth Supplemental Indenture is in form satisfactory to it. W I T N E S S E T H : NOW, THEREFORE, for and in consideration of the premises, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders, as follows: ARTICLE 1 GUARANTEE OF OBLIGATIONS SECTION 1.1 Guarantee. IR-Limited hereby irrevocably and unconditionally guarantees to the Trustee and the Holders on and after the Effective Date all of the obligations of the Company under the Indenture and the Securities, including the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the principal of, premium, if any, and interest on the Securities according to the terms of the Securities and as more fully described in the Indenture. Notwithstanding the foregoing, the Company shall remain obligated under the Indenture and the Securities, in accordance with the terms of the Indenture. "Effective Date" shall mean the close of business on December 31, 2001, the date on which a certificate of merger, reflecting the Merger and filed with the Treasurer of the State of New Jersey, is expected to have become effective in accordance with New Jersey law. ARTICLE 2 REPORTS BY IR-LIMITED SECTION 2.1. Reports. Section 704 of the Indenture is hereby amended by deleting it in its entirety and substituting in place thereof the following: SECTION 704. Reports by IR-Limited. IR-Limited shall: (1) file with the Trustee, within 15 days after IR-Limited is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which IR-Limited may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or if IR- Limited is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by IR-Limited with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by IR-Limited pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). ARTICLE 3 CERTIFICATE OF COMPLIANCE SECTION 3.1. Certificate of Compliance. Section 1007 of the Indenture is hereby amended by deleting it in its entirety and substituting in place thereof the following: SECTION 1007. Statement by Officers as to Default IR-Limited will deliver to the Trustee on or before May 15 in each year ending after the date hereof, an Officers' Certificate stating that in the course of the performance by each signer of his duties as an officer of IR-Limited he would normally have knowledge of any default by the Company in the performance and observance of any of the covenants contained in Sections 802, 1004 and 1005, stating whether or not he has knowledge of any such default and, if so, specifying each such default of which such signer has knowledge and the nature thereof. ARTICLE 4 GENERAL PROVISIONS SECTION 4.1. Incorporation of Indenture. All the provisions of this Fourth Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented and amended by this Fourth Supplemental Indenture, shall be read, taken and construed as one and the same instrument. SECTION 4.2. Headings. The headings of the Articles and Sections of this Fourth Supplemental Indenture are inserted for convenience of reference and shall not be deemed to be a part thereof. SECTION 4.3. Counterparts. This Fourth Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 4.4. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Fourth Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. SECTION 4.5. Successors. All covenants and agreements in this Fourth Supplemental Indenture by the Company and IR-Limited shall be binding upon and accrue to benefit of their respective successors. All covenants and agreements in this Fourth Supplemental Indenture by the Trustee shall be binding upon and accrue to the benefit of its successors. SECTION 4.6. Severability Clause. In case any provision in this Fourth Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 4.7. Benefits of Fourth Supplemental Indenture. Nothing in this Fourth Supplemental Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Fourth Supplemental Indenture. SECTION 4.8. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed in accordance with, the law of the State of New York without regard to any conflict of law principles thereof. SECTION 4.9 Trustee Not Responsible for Recitals. The Trustee makes no undertaking or representations in respect of, and shall not be responsible in any manner whatsoever for and in respect of, the validity or sufficiency of this Fourth Supplemental Indenture or the proper authorizations or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. [signature page to follow] IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Fourth Supplemental Indenture, as of the date first above written. Attest: INGERSOLL-RAND COMPANY LIMITED /S/________________________ /S/_______________________ Name: By: Title: Attest: /S/_______________________ /S/________________________ Name: By: Title: Attest: INGERSOLL-RAND COMPANY /S/______________________ /S/________________________ Name: By: Title: THE BANK OF NEW YORK, as Trustee /S/________________________ By: Title: EX-4 4 exh4-8.txt SECOND SUPPLEMENTAL INDENTURE EXHIBIT 4.8 INGERSOLL-RAND COMPANY LIMITED, INGERSOLL-RAND COMPANY, AND THE BANK OF NEW YORK, as Trustee SECOND SUPPLEMENTAL INDENTURE Dated as of December 31, 2001 Supplementing and Amending the Indenture Dated as of March 23, 1998 SECOND SUPPLEMENTAL INDENTURE, dated as of December 31, 2001, among Ingersoll-Rand Company Limited, a company organized and existing under the laws of Bermuda ("IR-Limited"), Ingersoll- Rand Company, a New Jersey corporation (the "Company"), and The Bank of New York, as trustee (the "Trustee"). Terms not defined herein shall have the meanings assigned to them in the Indenture. RECITALS WHEREAS, Company and the Trustee are parties to an Indenture, dated as of March 23, 1998, as the same may be amended or supplemented from time to time (the "Indenture"), providing for the issuance from time to time of the Company's unsecured debentures, notes or other evidences of indebtedness (herein and therein called the "Securities"), to be issued in one or more series as provided in the Indenture. WHEREAS, on December 31, 2001 a newly formed subsidiary of IR-Limited is expected to merge with and into the Company with the Company being the surviving corporation in the merger (the "Merger") and each outstanding share of common stock of the Company will be converted into one share of Class A common stock of IR-Limited. WHEREAS, in connection with the Merger, IR-Limited desires to guarantee all of the Company's obligations under the Indenture and the Securities. WHEREAS, Section 901 of the Indenture provides that the Company, when authorized by a Board Resolution, and the Trustee may enter into a supplemental indenture, without the consent of any Holder, to make provisions with respect to matters arising under the Indenture, provided that such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect. WHEREAS, the Company and the Trustee have determined that this Second Supplemental Indenture complies with Section 901 of the Indenture and does not require the consent of any Holders and, on the basis of the foregoing, the Trustee has determined that this Second Supplemental Indenture is in form satisfactory to it. W I T N E S S E T H : NOW, THEREFORE, for and in consideration of the premises, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders, as follows: ARTICLE 1 GUARANTEE OF OBLIGATIONS SECTION 1.1 Guarantee. IR-Limited hereby irrevocably and unconditionally guarantees to the Trustee and the Holders on and after the Effective Date all of the obligations of the Company under the Indenture and the Securities, including the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the principal of, premium, if any, and interest on the Securities according to the terms of the Securities and as more fully described in the Indenture. Notwithstanding the foregoing, the Company shall remain obligated under the Indenture and the Securities, in accordance with the terms of the Indenture. "Effective Date" shall mean the close of business on December 31, 2001, the date on which a certificate of merger, reflecting the Merger and filed with the Treasurer of the State of New Jersey, is expected to have become effective in accordance with New Jersey law. ARTICLE 2 REPORTS BY IR-LIMITED SECTION 2.1. Reports. Section 704 of the Indenture is hereby amended by deleting it in its entirety and substituting in place thereof the following: SECTION 704. REPORTS BY IR-LIMITED. IR-Limited shall: (1) file with the Trustee, within 15 days after IR-Limited is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which IR-Limited may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if IR-Limited is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by IR-Limited with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, (a) concurrently with furnishing the same to its shareholders, IR-Limited's annual report to shareholders, containing certified financial statements, and any other financial reports which IR- Limited generally furnishes to its shareholders, and (b) within 30 days after the filing thereof with the Trustee, such summaries of any other information, documents and reports required to be filed by IR- Limited pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates). ARTICLE 3 CERTIFICATE OF COMPLIANCE SECTION 2.1. Certificate of Compliance. Section 1003 of the Indenture is hereby amended by deleting it in its entirety and substituting in place thereof the following: SECTION 1003. COMPLIANCE CERTIFICATES. IR-Limited will deliver to the Trustee on or before May 15 in each year ending after the date hereof, an Officer's Certificate stating that in the course of the performance by each signer of his duties as an officer of IR-Limited he would normally have knowledge of any default of the Company in the performance and observance of any of the covenants contained in Sections 1005 and 1006, stating whether or not he has knowledge of any such default and, if so, specifying each such default of which such signer has knowledge and the nature thereof. ARTICLE 4 GENERAL PROVISIONS SECTION 4.1. Incorporation of Indenture. All the provisions of this Second Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented and amended by this Second Supplemental Indenture, shall be read, taken and construed as one and the same instrument. SECTION 4.2. Headings. The headings of the Articles and Sections of this Second Supplemental Indenture are inserted for convenience of reference and shall not be deemed to be a part thereof. SECTION 4.3. Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 4.4. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Second Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. SECTION 4.5. Successors. All covenants and agreements in this Second Supplemental Indenture by the Company and IR-Limited shall be binding upon and accrue to benefit of their respective successors. All covenants and agreements in this Second Supplemental Indenture by the Trustee shall be binding upon and accrue to the benefit of its successors. SECTION 4.6. Severability Clause. In case any provision in this Second Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 4.7. Benefits of Second Supplemental Indenture. Nothing in this Second Supplemental Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Second Supplemental Indenture. SECTION 4.8. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed in accordance with, the law of the State of New York without regard to any conflict of law principles thereof. SECTION 4.9 Trustee Not Responsible for Recitals. The Trustee makes no undertaking or representations in respect of, and shall not be responsible in any manner whatsoever for and in respect of, the validity or sufficiency of this Second Supplemental Indenture or the proper authorizations or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. [signature page to follow] IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Second Supplemental Indenture, as of the date first above written. Attest: INGERSOLL-RAND COMPANY LIMITED /S/_______________________ /S/________________________________ Name: By: Title: Attest: /S/________________________ /S/_______________________________ Name: By: Title: Attest: INGERSOLL-RAND COMPANY /S/________________________ /S/________________________________ Name: By: Title: THE BANK OF NEW YORK, as Trustee /S/________________________________ By: Title: EX-4 5 exh4-12.txt AMENDMENT AND WAIVER- 5-YEAR EXHIBIT 4.12 5-Year AMENDMENT AND WAIVER AMENDMENT AND WAIVER, dated as of November 28, 2001 (this "Amendment and Waiver"), to the Credit Agreement, dated as of July 2, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Borrower"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "Banks"), THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "Administrative Agent"), CITIBANK N.A. and DEUTSCHE BANC ALEX. BROWN INC., as co- syndication agents and THE BANK OF NOVA SCOTIA and BANK OF TOKYO MITSUBISHI TRUST COMPANY, as co-documentation agents. W I T N E S S E T H: WHEREAS, the Borrower has requested certain amendments to, and waivers of, the Credit Agreement; NOW THEREFORE, in consideration of the premises herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. 2. Amendments to Section 1.1 (Definitions). (a) Section 1.1 of the Credit Agreement is hereby amended by adding thereto in proper alphabetical order the following defined term: "IR Parent" means Ingersoll-Rand Company Limited, a Bermuda company. (b) The definition of "Borrowing Subsidiary" is hereby amended by deleting such definition in its entirety and inserting in lieu thereof, in proper alphabetical order, the following: "Additional Borrower" means, at any time, IR Parent and each of the Subsidiaries which has been designated as an Additional Borrower by the Borrower pursuant to Section 2.16, other than any such Subsidiary which has ceased to be an Additional Borrower as provided in Section 2.16, and which may borrow Committed Loans as described in Section 2.1. (c) The definitions of "Consolidated Debt", "Consolidated Net Worth", "Consolidated Subsidiary", "Debt" and "Material Adverse Effect" are hereby amended by replacing the references to "Borrower" therein with "IR Parent". (d) The definition of "Cross Default" is hereby amended by (i) inserting immediately after the first appearance of the word "Borrower" therein the words "or IR Parent" and (ii) by inserting immediately after the word "Borrower" in each of clauses (i) and (ii) thereof the words ", IR Parent". (e) The definition of "Lien" is hereby amended by inserting immediately after the word "Borrower" therein the words ", IR Parent". (f) The definition of "Material Debt" is hereby amended by (i) inserting immediately after the word "Borrower" in clause (ii) thereof the words ", IR Parent" and (ii) deleting the word "its" appearing in clause (ii) thereof and inserting in lieu thereof the words "their respective". (g) The definition of "Subsidiary" is hereby amended by inserting immediately before the period therein "or by IR Parent, as applicable". 3. Amendment to Section 1.2 (Accounting Terms and Determinations). Section 1.2 is hereby amended by (i) replacing both occurrences of the words "the Borrower's" therein with the words "IR Parent's" and (ii) replacing the first occurrence of the words "the Borrower" therein with the words "IR Parent". 4. Borrowing Subsidiary/Additional Borrower. As used throughout the Credit Agreement, the term "Borrowing Subsidiary" is hereby replaced with the term "Additional Borrower". 5. Representations and Covenants. Notwithstanding any provisions of the Credit Agreement to the contrary, each covenant, representation and warranty therein made by the Borrower and/or its Subsidiaries under Sections IV and V is hereby deemed, from and after the effectiveness hereof, also to be covenants, representations and warranties made by IR Parent and its Subsidiaries to the same extent as if each such reference to the Borrower and/or its Subsidiaries were also references to IR Parent and/or its Subsidiaries, and such amendments to the Credit Agreement shall be deemed to be made, including, as appropriate, to defined terms used in such provisions, as are necessary to effectuate the foregoing, provided that (i) the reference to the Borrower's incorporation in New Jersey shall, as so deemed to apply to IR Parent, be a reference in respect of IR Parent to the laws of Bermuda, (ii) the references in Section 4.4(a) and (b) to previously delivered financial statements of the Borrower shall not be so deemed also to refer to IR Parent, (iii) Section 4.5 (Litigation) shall be deemed not to refer to the Borrower, but only to IR Parent, (iv) Section 4.6 (Compliance with ERISA) shall not be deemed also to apply to IR Parent, (v) Section 4.7 (Environmental Matters) shall be deemed not to refer to the Borrower, but only to IR Parent, so that the representations and warranties made therein with respect to environmental matters shall be made by IR Parent and not the Borrower, (vi) the first sentence of Section 4.8 (Taxes) shall not be deemed also to apply to IR Parent, and the reference in the second sentence thereof to U.S. tax returns shall, as so deemed to apply to IR Parent, be a reference in respect of IR Parent to Bermuda tax returns, (vii) Section 5.1(a), (b), (c), (e) and (f) shall be deemed not to refer to the Borrower, but only to IR Parent, so that the financial statements, the related compliance certificate, the reports, proxy statements and Securities and Exchange Commission filings referred to therein shall be required in respect of IR Parent and not the Borrower, (viii) Section 5.1(g) shall not be deemed also to apply to IR Parent and (ix) Section 5.2(a) shall be deemed not to refer to the Borrower, but only to IR Parent, so that covenant made therein with respect to the maintenance of property shall be made by IR Parent and not the Borrower. 6. Amendment to Section 2.3 (Money Market Borrowings). Section 2.3 of the Credit Agreement is hereby amended to make each reference therein to "the Borrower" a reference to "the Borrower or IR Parent", except that in subsection 2.3(f)(iv) the words "the Borrower may not" are hereby replaced with the words "neither the Borrower nor IR Parent may". 7. Amendment to Section 2.15 (Withholding Tax Exemption). Section 2.15 of the Credit Agreement is hereby amended by inserting after each of the phrases "entitled to receive payments under this Agreement and the Notes" therein the phrase "from the Borrower, IR Parent or any other entity that is an Additional Borrower at the time of such delivery". 8. Amendment to Section 2.16 (Borrowing Subsidiaries). Section 2.16 of the Credit Agreement is hereby amended by deleting said Section 2.16 in its entirety and inserting in lieu thereof the following: Additional Borrowers. (a) The Borrower hereby designates IR Parent as an Additional Borrower, effective as of the date of the First Amendment hereto. (b) On or after the Effective Date, the Borrower may designate any wholly owned Subsidiary of IR Parent or any wholly owned Subsidiary of the Borrower as an Additional Borrower by delivery to the Administrative Agent of (i) an Additional Borrower Agreement executed by such Subsidiary, IR Parent, and the Borrower, substantially in the form of Exhibit G hereto and (ii) a favorable written opinion (addressed to the Administrative Agent and the Banks) of counsel of such Subsidiary or Subsidiaries (which opinion shall be reasonably satisfactory to the Administrative Agent). Upon delivery of the above-mentioned documents, such Subsidiary shall for all purposes of this Agreement be an Additional Borrower and a party to this Agreement. Promptly following receipt of any Additional Borrower Agreement, the Administrative Agent shall send a copy thereof to each Bank. 9. Amendments to Section 6.1 (Events of Default). (a) Section 6.1 is hereby amended to make certain references therein to "the Borrower" references to each of the Borrower and IR Parent, or to IR Parent only, as follows: (i) in Section 6.1(b), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (ii) in Section 6.1(f), by inserting immediately after the word "Borrower" therein the words ", IR Parent"; (iii) in Section 6.1(g), by inserting immediately after both occurrences of the word "Borrower" therein the words ", IR Parent"; (iv) in Section 6.1(i), by inserting immediately after the word "Borrower" therein the words ", IR Parent"; and (v) in Section 6.1(j), by inserting in lieu of each occurrence of the word "Borrower" therein, the words "IR Parent". (b) In addition, Section 6.1(k) of the Credit Agreement is hereby amended by inserting immediately after the semicolon therein the following: or the guarantee of IR Parent made in Section 9.16 hereof shall cease to be effective or IR Parent shall contest the validity of such guarantee in court; 10. Amendment to Section 9.16 (Guarantee Agreement). Section 9.16 of the Credit Agreement is hereby amended to add, in addition to and in the same form as the existing guarantee by the Borrower, a guarantee by IR Parent of the obligations of the Borrower and each Additional Borrower, as follows: (i) immediately after the title of such section, inserting "(a)" and (ii) after the final period therein inserting the following: (b) In order to induce the Banks to extend credit to the Borrower hereunder, IR Parent hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Borrower and each Additional Borrower. IR Parent further agrees that the due and punctual payment of the Obligations of the Borrower or any Additional Borrower may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation. IR Parent waives presentment to, demand of payment from and protest to the Borrower or any Additional Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of IR Parent hereunder shall not be affected by (a) the failure of any lender to assert any claim or demand or to enforce any right or remedy against the Borrower or any Additional Borrower under the provisions of this Agreement, any Additional Borrower Agreement, any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement or any other Loan Document or agreement; (d) the failure or delay of any Bank to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Bank to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might otherwise operate as a discharge of IR Parent as a matter of law or equity or which would impair or eliminate any right of IR Parent to subrogation. IR Parent further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Bank to any balance of any deposit account or credit on the books of any Bank in favor of the Borrower, any Additional Borrower or other Subsidiary or any other Person. The obligations of IR Parent hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. IR Parent further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Bank upon the bankruptcy or reorganization of the Borrower or any Additional Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Bank may have at law or in equity against IR Parent by virtue hereof, upon the failure of the Borrower or any Additional Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, IR Parent hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Banks in cash an amount equal the unpaid principal amount of such Obligation. IR Parent further agrees that if payment in respect of any Obligation shall be due in currency other than Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Bank, not consistent with the protection of its rights, then, at the election of such Bank and in reasonable consultation with IR Parent, IR Parent shall make payments of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Bank against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment. Upon payment in full by IR Parent of any Obligation of the Borrower or any Additional Borrower, each Bank shall, in a reasonable manner, assign to IR Parent the amount of such Obligation owed to such Bank and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by IR Parent, or make such disposition thereof as IR Parent shall direct (all without recourse to any Bank and without any representation or warranty by any Bank). Upon payment by IR Parent of any sums as provided above, all rights of IR Parent against the Borrower or any Additional Borrower arising as a result thereof by way of right of subrogation, through the assignment described herein or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by the Borrower or any Additional Borrower to the Bank (it being understood that, after the discharge of all the Obligations due and payable from the Borrower and the Additional Borrowers, such rights may be exercised by IR Parent notwithstanding that the Borrower may remain contingently liable for indemnity or other Obligations). 11. Waiver. The Required Banks hereby waive any Default or Event of Default under the Credit Agreement, including of Section 5.7 (Consolidations, Mergers, Sales of Assets) or Section 6.1(j) (Change of Control) to the extent that it would otherwise directly result from the implementation of the corporate reorganization as and to the extent described in the Agreement and Plan of Merger, among Ingersoll-Rand Company, Ingersoll-Rand Company Limited and IR Merger Corporation, as attached to the proxy statement dated October 31, 2001 (the "Merger Agreement") and related information filed with the SEC and provided to the Banks in respect thereof, in each case prior to the date hereof. 12. Amendment to Exhibit G. Exhibit G to the Credit Agreement is hereby amended by deleting said exhibit in its entirety and inserting in lieu thereof Exhibit G hereto. 13. Effectiveness. This Amendment and Waiver shall become effective as of the date hereof when (a) the Administrative Agent shall have received (i) counterparts hereof duly executed by the Borrower, IR Parent, the Administrative Agent and the Required Banks and (ii) legal opinions of counsel for the Borrower and for IR Parent in form reasonably satisfactory to the Administrative Agent and (b) the certificate of merger referred to in the Merger Agreement and filed with the Treasurer of State of New Jersey shall have become effective. 14. Representations and Warranties. The Borrower and IR Parent hereby represent and warrant on the date hereof that, after giving effect to this Amendment and Waiver, (a) no Default or Event of Default has occurred and is continuing and (b) each of the representations and warranties of the Borrower and IR Parent in or pursuant to the Loan Documents is true and correct in all material respects, as if made on and as of the date hereof. 15. Continuing Effect of Credit Agreement. This Amendment and Waiver shall not be construed as a waiver of or consent to any further or future action on the part of the Borrower or IR Parent that would require a waiver or consent by the Administrative Agent and/or the Banks. Except as expressly amended or waived hereby, the Credit Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. 16. Counterparts. This Amendment and Waiver may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment and Waiver by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. 17. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 18. Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of this Amendment and Waiver, including, without limitation, the fees and disbursements of counsel to the Administrative Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be executed and delivered by their duly authorized officers as of the date first written above. INGERSOLL-RAND COMPANY By: /S/_________________________ Name: Title: INGERSOLL-RAND COMPANY LIMITED By: /S/__________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Bank By: /S/___________________________ Name: Title: CITIBANK, N.A., as Co-Syndication Agent and as a Bank By: /S/__________________________ Name: Title: THE BANK OF NOVA SCOTIA, as Co- Documentation Agent and as a Bank By: /S/__________________________ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Co-Documentation Agent and as a Bank By: /S/___________________________ Name: Title: DEUTSCHE BANC ALEX. BROWN INC., as Co-Syndication Agent By: /S/___________________________ Name: Title: By: /S/__________________________ Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH and/or CAYMAN ISLANDS BRANCH By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: FLEET NATIONAL BANK By: /S/___________________________ Name: Title: BANK OF AMERICA, N.A. By: /S/___________________________ Name: Title: CREDIT SUISSE FIRST BOSTON By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: WACHOVIA BANK, N.A. By: /S/___________________________ Name: Title: BARCLAYS BANK, PLC By: /S/___________________________ Name: Title: HSBC BANK USA By: /S/___________________________ Name: Title: BNP PARIBAS By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: ING (U.S.) CAPITAL LLC By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: WELLS FARGO BANK, N.A. By: /S/___________________________ Name: Title: MELLON BANK, N.A. By: /S/___________________________ Name: Title: THE BANK OF NEW YORK By: /S/___________________________ Name: Title: CREDIT AGRICOLE INDOSUEZ By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: STANDARD CHARTERED BANK By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: INTESABCI-NEW YORK BRANCH By: /S/___________________________ Name: Title: NORDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: THE NORTHERN TRUST COMPANY By: /S/___________________________ Name: Title: THE FUJI BANK, LIMITED By: /S/___________________________ Name: Title: BANK OF IRELAND INTERNATIONAL FINANCE LTD By: /S/___________________________ Name: Title: EXHIBIT G ADDITIONAL BORROWER AGREEMENT AGREEMENT dated as of _____, 20 , made by [ADDITIONAL BORROWER(S)] (the "New Additional Borrower"), INGERSOLL-RAND COMPANY (the "Borrower") in favor of THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks from time to time parties to the Credit Agreement referred to below. W I T N E S S E T H WHEREAS, this Additional Borrower Agreement (the "Agreement") relates to the $1,250,000,000 5-Year Credit Agreement dated as of July 2, 2001 among the Borrower, the Banks, and the Agents (the "Credit Agreement"); and WHEREAS, the Borrower and the New Additional Borrower desire that the New Additional Borrower become an Additional Borrower under the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. New Additional Borrower. Upon the effectiveness of this Agreement and the satisfaction of the requirements of the Credit Agreement, the New Additional Borrower, as provided in Section 2.16 of the Credit Agreement, hereby becomes party to the Credit Agreement as an Additional Borrower. SECTION 4. Agreements. (a) The Borrower hereby agrees that the guarantee of the Borrower contained in the Credit Agreement shall apply to the Obligations of the New Additional Borrower. (b) IR Parent hereby agrees that the guarantee of IR Parent contained in the Credit Agreement shall apply to the Obligations of the New Additional Borrower. (c) The New Additional Borrower hereby agrees to be bound by all provisions of the Credit Agreement. SECTION 5. Representations and Warranties. The Borrower represents that the New Additional Borrower is organized under the laws of [ ], and that the representations and warranties of the Borrower in the Credit Agreement are true and correct in all material respects on and as of the date hereof after giving effect to this agreement (it being understood that the representations and warranties in Sections 4.4 [Financial Information; No Material Adverse Change] and 4.5 [Litigation ] shall be deemed for purposes of this agreement to refer to the financial statements most recently delivered under Section 5.1(a) or (b) [Information] and to the date thereof at all times after the first such delivery thereunder rather than to the dates and financial statements specified in Section s 4.4 and 4.5). SECTION 6. Effectiveness. This Agreement shall become effective as of the date when the Administrative Agent shall have received: (a) Counterparts hereof duly executed by the Borrower, IR Parent, the New Additional Borrower and the Administrative Agent; (b) All documents the Administrative Agent may reasonably request relating to the existence of the New Additional Borrower, the corporate authority for and the validity of this Agreement and the Credit Agreement, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent; (c) A favorable written opinion of counsel for the New Additional Borrower, addressed to the Administrative Agent and the Banks, in form and substance reasonably satisfactory to the Administrative Agent; and (d) If the New Additional Borrower is organized under a jurisdiction other than the United States of America, evidence in form and substance reasonably satisfactory to the Administrative Agent that the New Additional Borrower has appointed an agent for service of process in New York City. SECTION 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first written above. INGERSOLL-RAND COMPANY By:/S/__________________________ Name: Title: INGERSOLL-RAND COMPANY LIMITED By:/S/____________________________ Name: Title: [NEW ADDITIONAL BORROWER] By:/S/____________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By:/S/____________________________ Name: Title: EX-4 6 exh4-14.txt AMENDMENT AND WAIVER - 364-DAY EXHIBIT 4.14 364-Day AMENDMENT AND WAIVER AMENDMENT AND WAIVER, dated as of November 28, 2001 (this "Amendment and Waiver"), to the Credit Agreement, dated as of July 2, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Borrower"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "Banks"), THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "Administrative Agent"), CITIBANK N.A. and DEUTSCHE BANC ALEX. BROWN INC., as co- syndication agents and THE BANK OF NOVA SCOTIA and BANK OF TOKYO MITSUBISHI TRUST COMPANY, as co-documentation agents. W I T N E S S E T H: WHEREAS, the Borrower has requested certain amendments to, and waivers of, the Credit Agreement; NOW THEREFORE, in consideration of the premises herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. 2. Amendments to Section 1.1 (Definitions). (a) Section 1.1 of the Credit Agreement is hereby amended by adding thereto in proper alphabetical order the following defined term: "IR Parent" means Ingersoll-Rand Company Limited, a Bermuda company. (b) The definitions of "Consolidated Debt", "Consolidated Net Worth", "Consolidated Subsidiary", "Debt" and "Material Adverse Effect" are hereby amended by replacing the references to "Borrower" therein with "IR Parent". (c) The definition of "Cross Default" is hereby amended by (i) inserting immediately after the first appearance of the word "Borrower" therein the words "or IR Parent" and (ii) by inserting immediately after the word "Borrower" in each of clauses (i) and (ii) thereof the words ", IR Parent". (d) The definition of "Lien" is hereby amended by inserting immediately after the word "Borrower" therein the words ", IR Parent". (e) The definition of "Material Debt" is hereby amended by (i) inserting immediately after the word "Borrower" in clause (ii) thereof the words ", IR Parent" and (ii) deleting the word "its" appearing in clause (ii) thereof and inserting in lieu thereof the words "their respective". (f) The definition of "Subsidiary" is hereby amended by inserting immediately before the period therein "or by IR Parent, as applicable". 3. Amendment to Section 1.2 (Accounting Terms and Determinations). Section 1.2 is hereby amended by (i) replacing both occurrences of the words "the Borrower's" therein with the words "IR Parent's" and (ii) replacing the first occurrence of the words "the Borrower" therein with the words "IR Parent". 4. Amendment to Section 1.3 (Types of Borrowings). Section 1.3 is hereby amended by inserting immediately after the word "Borrower" therein the phrase "or IR Parent". 5. Representations and Covenants. Notwithstanding any provisions of the Credit Agreement to the contrary, each covenant, representation and warranty therein made by the Borrower and/or its Subsidiaries under Sections IV and V is hereby deemed, from and after the effectiveness hereof, also to be covenants, representations and warranties made by IR Parent and its Subsidiaries to the same extent as if each such reference to the Borrower and/or its Subsidiaries were also references to IR Parent and/or its Subsidiaries, and such amendments to the Credit Agreement shall be deemed to be made, including, as appropriate, to defined terms used in such provisions, as are necessary to effectuate the foregoing, provided that (i) the reference to the Borrower's incorporation in New Jersey shall, as so deemed to apply to IR Parent, be a reference in respect of IR Parent to the laws of Bermuda, (ii) the references in Section 4.4(a) and (b) to previously delivered financial statements of the Borrower shall not be so deemed also to refer to IR Parent, (iii) Section 4.5 (Litigation) shall be deemed not to refer to the Borrower, but only to IR Parent, (iv) Section 4.6 (Compliance with ERISA) shall not be deemed also to apply to IR Parent, (v) Section 4.7 (Environmental Matters) shall be deemed not to refer to the Borrower, but only to IR Parent, so that the representations and warranties made therein with respect to environmental matters shall be made by IR Parent and not the Borrower, (vi) the first sentence of Section 4.8 (Taxes) shall not be deemed also to apply to IR Parent, and the reference in the second sentence thereof to U.S. tax returns shall, as so deemed to apply to IR Parent, be a reference in respect of IR Parent to Bermuda tax returns, (vii) Section 5.1(a), (b), (c), (e) and (f) shall be deemed not to refer to the Borrower, but only to IR Parent, so that the financial statements, the related compliance certificate, the reports, proxy statements and Securities and Exchange Commission filings referred to therein shall be required in respect of IR Parent and not the Borrower, (viii) Section 5.1(g) shall not be deemed also to apply to IR Parent and (ix) Section 5.2(a) shall be deemed not to refer to the Borrower, but only to IR Parent, so that covenant made therein with respect to the maintenance of property shall be made by IR Parent and not the Borrower. 6. Amendments to Section 2 (The Credits). (a) Section 2 is hereby amended to make certain references therein to "the Borrower" references to each of the Borrower and/or IR Parent as follows: (i) in Section 2.1, by inserting immediately after both occurrences of the word "Borrower" therein the phrase "or IR Parent"; (ii) in Section 2.2, by inserting immediately after the word "Borrower" therein the phrase "or IR Parent, as applicable"; (iii) in Section 2.3, by replacing each reference therein to "the Borrower" with a reference to "the Borrower or IR Parent", except that in subsection 2.3(f)(iv) the words "the Borrower may not" are hereby replaced with the words "neither the Borrower nor IR Parent may"; (iv) in Section 2.4(a), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent, as the case may be"; (v) in Section 2.4(b), (x) by inserting immediately after the word "Borrower" in the second sentence therein and as such word first appears in the third sentence therein the phrase "or IR Parent, as the case may be" and (y) by inserting immediately after the word "Borrower" as such word appears for the second time in the third sentence therein the phrase "or IR Parent"; (vi) in Section 2.4(c), (x) by inserting immediately after the word "Borrower" in the first sentence therein the phrase "or IR Parent, as the case may be" and (y) by inserting immediately after both occurrences of the word "Borrower" in the second sentence therein the phrase "or IR Parent"; (vii) in Section 2.5(a), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (viii) in Section 2.5(b), (x) by inserting immediately after the word "Borrower" in clause (ii) thereof the phrase "and IR Parent" and (y) by inserting immediately after the word "Borrower" in clause (iii) thereof the phrase "or IR Parent"; (ix) in Section 2.5(c), (x) by inserting immediately after the first occurrence of the word "Borrower" therein the phrase "and IR Parent" and (y) by inserting immediately after the second and third occurrences of the word "Borrower" therein the phrase "or IR Parent"; (x) in Section 2.5(d), (x) by inserting immediately after the first occurrence of the word "Borrower" therein the phrase "and IR Parent" and deleting the word "agrees" therein and inserting in lieu thereof the word "agree" and (y) by inserting immediately after the second occurrence of the word "Borrower" therein the phrase "or IR Parent, as the case may be,"; (xi) in Section 2.10(b) by inserting immediately after the word "Borrower" therein the phrase "and IR Parent"; (xii) in Section 2.11(a), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (xiii) in Section 2.11(b), by inserting immediately after the word "Borrower" therein the phrase "and IR Parent"; (xiv) in Section 2.11(c), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent, as the case may be"; (xv) in Section 2.12(a), by inserting immediately after each of the first and second occurrences of the word "Borrower" therein the phrase "and IR Parent, as applicable,"; (xvi) in Section 2.12(b), by inserting immediately after each of the four occurrences of the word "Borrower" therein the phrase "or IR Parent"; and (xvii) in Section 2.13, by inserting immediately after each of the five occurrences of the word "Borrower" therein the phrase "or IR Parent". (b) Section 2.15 of the Credit Agreement is hereby amended by inserting after each of the phrases "entitled to receive payments under this Agreement and the Notes" therein the phrase "from the Borrower or IR Parent". (c) In addition, Section 2 of the Credit Agreement is hereby amended by adding the following Section 2.17 (IR Parent Costs) at the end thereof: SECTION 2.17 IR Parent Costs. (a) If the cost to any Bank of making or maintaining any Loan to IR Parent is increased, or the amount of any sum received or receivable by any Bank (or its Applicable Lending Office) is reduced, by an amount deemed by such Bank to be material, by reason of the fact that IR Parent is organized under the laws of, or principally conducts its business in, a jurisdiction or jurisdictions outside the United States of America, the Borrower and IR Parent shall indemnify such Bank for such increased cost or reduction within 15 days after demand by such Bank (with a copy to the Administrative Agent). A certificate of such Bank claiming compensation under this subsection (a) and setting forth the additional amount or amounts to be paid to it hereunder, together with calculations in reasonable detail supporting such amounts, shall be conclusive in the absence of clearly demonstrable error. No such compensation may be claimed (x) in respect of any Committed Loan for any period prior to the date 90 days before the date of notice by such Bank to the Borrower of its intention to make claims therefore or (y) to the extent such Bank was aware of such cost or reduction at the time the related Loan was made. (b) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge that will entitle such Bank to additional interest or payments pursuant to the foregoing subsection (a) and will designate a different Applicable Lending Office, if, in the judgment of such Bank, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank. 7. Amendments to Section 6.1 (Events of Default). (a) Section 6.1 is hereby amended to make certain references therein to "the Borrower" references to each of the Borrower and IR Parent, or to IR Parent only, as follows: (i) in Section 6.1(a), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (ii) in Section 6.1(b), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (iii) in Section 6.1(c), by inserting immediately after both occurrences of the word "Borrower" therein the phrase "or IR Parent"; (iv) in Section 6.1(d), by inserting immediately after the word "Borrower" therein the phrase "or IR Parent"; (v) in Section 6.1(f), by inserting immediately after the word "Borrower" therein the words ", IR Parent"; (vi) in Section 6.1(g), by inserting immediately after both occurrences of the word "Borrower" therein the words ", IR Parent"; (vii) in Section 6.1(i), by inserting immediately after the word "Borrower" therein the words ", IR Parent"; (viii) in Section 6.1(j), by inserting in lieu of each occurrence of the word "Borrower" therein, the words "IR Parent"; (ix) in clause (ii) of Section 6.1, by inserting immediately after the second occurrence of the word "Borrower" therein the phrase "and IR Parent"; and (x) in the final proviso of Section 6.1, by (x) inserting immediately after the first and second occurrences of the word "Borrower" therein the phrase "or IR Parent" and (y) inserting immediately after the third occurrence of the word "Borrower" therein the phrase "and IR Parent". (b) In addition, Section 6.1 of the Credit Agreement is hereby amended by inserting immediately after subsection (j) thereof the following subsection (k): (k) the guarantee of the Borrower, made in Section 9.16(a) hereof, shall cease to be effective or the Borrower shall contest the validity of such guarantee in court; or the guarantee of IR Parent made in Section 9.16(b) hereof shall cease to be effective or IR Parent shall contest the validity of such guarantee in court; 8. Amendments to Section 3.2 (Borrowings). Section 3.2 of the Credit Agreement is hereby amended by inserting in the final sentence thereof after both occurrences of the word "Borrower" therein the words "and IR Parent". 9. Amendments to Section 8 (Change in Circumstances). (a) Section 8.2 of the Credit Agreement is hereby amended by inserting in the third sentence thereof after the word "Borrower" therein the words "or IR Parent, as the case may be,". (b) Section 8.3(a) of the Credit Agreement is hereby amended by inserting in the second to last sentence thereof after the word "Borrower" therein the words "or IR Parent, as the case may be,". (c) Section 8.3(b) of the Credit Agreement is hereby amended by (i) inserting immediately after the first occurrence of the word "Borrower" therein the phrase "or IR Parent, as the case may be" and (ii) inserting immediately after the second and third occurrences of the word "Borrower" therein the phrase "or IR Parent". 10. Amendments to Section 9 (Miscellaneous). (a) Section 9.5 of the Credit Agreement is hereby amended by inserting at the end thereof the following sentence: For the purposes of this Section, any Loans assigned to the Borrower pursuant to Section 9.16 shall not be considered outstanding. (b) Section 9.8 of the Credit Agreement is hereby amended by (i) in the second sentence thereof, (x) inserting after the word "Borrower" therein the words "and IR Parent" and (y) deleting the word "submits" therein and inserting in lieu thereof the word "submit" and (ii) in the third sentence thereof, (x) inserting after the word "Borrower" therein the words "and IR Parent" and (y) deleting the word "waives" therein and inserting in lieu thereof the word "waive". (c) In addition, Section 9 of the Credit Agreement is hereby amended by adding the following Section 9.16 (Guarantee Agreement) at the end thereof: SECTION 9.16 Guarantee Agreement. (a) Guarantee of the Borrower. In order to induce the Banks to extend credit to IR Parent hereunder, the Borrower hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of IR Parent. The Borrower further agrees that the due and punctual payment of the Obligations of IR Parent may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation. The Borrower waives presentment to, demand of payment from and protest to IR Parent of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of the Borrower hereunder shall not be affected by (a) the failure of any lender to assert any claim or demand or to enforce any right or remedy against IR Parent under the provisions of this Agreement and any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement or any other Loan Document or agreement; (d) the failure or delay of any Bank to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Bank to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might otherwise operate as a discharge of the Borrower as a matter of law or equity or which would impair or eliminate any right of the Borrower to subrogation. The Borrower further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Bank to any balance of any deposit account or credit on the books of any Bank in favor of the Borrower, IR Parent or any Subsidiary or any other Person. The obligations of the Borrower hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. The Borrower further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Bank upon the bankruptcy or reorganization of the Borrower or IR Parent or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Bank may have at law or in equity against the Borrower by virtue hereof, upon the failure of IR Parent to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Borrower hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Banks in cash an amount equal the unpaid principal amount of such Obligation. The Borrower further agrees that if payment in respect of any Obligation shall be due in currency other than Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Bank, not consistent with the protection of its rights, then, at the election of such Bank and in reasonable consultation with the Borrower, the Borrower shall make payments of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Bank against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment. Upon payment in full by the Borrower of any Obligation of IR Parent, each Bank shall, in a reasonable manner, assign to the Borrower the amount of such Obligation owed to such Bank and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by the Borrower, or make such disposition thereof as the Borrower shall direct (all without recourse to any Bank and without any representation or warranty by any Bank). Upon payment by the Borrower of any sums as provided above, all rights of the Borrower against IR Parent arising as a result thereof by way of right of subrogation, through the assignment described herein or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by IR Parent to the Bank (it being understood that, after the discharge of all the Obligations due and payable from IR Parent, such rights may be exercised by the Borrower notwithstanding that IR Parent may remain contingently liable for indemnity or other Obligations). (b) Guarantee of IR Parent. In order to induce the Banks to extend credit to the Borrower hereunder, IR Parent hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Borrower. IR Parent further agrees that the due and punctual payment of the Obligations of the Borrower may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation. IR Parent waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of IR Parent hereunder shall not be affected by (a) the failure of any lender to assert any claim or demand or to enforce any right or remedy against the Borrower under the provisions of this Agreement, any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement or any other Loan Document or agreement; (d) the failure or delay of any Bank to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Bank to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might otherwise operate as a discharge of IR Parent as a matter of law or equity or which would impair or eliminate any right of IR Parent to subrogation. IR Parent further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Bank to any balance of any deposit account or credit on the books of any Bank in favor of the Borrower or any Subsidiary or any other Person. The obligations of IR Parent hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. IR Parent further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Bank upon the bankruptcy or reorganization of the IR Parent or Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Bank may have at law or in equity against IR Parent by virtue hereof, upon the failure of the Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, IR Parent hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Banks in cash an amount equal the unpaid principal amount of such Obligation. IR Parent further agrees that if payment in respect of any Obligation shall be due in currency other than Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Bank, not consistent with the protection of its rights, then, at the election of such Bank and in reasonable consultation with IR Parent, IR Parent shall make payments of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Bank against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment. Upon payment in full by IR Parent of any Obligation of the Borrower, each Bank shall, in a reasonable manner, assign to IR Parent the amount of such Obligation owed to such Bank and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by IR Parent, or make such disposition thereof as IR Parent shall direct (all without recourse to any Bank and without any representation or warranty by any Bank). Upon payment by IR Parent of any sums as provided above, all rights of IR Parent against the Borrower arising as a result thereof by way of right of subrogation, through the assignment described herein or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by the Borrower to the Bank (it being understood that, after the discharge of all the Obligations due and payable from the Borrower, such rights may be exercised by IR Parent notwithstanding that the Borrower may remain contingently liable for indemnity or other Obligations). 11. Waiver. The Required Banks hereby waive any Default or Event of Default under the Credit Agreement, including of Section 5.7 (Consolidations, Mergers, Sales of Assets) or Section 6.1(j) (Change of Control) to the extent that it would otherwise directly result from the implementation of the corporate reorganization as and to the extent described in the Agreement and Plan of Merger, among Ingersoll-Rand Company, Ingersoll-Rand Company Limited and IR Merger Corporation, as attached to the proxy statement dated October 31, 2001 (the "Merger Agreement") and related information filed with the SEC and provided to the Banks in respect thereof, in each case prior to the date hereof. 12. Effectiveness. This Amendment and Waiver shall become effective as of the date hereof when (a) the Administrative Agent shall have received (i) counterparts hereof duly executed by the Borrower, IR Parent, the Administrative Agent and the Required Banks, (ii) legal opinions of counsel for the Borrower and for IR Parent in form reasonably satisfactory to the Administrative Agent, (iii) all documents the Administrative Agent may reasonably request relating to the existence of the IR Parent, the corporate authority for and the validity of this Amendment and Waiver and the Credit Agreement, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent and (iv) evidence in form and substance reasonably satisfactory to the Administrative Agent that IR Parent has appointed an agent for service of process in New York City and (b) the certificate of merger referred to in the Merger Agreement and filed with the Treasurer of State of New Jersey shall have become effective. 13. Representations and Warranties. The Borrower and IR Parent hereby represent and warrant on the date hereof that, after giving effect to this Amendment and Waiver, (a) no Default or Event of Default has occurred and is continuing and (b) each of the representations and warranties of the Borrower and IR Parent in or pursuant to the Loan Documents is true and correct in all material respects, as if made on and as of the date hereof. 14. Continuing Effect of Credit Agreement. This Amendment and Waiver shall not be construed as a waiver of or consent to any further or future action on the part of the Borrower or IR Parent that would require a waiver or consent by the Administrative Agent and/or the Banks. Except as expressly amended or waived hereby, the Credit Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. 15. Counterparts. This Amendment and Waiver may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment and Waiver by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. 16. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 17. Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of this Amendment and Waiver, including, without limitation, the fees and disbursements of counsel to the Administrative Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be executed and delivered by their duly authorized officers as of the date first written above. INGERSOLL-RAND COMPANY By: /S/_________________________ Name: Title: INGERSOLL-RAND COMPANY LIMITED By: /S/___________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Bank By: /S/___________________________ Name: Title: CITIBANK, N.A., as Co-Syndication Agent and as a Bank By: /S/___________________________ Name: Title: THE BANK OF NOVA SCOTIA, as Co- Documentation Agent and as a Bank By: /S/___________________________ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Co-Documentation Agent and as a Bank By: /S/___________________________ Name: Title: DEUTSCHE BANC ALEX. BROWN INC., as Co-Syndication Agent By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH and/or CAYMAN ISLANDS BRANCH By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: FLEET NATIONAL BANK By: /S/___________________________ Name: Title: BANK OF AMERICA, N.A. By: /S/___________________________ Name: Title: CREDIT SUISSE FIRST BOSTON By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: WACHOVIA BANK, N.A. By: /S/___________________________ Name: Title: BARCLAYS BANK, PLC By: /S/___________________________ Name: Title: HSBC BANK USA By: /S/___________________________ Name: Title: BNP PARIBAS By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: ING (U.S.) CAPITAL LLC By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: WELLS FARGO BANK, N.A. By: /S/___________________________ Name: Title: MELLON BANK, N.A. By: /S/___________________________ Name: Title: THE BANK OF NEW YORK By: /S/___________________________ Name: Title: CREDIT AGRICOLE INDOSUEZ By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: STANDARD CHARTERED BANK By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: INTESABCI-NEW YORK BRANCH By: /S/___________________________ Name: Title: NORDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /S/___________________________ Name: Title: By: /S/___________________________ Name: Title: THE NORTHERN TRUST COMPANY By: /S/___________________________ Name: Title: THE FUJI BANK, LIMITED By: /S/___________________________ Name: Title: BANK OF IRELAND INTERNATIONAL FINANCE LTD By: /S/___________________________ Name: Title: EX-10 7 exh10-2.txt MANAGEMENT INCENTIVE UNIT PLAN EXHIBIT 10.2 REORGANIZATION AMENDMENT TO THE MANAGEMENT INCENTIVE UNIT PLAN OF INGERSOLL-RAND COMPANY WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Management Incentive Unit Plan of Ingersoll-Rand Company (the "Plan"); and WHEREAS, the Plan has been amended from time to time; and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section XV(b) of the Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates as defined below: 1. The definition of Common Stock in Section II(c) of the Plan is hereby amended and restated in its entirety as of the Effective Time to read as follows: "(c) `Common Stock' means the Class A common shares, par value $1.00 per share, of Ingersoll-Rand Company Limited, a Bermuda company." 2. Section II of the Plan is hereby amended to include the following definitions in proper alphabetical progression: "(g-1) `Effective Time' means the Effective Time as such term is defined in the Merger Agreement." "(h-1) `Merger Agreement' means that certain Agreement and Plan of Merger among the Company, Ingersoll- Rand Company Limited and IR Merger Corporation, dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 3. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company has had its duly authorized representative sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary EX-10 8 exh10-4.txt IR DIRECTOR DEFERRED COMPENSATION AND STOCK AWARD PLAN EXHIBIT 10.4 FIRST AMENDMENT TO THE IR DIRECTOR DEFERRED COMPENSATION AND STOCK AWARD PLAN WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the IR Director Deferred Compensation and Stock Award Plan (the "Plan") which was originally effective on January 1, 1997; and WHEREAS, the Plan has been amended and restated most recently effective January 1, 2001; and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section 8.1 of the Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates noted below: 1. As of the Effective Time the name of the Plan is hereby changed to IR-Limited Director Deferred Compensation and Stock Award Plan, and Ingersoll Rand Company Limited hereby assumes the rights and obligations of Ingersoll-Rand Company under the Plan and shall become the Plan sponsor. All references to the "Company" shall become references to Ingersoll-Rand Company Limited. 2. Section 1 of the Plan is hereby amended as of the Effective Time to read as follows in its entirety: "The purpose of the IR-Limited Director Deferred Compensation and Stock Award Plan (the "Plan") is to further increase the mutuality of interest between Ingersoll- Rand Company Limited, a Bermuda company (as of the Effective Time, the "Company"), its non-employee members of the Board ("Non-employee Directors") and members by providing its Non- employee Directors the opportunity to elect to defer receipt of cash compensation. The Plan, originally known as the Ingersoll-Rand Company Directors Deferred Compensation and Stock Award Plan, became effective on January 1, 1997, was amended and restated effective January 1, 2001, and was subsequently amended as of December , 2001." 3. Section 2.12 of the Plan is hereby amended and restated in its entirety to read as follows as of the Effective Time: "2.12 `IR Stock' means the Class A common shares, par value $1.00 per share, of the Company." 4. Section 2 of the Plan is hereby amended to include the following definitions in proper alphabetical progression: "2.8A `Effective Time' means the Effective Time as such term is defined in the Merger Agreement." "2.13A `Merger Agreement' means that certain Agreement and Plan of Merger among Ingersoll-Rand Company, Ingersoll-Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which Ingersoll- Rand Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 5. Section 6.4(4) of the Plan, "Change in Control", is hereby amended by adding the following subparagraph (d) to the end thereof: "(d) Notwithstanding any provision of this Section 6.4 or any other provision of the Plan to the contrary, none of the transactions contemplated by the Merger Agreement which are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on or after the Effective Time shall trigger, constitute or be deemed a Change in Control." 6. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company and Ingersoll-Rand Company Limited have had their duly authorized representatives sign this Amendment on December 21, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary INGERSOLL-RAND COMPANY LIMITED By: /S/ Patricia Nachtigal Senior Vice President and General Counsel EX-10 9 exh10-5.txt DESCRIPTION OF BONUS ARRANGEMENT EXHIBIT 10.5 DESCRIPTION OF BONUS ARRANGEMENT FOR SECTOR PRESIDENTS OF INGERSOLL-RAND COMPANY LIMITED There is no formal document setting forth this arrangement. However, the Compensation and Nominating Committee of the Board of Directors will approve bonus arrangements for the Sector Presidents for 2002 which will be dependent upon the performance of the Sector Presidents' respective sectors in two categories; a set of financial objectives based on Sales, Operating Income, Cash Flow and Return on invested capital, and a set of individual objectives, which are based on improved organizational effectiveness, for both their respected sector and the enterprise. Discretionary bonuses may be paid in the event that goals are not met. EX-10 10 exh10-7.txt AMENDED AND RESTATED AGREEMENT EXHIBIT 10.7 AMENDED AND RESTATED AGREEMENT This AGREEMENT, amended and restated as of October 1, 2001, is between INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"), and HERBERT L. HENKEL (the "Employee"). Unless otherwise indicated, terms used herein and defined in Schedule A hereto shall have the meanings assigned to them in said Schedule. The Company and the Employee are already parties to an agreement that is currently in effect, which they desire to hereby amend and restate. The Company and the Employee agree as follows: 1. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution and shall continue thereafter from year to year prior to a Change of Control Event unless terminated as of any anniversary of the date hereof by either party upon written notice to the other party given at least 60 days, but not more than 90 days, prior to such anniversary date. Notwithstanding the foregoing, this Agreement may not be terminated after the occurrence of a Change of Control Event. 2. AGREEMENT TERM. The term of this Agreement shall begin on the date hereof and, unless terminated pursuant to paragraph 1 prior to a Change of Control Event, shall end on the fifth anniversary of the occurrence of a Change of Control Event (or, if later, after satisfaction of all obligations hereunder). 3. EMPLOYEE'S POSITION AND RESPONSIBILITIES. (A) The Employee will continue to serve the Company upon the occurrence of a Change of Control Event, in all material respects, in the same capacity (including position, status, offices, titles and reporting responsibilities) with the same authorities, duties and responsibilities as he serves the Company immediately prior thereto. (b) During the term of this Agreement the Employee shall devote substantially all of his business time (excluding vacation time and sick leave to which the Employee is entitled) and attention exclusively to the business and affairs of the Company and shall use his reasonable best efforts to promote the interests of the Company. The participation of the Employee in outside directorships and civic or charitable activities, and the management of the Employee's personal investments in public companies in which the Employee holdings do not exceed 5% of the voting power or value of such companies, in each case, which do not materially interfere with the performance of Employee's duties for the Company shall not be deemed a violation of this paragraph 3. 4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF CONTROL EVENT. The Company and the Employee agree that, upon the occurrence of any Change of Control Event, the Employee shall receive basic annual salary, bonus and fringe and other benefits as follows: (a) Basic Annual Salary and Bonus. The Employee's basic annual salary shall be at a rate not less than the rate of annual salary, which has been paid to the Employee immediately prior to the Change of Control Event, with such annual increases (but not decreases) equal to the greater of (i) salary increases as may be contemplated by any salary adjustment programs of the Company in effect immediately prior to the Change of Control Event and applicable to the Employee and such further increases as shall be determined from time to time by the Board or (ii) a percentage equal to the percentage increase (if any) in the "Consumer Price Index for All Urban Consumers" published by the United States Department of Labor's Bureau of Labor Statistics for the then most recently ended 12-month period. In addition, the Employee shall be entitled to receive an annual bonus in an amount not less than the highest annual bonus received by, or accrued on behalf of, the Employee during the lesser of (i) the five full Fiscal Years immediately preceding the Change of Control Event, or (ii) the number of full Fiscal Years immediately preceding the Change of Control Event during which the Employee has been employed by the Company (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the IR Executive Deferred Compensation Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (b) Fringe Benefits; Business Expenses. The Employee shall be entitled to receive benefits, including but not limited to pension (and supplemental pension), savings and stock investment plan (and supplemental savings and stock investment and retirement plans), leveraged employee stock ownership plan, stock award, stock option, deferred compensation, and welfare plans (as defined in section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, or otherwise) including, but not limited to, life, medical, prescription drugs, dental, disability, accidental death and travel accident coverage plans, post-retirement welfare benefits, and an estate enhancement program on terms no less favorable than those in effect under each such plan immediately prior to the Change of Control Event, and at no less than the same benefit levels (and no more than the same employee contribution levels) then in effect under each such plan and to receive all other fringe benefits and perquisites (or their equivalent) from time to time in effect for the benefit of any executive, management or administrative group for which the employment position then held by the Employee entitles the Employee to participate. The Company shall provide for the payment of, or reimburse the Employee for, all travel and other out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder. (c) Management Incentive Unit Award Plan. The Company and the Employee further agree that immediately upon the occurrence of any Change of Control Event, all amounts theretofore credited to the Employee under the Company's Management Incentive Unit Award Plan, as amended (the "MIU Plan"), shall become fully vested and all such amounts thereafter credited shall become fully vested immediately upon such crediting. 5. PAYMENTS AND BENEFITS UPON TERMINATION. The Employee shall be entitled to the following payments and benefits upon Termination: (a) Salary and Bonus. The Company shall pay to the Employee, in a cash lump sum on the Termination Date, an amount equal to the sum of (i) the basic annual salary and any annual bonus in respect of a completed fiscal year, which have not yet been paid to the Employee through the Termination Date; (ii) an amount equal to the last annual bonus received by, or awarded to, the Employee for the full Fiscal Year immediately preceding the Termination Date multiplied by a fraction the numerator of which shall be the number of full months the Employee was employed by the Company during the Fiscal Year containing the Employee's Termination Date and the denominator of which shall be 12; and (iii) an amount equal to the Employee's basic annual salary multiplied by a fraction, the numerator of which shall be the number of unused vacation days to which the Employee is entitled as of the Termination Date and the denominator of which shall be 365, and any other amounts normally paid to an employee by the Company upon termination of employment. For these purposes, any partial month during which the Employee is employed shall be deemed a full month. (b) Severance. The Company shall pay to the Employee, in a cash lump sum not more than 30 days following the Termination Date, an amount equal to three times the sum of (i) the highest basic annual salary in effect at any time during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date; and (ii) the Employee's target bonus for the year of termination or, if higher, the highest annual bonus received by, or accrued on behalf of, the Employee during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the IR Executive Deferred Compensation Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (c) Employee Benefit Plans. For the three-year period following the Termination Date (or, if sooner, until the Employee is covered under a comparable plan offered by a subsequent employer), the Company shall continue to cover the Employee under those employee welfare plans (including, but not limited to, life, medical, prescription drugs, dental, accidental death and travel accident and disability coverage, but not including any severance pay plan, other than that provided pursuant to this Agreement or any pension plan) applicable to the Employee on the Termination Date at the same benefit levels then in effect (or shall provide their equivalent); provided, however, that if the Employee becomes employed by a new employer and participates in a welfare plan of such employer that is at least as favorable as the comparable Company plan, the Employee's coverage hereunder under the applicable Company welfare plan (or the equivalent) shall continue as secondary coverage to that provided by the new employer until the third anniversary of the Termination Date (but shall become primary coverage on or prior to the third anniversary of the Termination Date if, for any reason, the Employee ceases to participate in the new employer's plan or if such new employer's plan becomes less favorable than the comparable Company plan). (d) Deferred Compensation, Savings and Leveraged Employee Stock Ownership Plans. As soon as practicable following the determination thereof (but in any event no later than 30 days following the Termination Date), the Company shall pay the Employee an amount (in one lump sum cash payment and in lieu of the benefit otherwise provided under the applicable plan) equal to the value of the sum of: (i) with respect to the IR Executive Deferred Compensation Plan (the "Executive Deferred Plan"), the number of IR Stock units credited to the Employee's Account Balance for all Plan Years (as such terms are defined in the Executive Deferred Plan) at the Termination Date multiplied by the Company Stock Value (as defined in paragraph 5(g) below) plus the value of all other amounts credited to the Employee's Account Balance for all Plan Years under the Executive Deferral Plan at the Termination Date as such value is determined under the terms of the Executive Deferred Plan; (ii) the number of Common Stock equivalents credited to the Employee's Employee Account under the Ingersoll-Rand Company Supplemental Savings and Stock Investment Plan at the Termination Date multiplied by the Company Stock Value (as defined in paragraph 5(g) below); (iii) the amount credited to the Employee's Employee Account under the Ingersoll- Rand Company Supplemental Retirement Account Plan at the Termination Date; (iv) all contributions to, or amounts credited to, the Ingersoll-Rand Company Savings and Stock Investment Plan, IR/Clark Leveraged Employee Stock Ownership Plan, Ingersoll-Rand Company Supplemental Savings and Stock Investment Plan, and Ingersoll-Rand Company Supplemental Retirement Account Plan (and earnings and appreciation attributable thereto) that theretofore were made by the Company on behalf of the Employee and are forfeited as a result of the Employee's Termination; and (v) five percent (or such higher maximum Company Matching Contribution percentage provided under the Ingersoll-Rand Company Savings and Stock Investment Plan as of the Termination Date, calculated as though no Contribution Percentage Limitation or other limits under the Ingersoll-Rand Company Savings and Stock Investment Plan were applicable (as those terms are defined in the Ingersoll- Rand Company Savings and Stock Investment Plan)) of the aggregate amount payable pursuant to subparagraphs 5(a) and 5(b). (e) Pension Benefits. (i) No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the present value of the sum of the pension benefits the Employee is entitled to receive under (A) the Restated Ingersoll-Rand Company Supplemental Pension Plan (the "Section 415 Excess Plan"), (B) the Ingersoll-Rand Company Elected Officers Supplemental Program (the "Elected Officers Supplemental Program" or the "Program"), and (C) the Ingersoll- Rand Company Executive Supplementary Retirement Agreement (the "Ten-Year Annuity"), all as in effect immediately prior to the Change of Control Event (collectively, the "Pension Benefit"). (ii) In calculating the portion of the Pension Benefit under Section 1.1 of the Section 415 Excess Plan the Company shall credit the Employee with five additional years of credited service (within the meaning of the Company's qualified defined benefit plan in which the Employee actively participates immediately prior to the Change of Control Event (the "Qualified Pension Plan"), and including compensation, vesting and age credit) and five additional years of age for purposes of the Section 415 Excess Plan but not the Qualified Pension Plan. (If, after crediting five years of age, the Employee is less than fifty-five years old, it will be assumed that the benefit commencement age for purposes of the Section 415 Excess Plan is fifty-five). (iii) In calculating the portion of the Pension Benefit under the Elected Officers Supplemental Program, the Company shall: (A) credit the Employee with an additional seventeen Years of Service (as defined in the Program) and an additional five years of age for purposes of computing the amount of the Pension Benefit; (B) define "Final Average Pay" in Section 1.10 of the Program as 1/3 of the severance amount determined pursuant to paragraph 5(b) of this Agreement; (C) revise Section 3.1(a) of the Program to read "the product of: (x) 53.6% plus the product of 1.9% times Years of Service after 1999, and (y) his Final Average Pay"; and (D) for purposes of benefit offset determinations, increase the annual life annuity pension benefit as determined in Appendix A, paragraph (a), by the product of: (x) $139,548, and (y) 1 minus the sum of (a) 1/180 for each of the next 60 months plus (b) 1/360 for each of the next 60 months that the Change in Control Event precedes the Employee's 65th birthday, and (z) in the event that a change in control precedes the Employee's 55th birthday, a further actuarial reduction factor for the period (measured in years and months) between the Employee's actual retirement age and age 55, computed using the applicable definition of "Actuarial Equivalent" under the provisions of the qualified defined benefit pension plan in which the Employee actively participated immediately prior to the Change in Control Event. (iv) In calculating the portion of the Pension Benefit under the Ten-Year Annuity: (A) the phrase "subject to paragraph 5 hereof" shall be deleted, and the phrase "normal retirement age" or "age 65", as applicable depending on the Employee's arrangement, shall be replaced with "age 62", in each case, in paragraph 1; (B) the Company shall credit the Employee with five additional years of age but to an age no greater than 62; and (C) the competition restriction under the Ten-Year Annuity shall be deleted, and shall be null and void as of the Termination Date. (v) The present value of the Pension Benefit shall be calculated using (A) an interest rate equal to the product of (I) the 10-year Treasury Note rate as used in the Elected Officers Supplemental Program's definition of Actuarial Equivalent times (II) one minus the federal income tax rate at the highest bracket of income for individuals in effect for the year containing the date of payment, (B) the mortality rate used to determine lump sum values in the Elected Officers Supplemental Program, and (C) actual age without the five year addition to age, except that the Ten-Year Annuity present value shall be calculated using no mortality assumption and actual age plus the additional five years but to an age no greater than 62. (f) Retiree Welfare Benefits. For purposes of determining the Employee's eligibility for post-retirement benefits under any welfare plan maintained by the Company prior to the occurrence of a Change of Control Event, the Employee shall be credited with any combination of additional years of service and age not exceeding 10 years, to the extent necessary to qualify for benefits. If, after taking into account such additional age and service, the Employee is eligible for the Company's post- retirement welfare benefits (or would have been eligible under the terms of such plans as in effect prior to the occurrence of the Change of Control Event), the Employee shall receive, commencing on the third anniversary of the Termination Date, post- retirement welfare benefits no less favorable than the benefits the Employee would have received under the terms and conditions of the applicable plans in effect immediately prior to the occurrence of the Change of Control Event. (g) Employee Stock Awards, Options, SARs and MIUs. No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the aggregate Company Stock Value (defined below) of all shares underlying 100% of the Employee's then outstanding and unpaid stock and stock based awards (excluding stock options) (minus any applicable exercise price, in the case of stock appreciation rights) under the Company's Incentive Stock Plans, the MIU Plan and any similar plans of the Company (or any other company), which shall all be deemed vested and performance objectives shall be deemed fully earned, whether or not otherwise vested and fully earned in accordance with the terms of the employee benefit plans and agreements pursuant to which such stock and stock based awards were granted (upon such payment in full, such stock and stock based awards shall be cancelled and be of no further force or effect). In addition, all options to purchase shares of common stock of the Company (or the stock of any company for which the Company's stock has been substituted or exchanged or in respect of which options have been granted to the Employee) ("Company Stock") and all stock appreciation rights held by the Employee immediately prior to Termination shall become exercisable as of the Termination Date, whether or not otherwise exercisable in accordance with the terms of the employee benefit plans and agreements pursuant to which such options and stock appreciation rights were granted. During the 60 day period following the Termination Date, the Employee shall have the right to elect to exercise any or all stock options then held by the Employee as if such option were a stock appreciation right and, therefore, receive a cash payment equal to (x) the number of shares of Company Stock subject to each such option (or portion thereof), multiplied by (y) the excess of the Company Stock Value over the exercise price of such option (upon such payment in full, any stock option so exercised as a stock appreciation right shall be cancelled and be of no further force or effect). For purposes of this Agreement, Company Stock Value shall be deemed to be the highest of: (i) the closing sale price of the Company Stock on the New York Stock Exchange on the Change of Control Event; (ii) the closing sale price of the Company Stock on the New York Stock Exchange on the Termination Date; and (iii) the highest closing sale price of the Company Stock on the New York Stock Exchange during the 30 trading days immediately preceding the acquisition of more than 50% of the outstanding Company Stock by any person or group (including Affiliates of such person or group). If, as of any valuation date, the Company Stock is not traded on the New York Stock Exchange, the Company Stock Value shall be the closing sale price of the Company Stock on the principal national securities exchange on which the Common Stock is traded or, if the Common Stock is not traded on any national securities exchange, the closing bid price of the Common Stock in the over-the-counter market. (h) Estate Enhancement Program. If the Employee participates in the Ingersoll-Rand Company Estate Enhancement Program, the terms thereof shall apply. (i) Outplacement Expenses. For the three year period following the Termination Date, the Company shall reimburse the Employee for all reasonable expenses (up to 15% of the Employee's basic annual salary, but no more than $75,000, per 12 month period) incurred by the Employee for professional outplacement services by qualified consultants selected by the Employee. 6. PARACHUTE EXCISE TAX GROSS-UP. (A) If, as a result of any payment or benefit provided under this Agreement, either alone or together with other payments and benefits which the Employee receives or is then entitled to receive from the Company or any of its Affiliates, the Employee becomes subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (together with any income, employment or other taxes, interest and penalties thereon, an "Excise Tax"), the Company shall pay the Employee an amount sufficient to place the Employee in the same after-tax financial position that he would have been in if he had not incurred any Excise Tax (together with any taxes, interest and penalties hereon, the "Gross-Up Payment"). For purposes of determining whether the Employee is subject to an Excise Tax, (i) any payments or benefits received by the Employee (whether pursuant to the terms hereof or pursuant to any plan, arrangement or other agreement with the Company or any entity Affiliated with the Company) shall be deemed to be contingent on a change described in Section 280G(b)(2)(A)(i) of the Code and shall be taken into account and (ii) the Employee shall be deemed to pay taxes at the highest marginal applicable rates of such taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum deduction in federal income taxes which could be obtained from deduction of such state and local taxes. (b) The determination of whether the Employee is subject to Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as other calculations hereunder, shall be made at the expense of the Company by the independent auditors of the Company immediately prior to the Change of Control Event, which shall provide the Employee with prompt written notice (the "Company Notice") setting forth their determinations and calculations. Within 30 days following the receipt by the Employee of the Company Notice, the Employee may notify the Company in writing (the "Employee Notice") if the Employee disagrees with such determinations or calculations, setting forth the reasons for any such disagreement. If the Company and the Employee do not resolve such disagreement within 10 business days following receipt by the Company of the Employee Notice, the Company and the Employee shall agree upon a nationally recognized accounting or compensation firm (the "Resolving Firm") to make a determination with respect to such disagreement. If the Employee and the Company are unable to agree upon the Resolving Firm within 20 business days following the Employee Notice, the New York office of Towers, Perrin shall be the Resolving Firm. Within 30 business days following the Employee Notice, if the disagreement is not resolved by such time, each of the Employee and the Company shall submit its position to the Resolving Firm, which shall make a determination as to all such disagreements within 30 days following the last of such submissions, which determination shall be binding upon the Employee and the Company. The Company shall pay all reasonable expenses incurred by either party in connection with the determinations, calculations, disagreements or resolutions pursuant to this paragraph, including, but not limited to, reasonable legal, consulting or other similar fees and expenses. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30 day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Employee; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or other tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Employee is required to extend the statute of limitations to enable the Company to contest such claim, the Employee may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Employee's consent if such position or resolution could reasonably be expected to adversely affect the Employee (including any other tax position of the Employee unrelated to the matters covered hereby). (e) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company or the Resolving Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies and the Employee thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax, the Company or the Resolving Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall promptly be paid by the Company to or for the benefit of the Employee. (f) If, after the receipt by Employee of an amount advanced by the Company in connection with the contest of Excise Tax claim, the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund actually received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, by the amount of the Gross-Up Payment. 7. EFFECT ON OTHER ARRANGEMENTS. No provision of this Agreement shall affect or limit any interests or rights vested in the Employee under any other agreement or arrangement with the Employee or under any pension, profit-sharing, medical or other insurance or other benefit plans of the Company which may be in effect and in which the Employee may be participating at any time. 8. CONFIDENTIALITY. The Employee agrees to hold in confidence any and all confidential information known to him concerning the Company and its businesses so long as such information is not otherwise publicly disclosed; provided that the Employee shall be entitled to divulge confidences and confidential information (i) as required by applicable law or legal process (e.g., subpoena or investigation by governmental authority) or (ii) to defend the Employee in any action, suit or investigation or to enforce the Employee's rights hereunder or otherwise. 9. MISCELLANEOUS. (A) Legal Expenses; Severability. The Company shall pay all costs and expenses, including attorneys' fees, of the Company and, at least quarterly, the Employee, in connection with any legal proceedings, whether or not instituted by the Company, relating to the interpretation or enforcement of this Agreement. In the event that the provisions of this paragraph shall be determined to be invalid or unenforceable in any respect, such declaration shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. (b) Mitigation. All payments or benefits required by the terms of this Agreement shall be made or provided without offset, deduction, or mitigation on account of income the Employee may receive from other employment or otherwise and the Employee shall not have any obligation or duty to seek any other employment or otherwise earn any amounts to reduce or mitigate any payments required hereunder. (c) Death of the Employee. In the event of the Employee's death subsequent to Termination, all payments called for hereunder shall be paid to the Employee's designated beneficiary or beneficiaries, or to his estate if he has not designated a beneficiary or beneficiaries. (d) Notices. Any notice or other communication provided for in this Agreement or contemplated hereby shall be sufficiently given if given in writing and delivered by hand, by overnight courier (with receipt) or by certified mail, return receipt requested, and addressed, in the case of the Company, to the Company at: 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attention: Chairman of the Board of Directors or such other address if the executive offices of the Company have moved; and, in the case of the Employee, to the Employee at: 41 Twin Brooks Road Saddle River, New Jersey 07458 Either party may designate a different address by giving notice of change of address in the manner provided above. (e) Waiver. No waiver or modification in whole or in part of this Agreement, or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or any right or power by any party on one occasion shall not be construed as a waiver of, or a bar to, the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. (f) Binding Effect; Successors. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Employee and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph shall continue to apply to each subsequent employer of the Employee hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. (g) Calculations. Calculation of all benefits and amounts payable hereunder shall be made, at the expense of the Company, by the Wellesley Hills, Massachusetts office of Watson Wyatt & Company (or the Company's then actuary immediately prior to the Change of Control Event). (h) Plan Limitations. In the event the Company is unable to provide any benefit required to be provided under this Agreement through a plan sponsored by the Company or its Affiliates, the Company shall, at its own cost and expense, take appropriate actions to insure that alternative arrangements are made so that equivalent benefits can be provided to the Employee, including to the extent appropriate purchasing for the benefit of the Employee (and if applicable the Employee's dependents) individual policies of insurance providing benefits, which on an after-tax basis, are equivalent to the benefits required to be provided hereunder. (i) Controlling Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed therein, without regard to conflicts of laws principles. Any suit, action or proceeding related to this Agreement, or any judgment entered by any court related to this Agreement, may be brought only in any court of competent jurisdiction in the State of New Jersey, and the parties hereby submit to the exclusive jurisdiction of such courts. The parties (and any Affiliates of the Company or beneficiary of the Employee, or any successor to the Company or the Company's Affiliate) irrevocably waive any objections which they may now or hereafter have to the laying of venue of any suit, action or proceeding brought in any court of competent jurisdiction in the State of New Jersey, and hereby irrevocably waive any claim that any such action, suit or proceeding has been brought in an inconvenient forum. 10. EFFECT ON PRIOR AGREEMENTS. Subject to paragraph 7, this Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior employment or severance agreement or understanding between the Company (or any Affiliate thereof) and the Employee. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. INGERSOLL-RAND COMPANY _____________________________ _____________________________ EMPLOYEE By: Patricia Nachtigal Title: Senior Vice President and General Counsel Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate", used to indicate a relationship with a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such a specified person. "Associate", used to indicate a relationship with a specified person, means (i) any corporation, partnership, or other organization of which such specified person is an officer or partner; (ii) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person, or who is a director or officer of the Company or any of its parents or subsidiaries; and (iv) any person who is a director, officer, or partner of such specified person or of any corporation (other than the Company or any wholly-owned subsidiary of the Company), partnership or other entity which is an Affiliate of such specified person. "Beneficial Owner" means the same as such term is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor provision at the time in effect); provided, however, that any individual, corporation, partnership, group, association, or other person or entity which has the right to acquire any of the Company's outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement, or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such securities. "Board" means the Board of Directors of the Company (or, if the Company is then a subsidiary of any other company, of the ultimate parent company). "Cause" means (i) any action by the Employee involving willful malfeasance or willful gross misconduct having a demonstrable adverse effect on the Company; (ii) substantial and continuing refusal by the Employee in willful breach of this Agreement to perform his employment duties hereunder; or (iii) the Employee being convicted of a felony under the laws of the United States or any state. Termination of the Employee for Cause shall be communicated by a Notice of Termination given within one year after the Board (i) has knowledge of conduct or an event allegedly constituting Cause; and (ii) has reason to believe that such conduct or event could be grounds for Cause. For purposes of this Agreement a "Notice of Termination" shall mean delivery to the Employee of a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board at a meeting of that Board called and held for the purpose (after reasonable notice to the Employee ("Preliminary Notice") and reasonable opportunity for the Employee, together with the Employee's counsel, to be heard before the Board prior to such vote) of finding, in the good faith opinion of the Board, that the Employee has engaged in the conduct constituting Cause and specifying the particulars thereof in detail. Upon the receipt of the Preliminary Notice, the Employee shall have 30 days in which to appear with counsel or take such other action as he desires on his behalf, and such 30- day period is hereby agreed to by the parties as a reasonable opportunity for the Employee to be heard. The Board shall no later than 45 days after the receipt of the Preliminary Notice by the Employee communicate its findings to Employee. A failure by the Board to make its finding of Cause or to communicate its conclusion within such 45-day period shall be deemed to be a finding that the Employee has not engaged in the conduct described herein. Any termination of the Employee's employment (other than by death or Permanent Disability) within 45 days after the date that the Preliminary Notice has been given to the Employee shall be deemed to be a termination for Cause; provided, however, that if during such period the Employee voluntarily terminates other than for Good Reason or the Company terminates the Employee other than for Cause, and the Employee is found (or is deemed to be found) not to have engaged in the conduct described herein, such termination shall not be deemed to be for Cause. "Change of Control Event" means the date (i) any individual, corporation, partnership, group, association or other person or entity, together with its Affiliates and Associates (each a "Person") (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company), is or becomes the Beneficial Owner of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; (ii) the Continuing Directors fail to constitute a majority of the members of the Board; (iii) of consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company; or (iv) of any sale, lease, exchange or other transfer, in one transaction or a series of related transactions, of all, or substantially all, of the assets of the Company, other than any sale, lease, exchange or other transfer to any Person or entity where the Company owns, directly or indirectly, at least 80% of the outstanding voting securities of such Person or entity or its parent corporation after any such transfer; provided, however, that in the case of a transaction described in (i), (iii) or (iv), above, there shall not be a Change of Control Event if the shareholders of the Company immediately prior to any such transaction own (or continue to own by remaining outstanding or by being converted into voting securities of the surviving entity or parent entity) 70% or more of the combined voting power of the voting securities of the Company, the surviving entity or any parent of either outstanding immediately following such transaction, in substantially the same proportion to each other as prior to such transaction. For purposes of the foregoing definition and the definitions of "Continuing Director" and "Duly Approved by the Continuing Directors," below, following the contemplated inversion transaction, "the Company" shall mean either Ingersoll-Rand Company or the Bermuda entity that owns Ingersoll-Rand Company. "Continuing Director" means a director who either was a member of the Board on the date hereof or who became a member of the Board subsequent to such date and whose election, or nomination for election by the Company's shareholders, was Duly Approved by the Continuing Directors on the Board at the time of such nomination or election, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Board in which such person is named as nominee for director, without due objection to such nomination, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board. "Duly Approved by the Continuing Directors" means an action approved by the vote of at least two-thirds of the Continuing Directors then on the Board. "Fiscal Year" means the fiscal year of the Company. "Good Reason" means (i) a material adverse change in the Employee's job responsibilities, title or status from those in effect on the date hereof or as enhanced from time to time, which change continues for a period of at least 15 days after written notice from the Employee; (ii) a reduction of the Employee's base salary or target bonus, the failure to pay Employee's salary or bonus when due, or the failure to maintain on behalf of the Employee (and his or her dependents) benefits which are at least as favorable in the aggregate to those provided for in paragraph 4(b); (iii) the relocation of the principal place of the Employee's employment by more than 35 miles from the Employee's principal place of employment immediately prior to the Change of Control Event, or the imposition of travel requirements on the Employee not substantially consistent with such travel requirements existing immediately prior to the Change of Control Event; (iv) the failure of the Company to obtain the assumption of, and the agreement to perform, this Agreement by any successor as contemplated in paragraph 8(f); (v) any voluntary resignation of employment by Employee following a Change of Control Event; or (vi) the failure of the Company to perform any of its other material obligations under this Agreement and the continuation of such failure for a period of 15 days after written notice from the Employee. "Permanent Disability", as applied to the Employee, means that (i) he has been totally incapacitated by bodily injury or disease so as to be prevented thereby from performing his duties hereunder; (ii) such total incapacity shall have continued for a period of six consecutive months; and (iii) such total incapacity will, in the opinion of a qualified physician, be permanent and continuous during the remainder of the Employee's life. "Termination" means (i) following the occurrence of a Change of Control Event, (A) the termination of the Employee's employment without Cause or (B) the resignation by an Employee for Good Reason, and (ii) prior to the occurrence of a Change of Control Event, but following the execution of an agreement or the commencement of a tender offer, proxy contest or other action that, if consummated, would reasonably be expected to result in a Change of Control Event and, in each case, does result in a Change of Control Event, the termination of the Employee's employment, or a material adverse change in the Employee's job responsibilities, title or status, reduction of the Employee's base salary or target bonus, the relocation of the Employee's principal place of employment by more than 35 miles or the imposition of travel requirements on the Employee not substantially consistent with the Employee's job; provided, that such term shall not include any termination of employment for Cause, any resignation without Good Reason (except as provided in clause (ii), above), or any termination of employment on account of an Employee's death or Permanent Disability. "Termination Date" shall mean the effective date of an Employee's Termination; provided, that with respect to a Termination that occurs prior to a Change of Control Event, the effective date of such Termination shall be deemed to be the date immediately following the Change of Control Event. EX-10 11 exh10-8.txt AMENDED AND RESTATED AGREEMENT EXHIBIT 10.8 AMENDED AND RESTATED AGREEMENT This AGREEMENT, amended and restated as of October 1, 2001, is between INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"), and _________ (the "Employee"). Unless otherwise indicated, terms used herein and defined in Schedule A hereto shall have the meanings assigned to them in said Schedule. The Company and the Employee are already parties to an agreement that is currently in effect, which they desire to hereby amend and restate. The Company and the Employee agree as follows: 1. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution and shall continue thereafter from year to year prior to a Change of Control Event unless terminated as of any anniversary of the date hereof by either party upon written notice to the other party given at least 60 days, but not more than 90 days, prior to such anniversary date. Notwithstanding the foregoing, this Agreement may not be terminated after the occurrence of a Change of Control Event. 2. AGREEMENT TERM. The term of this Agreement shall begin on the date hereof and, unless terminated pursuant to paragraph 1 prior to a Change of Control Event, shall end on the fifth anniversary of the occurrence of a Change of Control Event (or, if later, after satisfaction of all obligations hereunder). 3. EMPLOYEE'S POSITION AND RESPONSIBILITIES. (A) The Employee will continue to serve the Company upon the occurrence of a Change of Control Event, in all material respects, in the same capacity (including position, status, offices, titles and reporting responsibilities) with the same authorities, duties and responsibilities as he serves the Company immediately prior thereto. (b) During the term of this Agreement the Employee shall devote substantially all of his business time (excluding vacation time and sick leave to which the Employee is entitled) and attention exclusively to the business and affairs of the Company and shall use his reasonable best efforts to promote the interests of the Company. The participation of the Employee in outside directorships and civic or charitable activities, and the management of the Employee's personal investments in public companies in which the Employee holdings do not exceed 5% of the voting power or value of such companies, in each case, which do not materially interfere with the performance of Employee's duties for the Company shall not be deemed a violation of this paragraph 3. 4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF CONTROL EVENT. The Company and the Employee agree that, upon the occurrence of any Change of Control Event, the Employee shall receive basic annual salary, bonus and fringe and other benefits as follows: (a) Basic Annual Salary and Bonus. The Employee's basic annual salary shall be at a rate not less than the rate of annual salary, which has been paid to the Employee immediately prior to the Change of Control Event, with such annual increases (but not decreases) equal to the greater of (i) salary increases as may be contemplated by any salary adjustment programs of the Company in effect immediately prior to the Change of Control Event and applicable to the Employee and such further increases as shall be determined from time to time by the Board or (ii) a percentage equal to the percentage increase (if any) in the "Consumer Price Index for All Urban Consumers" published by the United States Department of Labor's Bureau of Labor Statistics for the then most recently ended 12-month period. In addition, the Employee shall be entitled to receive an annual bonus in an amount not less than the highest annual bonus received by, or accrued on behalf of, the Employee during the lesser of (i) the five full Fiscal Years immediately preceding the Change of Control Event, or (ii) the number of full Fiscal Years immediately preceding the Change of Control Event during which the Employee has been employed by the Company (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the IR Executive Deferred Compensation Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (b) Fringe Benefits; Business Expenses. The Employee shall be entitled to receive benefits, including but not limited to pension (and supplemental pension), savings and stock investment plan (and supplemental savings and stock investment and retirement plans), leveraged employee stock ownership plan, stock award, stock option, deferred compensation, and welfare plans (as defined in section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, or otherwise) including, but not limited to, life, medical, prescription drugs, dental, disability, accidental death and travel accident coverage plans, post-retirement welfare benefits, and an estate enhancement program on terms no less favorable than those in effect under each such plan immediately prior to the Change of Control Event, and at no less than the same benefit levels (and no more than the same employee contribution levels) then in effect under each such plan and to receive all other fringe benefits and perquisites (or their equivalent) from time to time in effect for the benefit of any executive, management or administrative group for which the employment position then held by the Employee entitles the Employee to participate. The Company shall provide for the payment of, or reimburse the Employee for, all travel and other out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder. (c) Management Incentive Unit Award Plan. The Company and the Employee further agree that immediately upon the occurrence of any Change of Control Event, all amounts theretofore credited to the Employee under the Company's Management Incentive Unit Award Plan, as amended (the "MIU Plan"), shall become fully vested and all such amounts thereafter credited shall become fully vested immediately upon such crediting. 5. PAYMENTS AND BENEFITS UPON TERMINATION. The Employee shall be entitled to the following payments and benefits upon Termination: (a) Salary and Bonus. The Company shall pay to the Employee, in a cash lump sum on the Termination Date, an amount equal to the sum of (i) the basic annual salary and any annual bonus in respect of a completed fiscal year, which have not yet been paid to the Employee through the Termination Date; (ii) an amount equal to the last annual bonus received by, or awarded to, the Employee for the full Fiscal Year immediately preceding the Termination Date multiplied by a fraction the numerator of which shall be the number of full months the Employee was employed by the Company during the Fiscal Year containing the Employee's Termination Date and the denominator of which shall be 12; and (iii) an amount equal to the Employee's basic annual salary multiplied by a fraction, the numerator of which shall be the number of unused vacation days to which the Employee is entitled as of the Termination Date and the denominator of which shall be 365, and any other amounts normally paid to an employee by the Company upon termination of employment. For these purposes, any partial month during which the Employee is employed shall be deemed a full month. (b) Severance. The Company shall pay to the Employee, in a cash lump sum not more than 30 days following the Termination Date, an amount equal to three times the sum of (i) the highest basic annual salary in effect at any time during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date; and (ii) the Employee's target bonus for the year of termination or, if higher, the highest annual bonus received by, or accrued on behalf of, the Employee during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the IR Executive Deferred Compensation Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (c) Employee Benefit Plans. For the three-year period following the Termination Date (or, if sooner, until the Employee is covered under a comparable plan offered by a subsequent employer), the Company shall continue to cover the Employee under those employee welfare plans (including, but not limited to, life, medical, prescription drugs, dental, accidental death and travel accident and disability coverage, but not including any severance pay plan, other than that provided pursuant to this Agreement or any pension plan) applicable to the Employee on the Termination Date at the same benefit levels then in effect (or shall provide their equivalent); provided, however, that if the Employee becomes employed by a new employer and participates in a welfare plan of such employer that is at least as favorable as the comparable Company plan, the Employee's coverage hereunder under the applicable Company welfare plan (or the equivalent) shall continue as secondary coverage to that provided by the new employer until the third anniversary of the Termination Date (but shall become primary coverage on or prior to the third anniversary of the Termination Date if, for any reason, the Employee ceases to participate in the new employer's plan or if such new employer's plan becomes less favorable than the comparable Company plan). (d) Deferred Compensation, Savings and Leveraged Employee Stock Ownership Plans. As soon as practicable following the determination thereof (but in any event no later than 30 days following the Termination Date), the Company shall pay the Employee an amount (in one lump sum cash payment and in lieu of the benefit otherwise provided under the applicable plan) equal to the value of the sum of: (i) with respect to the IR Executive Deferred Compensation Plan (the "Executive Deferred Plan"), the number of IR Stock units credited to the Employee's Account Balance for all Plan Years (as such terms are defined in the Executive Deferred Plan) at the Termination Date multiplied by the Company Stock Value (as defined in paragraph 5(g) below) plus the value of all other amounts credited to the Employee's Account Balance for all Plan Years under the Executive Deferral Plan at the Termination Date as such value is determined under the terms of the Executive Deferred Plan; (ii) the number of Common Stock equivalents credited to the Employee's Employee Account under the Ingersoll-Rand Company Supplemental Savings and Stock Investment Plan at the Termination Date multiplied by the Company Stock Value (as defined in paragraph 5(g) below); (iii) the amount credited to the Employee's Employee Account under the Ingersoll- Rand Company Supplemental Retirement Account Plan at the Termination Date; (iv) all contributions to, or amounts credited to, the Ingersoll-Rand Company Savings and Stock Investment Plan, IR/Clark Leveraged Employee Stock Ownership Plan, Ingersoll-Rand Company Supplemental Savings and Stock Investment Plan, and Ingersoll-Rand Company Supplemental Retirement Account Plan (and earnings and appreciation attributable thereto) that theretofore were made by the Company on behalf of the Employee and are forfeited as a result of the Employee's Termination; and (v) five percent (or such higher maximum Company Matching Contribution percentage provided under the Ingersoll-Rand Company Savings and Stock Investment Plan as of the Termination Date, calculated as though no Contribution Percentage Limitation or other limits under the Ingersoll-Rand Company Savings and Stock Investment Plan were applicable (as those terms are defined in the Ingersoll- Rand Company Savings and Stock Investment Plan)) of the aggregate amount payable pursuant to subparagraphs 5(a) and 5(b). (e) Pension Benefits. (i) No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the present value of the sum of the pension benefits the Employee is entitled to receive under (A) the Restated Ingersoll-Rand Company Supplemental Pension Plan (the "Section 415 Excess Plan"), (B) the Ingersoll-Rand Company Elected Officers Supplemental Program (the "Elected Officers Supplemental Program" or the "Program"), and (C) the Ingersoll- Rand Company Executive Supplementary Retirement Agreement (the "Ten-Year Annuity"), all as in effect immediately prior to the Change of Control Event (collectively, the "Pension Benefit"). (ii) In calculating the portion of the Pension Benefit under Section 1.1 of the Section 415 Excess Plan the Company shall credit the Employee with five additional years of credited service (within the meaning of the Company's qualified defined benefit plan in which the Employee actively participates immediately prior to the Change of Control Event (the "Qualified Pension Plan"), and including compensation, vesting and age credit) and five additional years of age for purposes of the Section 415 Excess Plan but not the Qualified Pension Plan. (If, after crediting five years of age, the Employee is less than fifty-five years old, it will be assumed that the benefit commencement date for purposes of the Section 415 Excess Plan is the first date on which the Employee becomes eligible to begin receiving payment of benefits under the Qualified Pension Plan). (iii) In calculating the portion of the Pension Benefit under the Elected Officers Supplemental Program, the Company shall: (A) credit the Employee with an additional five Years of Service (as defined in the Program) and an additional five years of age for purposes of computing the amount of the Pension Benefit; and (B) define "Final Average Pay" in Section 1.10 of the Program as 1/3 of the severance amount determined pursuant to paragraph 5(b) of this Agreement. (iv) In calculating the portion of the Pension Benefit under the Ten-Year Annuity: (A) the phrase "subject to paragraph 5 hereof" shall be deleted, and the phrase "normal retirement age" or "age 65", as applicable depending on the Employee's arrangement, shall be replaced with "age 62", in each case, in paragraph 1; (B) the Company shall credit the Employee with five additional years of age but to an age no greater than 62; and (C) the competition restriction under the Ten-Year Annuity shall be deleted, and shall be null and void as of the Termination Date. (v) The present value of the Pension Benefit shall be calculated using (A) an interest rate equal to the product of (I) the 10-year Treasury Note rate as used in the Elected Officers Supplemental Program's definition of Actuarial Equivalent times (II) One minus the federal income tax rate at the highest bracket of income for individuals in effect for the year containing the date of payment, (B) the mortality rate used to determine lump sum values in the Elected Officers Supplemental Program, and (C) actual age without the five year addition to age, except that the Ten-Year Annuity present value shall be calculated using no mortality assumption and actual age plus the additional five years but to an age no greater than 62. (f) Retiree Welfare Benefits. For purposes of determining the Employee's eligibility for post-retirement benefits under any welfare plan maintained by the Company prior to the occurrence of a Change of Control Event, the Employee shall be credited with any combination of additional years of service and age not exceeding 10 years, to the extent necessary to qualify for benefits. If, after taking into account such additional age and service, the Employee is eligible for the Company's post- retirement welfare benefits (or would have been eligible under the terms of such plans as in effect prior to the occurrence of the Change of Control Event), the Employee shall receive, commencing on the third anniversary of the Termination Date, post- retirement welfare benefits no less favorable than the benefits the Employee would have received under the terms and conditions of the applicable plans in effect immediately prior to the occurrence of the Change of Control Event. (g) Employee Stock Awards, Options, SARs and MIUs. No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the aggregate Company Stock Value (defined below) of all shares underlying 100% of the Employee's then outstanding and unpaid stock and stock based awards (excluding stock options) (minus any applicable exercise price, in the case of stock appreciation rights) under the Company's Incentive Stock Plans, the MIU Plan and any similar plans of the Company (or any other company), which shall all be deemed vested and performance objectives shall be deemed fully earned, whether or not otherwise vested and fully earned in accordance with the terms of the employee benefit plans and agreements pursuant to which such stock and stock based awards were granted (upon such payment in full, such stock and stock based awards shall be cancelled and be of no further force or effect). In addition, all options to purchase shares of common stock of the Company (or the stock of any company for which the Company's stock has been substituted or exchanged or in respect of which options have been granted to the Employee) ("Company Stock") and all stock appreciation rights held by the Employee immediately prior to Termination shall become exercisable as of the Termination Date, whether or not otherwise exercisable in accordance with the terms of the employee benefit plans and agreements pursuant to which such options and stock appreciation rights were granted. During the 60 day period following the Termination Date, the Employee shall have the right to elect to exercise any or all stock options then held by the Employee as if such option were a stock appreciation right and, therefore, receive a cash payment equal to (x) the number of shares of Company Stock subject to each such option (or portion thereof), multiplied by (y) the excess of the Company Stock Value over the exercise price of such option (upon such payment in full, any stock option so exercised as a stock appreciation right shall be cancelled and be of no further force or effect). For purposes of this Agreement, Company Stock Value shall be deemed to be the highest of: (i) the closing sale price of the Company Stock on the New York Stock Exchange on the Change of Control Event; (ii) the closing sale price of the Company Stock on the New York Stock Exchange on the Termination Date; and (iii) the highest closing sale price of the Company Stock on the New York Stock Exchange during the 30 trading days immediately preceding the acquisition of more than 50% of the outstanding Company Stock by any person or group (including Affiliates of such person or group). If, as of any valuation date, the Company Stock is not traded on the New York Stock Exchange, the Company Stock Value shall be the closing sale price of the Company Stock on the principal national securities exchange on which the Common Stock is traded or, if the Common Stock is not traded on any national securities exchange, the closing bid price of the Common Stock in the over-the-counter market. (h) Estate Enhancement Program. If the Employee participates in the Ingersoll-Rand Company Estate Enhancement Program, the terms thereof shall apply. (i) Outplacement Expenses. For the three year period following the Termination Date, the Company shall reimburse the Employee for all reasonable expenses (up to 15% of the Employee's basic annual salary, but no more than $75,000, per 12 month period) incurred by the Employee for professional outplacement services by qualified consultants selected by the Employee. 6. PARACHUTE EXCISE TAX GROSS-UP. (A) If, as a result of any payment or benefit provided under this Agreement, either alone or together with other payments and benefits which the Employee receives or is then entitled to receive from the Company or any of its Affiliates, the Employee becomes subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (together with any income, employment or other taxes, interest and penalties thereon, an "Excise Tax"), the Company shall pay the Employee an amount sufficient to place the Employee in the same after-tax financial position that he would have been in if he had not incurred any Excise Tax (together with any taxes, interest and penalties hereon, the "Gross-Up Payment"). For purposes of determining whether the Employee is subject to an Excise Tax, (i) any payments or benefits received by the Employee (whether pursuant to the terms hereof or pursuant to any plan, arrangement or other agreement with the Company or any entity Affiliated with the Company) shall be deemed to be contingent on a change described in Section 280G(b)(2)(A)(i) of the Code and shall be taken into account and (ii) the Employee shall be deemed to pay taxes at the highest marginal applicable rates of such taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum deduction in federal income taxes which could be obtained from deduction of such state and local taxes. (b) The determination of whether the Employee is subject to Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as other calculations hereunder, shall be made at the expense of the Company by the independent auditors of the Company immediately prior to the Change of Control Event, which shall provide the Employee with prompt written notice (the "Company Notice") setting forth their determinations and calculations. Within 30 days following the receipt by the Employee of the Company Notice, the Employee may notify the Company in writing (the "Employee Notice") if the Employee disagrees with such determinations or calculations, setting forth the reasons for any such disagreement. If the Company and the Employee do not resolve such disagreement within 10 business days following receipt by the Company of the Employee Notice, the Company and the Employee shall agree upon a nationally recognized accounting or compensation firm (the "Resolving Firm") to make a determination with respect to such disagreement. If the Employee and the Company are unable to agree upon the Resolving Firm within 20 business days following the Employee Notice, the New York office of Towers, Perrin shall be the Resolving Firm. Within 30 business days following the Employee Notice, if the disagreement is not resolved by such time, each of the Employee and the Company shall submit its position to the Resolving Firm, which shall make a determination as to all such disagreements within 30 days following the last of such submissions, which determination shall be binding upon the Employee and the Company. The Company shall pay all reasonable expenses incurred by either party in connection with the determinations, calculations, disagreements or resolutions pursuant to this paragraph, including, but not limited to, reasonable legal, consulting or other similar fees and expenses. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30 day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Employee; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or other tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Employee is required to extend the statute of limitations to enable the Company to contest such claim, the Employee may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Employee's consent if such position or resolution could reasonably be expected to adversely affect the Employee (including any other tax position of the Employee unrelated to the matters covered hereby). (e) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company or the Resolving Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies and the Employee thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax, the Company or the Resolving Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall promptly be paid by the Company to or for the benefit of the Employee. (f) If, after the receipt by Employee of an amount advanced by the Company in connection with the contest of Excise Tax claim, the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund actually received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, by the amount of the Gross-Up Payment. 7. EFFECT ON OTHER ARRANGEMENTS. No provision of this Agreement shall affect or limit any interests or rights vested in the Employee under any other agreement or arrangement with the Employee or under any pension, profit-sharing, medical or other insurance or other benefit plans of the Company which may be in effect and in which the Employee may be participating at any time. 8. CONFIDENTIALITY. The Employee agrees to hold in confidence any and all confidential information known to him concerning the Company and its businesses so long as such information is not otherwise publicly disclosed; provided that the Employee shall be entitled to divulge confidences and confidential information (i) as required by applicable law or legal process (e.g., subpoena or investigation by governmental authority) or (ii) to defend the Employee in any action, suit or investigation or to enforce the Employee's rights hereunder or otherwise. 9. MISCELLANEOUS. (A) Legal Expenses; Severability. The Company shall pay all costs and expenses, including attorneys' fees, of the Company and, at least quarterly, the Employee, in connection with any legal proceedings, whether or not instituted by the Company, relating to the interpretation or enforcement of this Agreement. In the event that the provisions of this paragraph shall be determined to be invalid or unenforceable in any respect, such declaration shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. (b) Mitigation. All payments or benefits required by the terms of this Agreement shall be made or provided without offset, deduction, or mitigation on account of income the Employee may receive from other employment or otherwise and the Employee shall not have any obligation or duty to seek any other employment or otherwise earn any amounts to reduce or mitigate any payments required hereunder. (c) Death of the Employee. In the event of the Employee's death subsequent to Termination, all payments called for hereunder shall be paid to the Employee's designated beneficiary or beneficiaries, or to his estate if he has not designated a beneficiary or beneficiaries. (d) Notices. Any notice or other communication provided for in this Agreement or contemplated hereby shall be sufficiently given if given in writing and delivered by hand, by overnight courier (with receipt) or by certified mail, return receipt requested, and addressed, in the case of the Company, to the Company at: 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attention: Chairman of the Board of Directors or such other address if the executive offices of the Company have moved; and, in the case of the Employee, to the Employee at: Either party may designate a different address by giving notice of change of address in the manner provided above. (e) Waiver. No waiver or modification in whole or in part of this Agreement, or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or any right or power by any party on one occasion shall not be construed as a waiver of, or a bar to, the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. (f) Binding Effect; Successors. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Employee and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph shall continue to apply to each subsequent employer of the Employee hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. (g) Calculations. Calculation of all benefits and amounts payable hereunder shall be made, at the expense of the Company, by the Wellesley Hills, Massachusetts office of Watson Wyatt & Company (or the Company's then actuary immediately prior to the Change of Control Event). (h) Plan Limitations. In the event the Company is unable to provide any benefit required to be provided under this Agreement through a plan sponsored by the Company or its Affiliates, the Company shall, at its own cost and expense, take appropriate actions to insure that alternative arrangements are made so that equivalent benefits can be provided to the Employee, including to the extent appropriate purchasing for the benefit of the Employee (and if applicable the Employee's dependents) individual policies of insurance providing benefits, which on an after-tax basis, are equivalent to the benefits required to be provided hereunder. (i) Controlling Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed therein, without regard to conflicts of laws principles. Any suit, action or proceeding related to this Agreement, or any judgment entered by any court related to this Agreement, may be brought only in any court of competent jurisdiction in the State of New Jersey, and the parties hereby submit to the exclusive jurisdiction of such courts. The parties (and any Affiliates of the Company or beneficiary of the Employee, or any successor to the Company or the Company's Affiliate) irrevocably waive any objections which they may now or hereafter have to the laying of venue of any suit, action or proceeding brought in any court of competent jurisdiction in the State of New Jersey, and hereby irrevocably waive any claim that any such action, suit or proceeding has been brought in an inconvenient forum. 10. EFFECT ON PRIOR AGREEMENTS. Subject to paragraph 7, this Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior employment or severance agreement or understanding between the Company (or any Affiliate thereof) and the Employee. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. INGERSOLL-RAND COMPANY _____________________________ ______________________________ EMPLOYEE By: Herbert L. Henkel Title: Chairman, President and Chief Executive Officer Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate", used to indicate a relationship with a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such a specified person. "Associate", used to indicate a relationship with a specified person, means (i) any corporation, partnership, or other organization of which such specified person is an officer or partner; (ii) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person, or who is a director or officer of the Company or any of its parents or subsidiaries; and (iv) any person who is a director, officer, or partner of such specified person or of any corporation (other than the Company or any wholly-owned subsidiary of the Company), partnership or other entity which is an Affiliate of such specified person. "Beneficial Owner" means the same as such term is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor provision at the time in effect); provided, however, that any individual, corporation, partnership, group, association, or other person or entity which has the right to acquire any of the Company's outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement, or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such securities. "Board" means the Board of Directors of the Company (or, if the Company is then a subsidiary of any other company, of the ultimate parent company). "Cause" means (i) any action by the Employee involving willful malfeasance or willful gross misconduct having a demonstrable adverse effect on the Company; (ii) substantial and continuing refusal by the Employee in willful breach of this Agreement to perform his employment duties hereunder; or (iii) the Employee being convicted of a felony under the laws of the United States or any state. Termination of the Employee for Cause shall be communicated by a Notice of Termination given within one year after the Board (i) has knowledge of conduct or an event allegedly constituting Cause; and (ii) has reason to believe that such conduct or event could be grounds for Cause. For purposes of this Agreement a "Notice of Termination" shall mean delivery to the Employee of a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board at a meeting of that Board called and held for the purpose (after reasonable notice to the Employee ("Preliminary Notice") and reasonable opportunity for the Employee, together with the Employee's counsel, to be heard before the Board prior to such vote) of finding, in the good faith opinion of the Board, that the Employee has engaged in the conduct constituting Cause and specifying the particulars thereof in detail. Upon the receipt of the Preliminary Notice, the Employee shall have 30 days in which to appear with counsel or take such other action as he desires on his behalf, and such 30- day period is hereby agreed to by the parties as a reasonable opportunity for the Employee to be heard. The Board shall no later than 45 days after the receipt of the Preliminary Notice by the Employee communicate its findings to Employee. A failure by the Board to make its finding of Cause or to communicate its conclusion within such 45-day period shall be deemed to be a finding that the Employee has not engaged in the conduct described herein. Any termination of the Employee's employment (other than by death or Permanent Disability) within 45 days after the date that the Preliminary Notice has been given to the Employee shall be deemed to be a termination for Cause; provided, however, that if during such period the Employee voluntarily terminates other than for Good Reason or the Company terminates the Employee other than for Cause, and the Employee is found (or is deemed to be found) not to have engaged in the conduct described herein, such termination shall not be deemed to be for Cause. "Change of Control Event" means the date (i) any individual, corporation, partnership, group, association or other person or entity, together with its Affiliates and Associates (each a "Person") (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company), is or becomes the Beneficial Owner of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; (ii) the Continuing Directors fail to constitute a majority of the members of the Board; (iii) of consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company; or (iv) of any sale, lease, exchange or other transfer, in one transaction or a series of related transactions, of all, or substantially all, of the assets of the Company, other than any sale, lease, exchange or other transfer to any Person or entity where the Company owns, directly or indirectly, at least 80% of the outstanding voting securities of such Person or entity or its parent corporation after any such transfer; provided, however, that in the case of a transaction described in (i), (iii) or (iv), above, there shall not be a Change of Control Event if the shareholders of the Company immediately prior to any such transaction own (or continue to own by remaining outstanding or by being converted into voting securities of the surviving entity or parent entity) 70% or more of the combined voting power of the voting securities of the Company, the surviving entity or any parent of either outstanding immediately following such transaction, in substantially the same proportion to each other as prior to such transaction. For purposes of the foregoing definition and the definitions of "Continuing Director" and "Duly Approved by the Continuing Directors," below, following the contemplated inversion transaction, "the Company" shall mean either Ingersoll-Rand Company or the Bermuda entity that owns Ingersoll-Rand Company. "Continuing Director" means a director who either was a member of the Board on the date hereof or who became a member of the Board subsequent to such date and whose election, or nomination for election by the Company's shareholders, was Duly Approved by the Continuing Directors on the Board at the time of such nomination or election, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Board in which such person is named as nominee for director, without due objection to such nomination, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board. "Duly Approved by the Continuing Directors" means an action approved by the vote of at least two-thirds of the Continuing Directors then on the Board. "Fiscal Year" means the fiscal year of the Company. "Good Reason" means (i) a material adverse change in the Employee's job responsibilities, title or status from those in effect on the date hereof or as enhanced from time to time, which change continues for a period of at least 15 days after written notice from the Employee; (ii) a reduction of the Employee's base salary or target bonus, the failure to pay Employee's salary or bonus when due, or the failure to maintain on behalf of the Employee (and his or her dependents) benefits which are at least as favorable in the aggregate to those provided for in paragraph 4(b); (iii) the relocation of the principal place of the Employee's employment by more than 35 miles from the Employee's principal place of employment immediately prior to the Change of Control Event, or the imposition of travel requirements on the Employee not substantially consistent with such travel requirements existing immediately prior to the Change of Control Event; (iv) the failure of the Company to obtain the assumption of, and the agreement to perform, this Agreement by any successor as contemplated in paragraph 8(f); or (v) the failure of the Company to perform any of its other material obligations under this Agreement and the continuation of such failure for a period of 15 days after written notice from the Employee. "Permanent Disability", as applied to the Employee, means that (i) he has been totally incapacitated by bodily injury or disease so as to be prevented thereby from performing his duties hereunder; (ii) such total incapacity shall have continued for a period of six consecutive months; and (iii) such total incapacity will, in the opinion of a qualified physician, be permanent and continuous during the remainder of the Employee's life. "Termination" means (i) following the occurrence of a Change of Control Event, (A) the termination of the Employee's employment without Cause or (B) the resignation by an Employee for Good Reason, and (ii) prior to the occurrence of a Change of Control Event, but following the execution of an agreement or the commencement of a tender offer, proxy contest or other action that, if consummated, would reasonably be expected to result in a Change of Control Event and, in each case, does result in a Change of Control Event, the termination of the Employee's employment, or a material adverse change in the Employee's job responsibilities, title or status, reduction of the Employee's base salary or target bonus, the relocation of the Employee's principal place of employment by more than 35 miles or the imposition of travel requirements on the Employee not substantially consistent with the Employee's job; provided, that such term shall not include any termination of employment for Cause, any resignation without Good Reason (except as provided in clause (ii), above), or any termination of employment on account of an Employee's death or Permanent Disability. "Termination Date" shall mean the effective date of an Employee's Termination; provided, that with respect to a Termination that occurs prior to a Change of Control Event, the effective date of such Termination shall be deemed to be the date immediately following the Change of Control Event. EX-10 12 exh10-13.txt REORGANIZATION AMENDMENT EXHIBIT 10.13 REORGANIZATION AMENDMENT TO THE INGERSOLL-RAND COMPANY SUPPLEMENTAL PENSION PLAN WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Ingersoll-Rand Company Supplemental Pension Plan effective as of June 30, 1995 (the "Supplemental Pension Plan"); and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Supplemental Pension Plan in accordance with Section 4.1 of the Supplemental Pension Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders desires to amend the Supplemental Pension Plan. NOW, THEREFORE, the Supplemental Pension Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. Section 4.1(a) is hereby amended and restated in its entirety to read as follows: "4.1 (a) Amendment and Termination. This Supplemental Pension Plan may, at any time and from time to time, be amended or terminated, without consent of any Employee or beneficiary (i) by the Board of Directors of the Company or (ii) in the case of amendments which do not materially modify the provisions hereof, the Committee, provided, however, that no such amendment or termination shall reduce any benefits accrued under the terms of this Supplemental Pension Plan prior to the date of termination or amendment. Subject to Section 4.1(c) below, notwithstanding the foregoing, in the event that the Board of Directors of Ingersoll-Rand Company (or any trustee of any trust established by the Company for purposes of satisfying its obligations hereunder) determines, or on and after the Effective Time is informed by the Board of Directors of the Company, that a `change of control' of the Company has occurred, any subsequent amendment modifying or terminating the Supplemental Pension Plan shall have no force or effect. (b) Change of Control. For purposes of this Section 4.1, a `change of control' shall have the meaning designated: (i) in the Ingersoll-Rand Benefit Trust Agreement, dated as of September 1, 1988, as amended, between the Company and The Bank of New York, as trustee, or (ii) in such other trust agreement that restates or supersedes the agreement referred to in clause (i), in either case for purposes of satisfying certain obligations to executive employees of the Company. (c) Notwithstanding the foregoing provisions of this Section 4.1 or any other provision of the Supplemental Pension Plan to the contrary, none of the transactions contemplated by the Merger Agreement that are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to and as of the Effective Time, or (ii) Ingersoll-Rand Company Limited or its affiliates on or after the Effective Time, shall trigger, constitute or be deemed a `change of control'. On and after the Effective Time, solely for the purpose of determining whether a `change of control' has occurred, the term `Company' shall mean Ingersoll-Rand Company Limited. (d) Change of Control Definitions. For purposes of Section 4.1 of this Supplemental Pension Plan the terms below shall have the following meaning: `Effective Time' shall mean the Effective Time as such term is defined in the Merger Agreement. `Merger Agreement' shall mean that certain Agreement and Plan of Merger among the Company, Ingersoll- Rand Company Limited and IR Merger Corporation, dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 2. Except as specifically set forth herein, all other terms of the Supplemental Pension Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company has had its duly authorized representative sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary EX-10 13 exh10-15.txt SUPPLEMENTAL SAVINGS AND STOCK INVESTMENT PLAN EXHIBIT 10.15 FIRST AMENDMENT TO THE INGERSOLL-RAND COMPANY SUPPLEMENTAL SAVINGS AND STOCK INVESTMENT PLAN WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Ingersoll-Rand Company Supplemental Savings and Stock Investment Plan (the "Supplemental Savings Plan") which was originally effective on January 1, 1989; and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Supplemental Savings Plan in accordance with Section 7.1 of the Supplemental Savings Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders desires to amend the Supplemental Savings Plan. NOW, THEREFORE, the Supplemental Savings Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below. 1. Section 2.3(a)(i) of the Supplemental Savings Plan is hereby amended and restated in its entirety as of the Effective Time to read as follows: "(i) `Common Stock' means the Class A common shares, par value $1.00 per share, of Ingersoll-Rand Company Limited, a Bermuda company." 2. Sections 6.1 and 6.2 of the Supplemental Savings Plan are hereby amended and restated in their entirety as of the Effective Time to read as follows: "6.1 Contributions to Trust. In the event that the Board of Directors of Ingersoll-Rand Company is informed by the Board of Directors of Ingersoll-Rand Company Limited that a `change in control' of Ingersoll-Rand Company Limited has occurred, Ingersoll-Rand Company shall be obligated to establish a trust and to contribute to the trust an amount equal to the balance credited to each Employee's Account established hereunder, such Accounts to be valued as of the last day of the calendar month immediately preceding the date the Board of Directors of Ingersoll-Rand Company was informed that a `change in control' has occurred. 6.2 Amendments. Following a `change in control' of Ingersoll-Rand Company Limited, any amendment modifying or terminating this Supplemental Savings Plan shall have no force or effect." 3. Section 6.3 is hereby amended and restated in its entirety to read as follows: "6.3 (a) Definition of Change of Control. For purposes hereof, a `change of control' shall have the meaning designated: (i) in the Ingersoll-Rand Benefit Trust Agreement, dated as of September 1, 1988, as amended, between Ingersoll-Rand Company and The Bank of New York, as trustee, or (ii) in such other trust agreement that restates or supercedes the agreement referred to in clause (i), in either case for purposes of satisfying certain obligations to executive employees of Ingersoll-Rand Company. Notwithstanding the foregoing paragraph or any other provision of the Supplemental Savings Plan or the trust agreement to the contrary, none of the transactions contemplated by the Merger Agreement that are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time, or (ii) Ingersoll-Rand Company Limited or its affiliates on and after the Effective Time, shall trigger, constitute or be deemed a `change of control'. On and after the Effective Time, the term `change of control' shall refer solely to a `change of control' of Ingersoll-Rand Company Limited. (b) Change of Control Definitions. For purposes of this Section 6.3 of the Supplemental Savings Plan the terms below shall have the following meaning: `Effective Time' shall mean the Effective Time as such term is defined in the Merger Agreement." `Merger Agreement' shall mean that certain Agreement and Plan of Merger among the Company, Ingersoll- Rand Company Limited and IR Merger Corporation, dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 4. Except as specifically set forth herein, all other terms of the Supplemental Savings Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company has had its duly authorized representative sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary EX-10 14 exh10-17.txt SUPPLEMENTAL RETIREMENT ACCOUNT PLAN EXHIBIT 10.17 FIRST AMENDMENT TO THE INGERSOLL-RAND COMPANY SUPPLEMENTAL RETIREMENT ACCOUNT PLAN WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Ingersoll-Rand Company Supplemental Retirement Account Plan (the "Supplemental Retirement Account Plan") effective as of January 1, 1989; and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with 7.1 of the Supplemental Retirement Account Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Supplemental Retirement Account Plan. NOW, THEREFORE, the Supplemental Retirement Account Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. Sections 6.1 and 6.2 of the Supplemental Retirement Account Plan are hereby amended and restated in their entirety as of the Effective Time to read as follows: "6.1 Contributions to Trust. In the event that the Board of Directors of Ingersoll-Rand Company is informed by the Board of Directors of Ingersoll-Rand Company Limited that a `change in control' of Ingersoll-Rand Company Limited has occurred, Ingersoll-Rand Company shall be obligated to establish a trust in accordance with the provisions of Section 3 hereof and to contribute to the trust an amount equal to the balance of each Employee's Account. 6.2 Amendments. Following a `change in control' of Ingersoll-Rand Company Limited, any amendment modifying or terminating this Supplemental Retirement Account Plan shall have no force or effect." 2. Section 6.3 of the Supplemental Retirement Account Plan is hereby amended and restated in its entirety to read as follows: "6.3(a) Definition of Change of Control. For purposes hereof, a `change of control' shall have the meaning designated: (i) in the Ingersoll-Rand Benefit Trust Agreement, dated as of September 1, 1988, as amended, between Ingersoll-Rand Company and The Bank of New York, as trustee, or (ii) in such other trust agreement that restates or supercedes the agreement referred to in clause (i), in either case for purposes of satisfying certain obligations to executive employees of Ingersoll-Rand Company. Notwithstanding the foregoing paragraph or any other provision of the Supplemental Retirement Account Plan or the trust agreement to the contrary, none of the transactions contemplated by the Merger Agreement that are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time, or (ii) Ingersoll-Rand Company Limited or its affiliates on and after the Effective Time, shall trigger, constitute or be deemed a `change of control'. On and after the Effective Time, the term `change of control' shall refer solely to a `change of control' of Ingersoll-Rand Company Limited. (b) Change of Control Definitions. For purposes of this Section 6.3 of the Supplemental Retirement Account Plan the terms below shall have the following meaning: `Effective Time' shall mean the Effective Time as such term is defined in the Merger Agreement." `Merger Agreement' shall mean that certain Agreement and Plan of Merger among the Company, Ingersoll- Rand Company Limited and IR Merger Corporation, dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 3. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company has had its duly authorized representative sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary EX-10 15 exh10-19.txt INGERSOLL-RAND COMPANY INCENTIVE STOCK PLAN OF 1995 EXHIBIT 10.19 REORGANIZATION AMENDMENT TO THE INGERSOLL-RAND COMPANY INCENTIVE STOCK PLAN OF 1995 WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Ingersoll-Rand Company Incentive Stock Plan of 1995 (the "Plan"); and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section 14 of the Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. As of the Effective Time, the name of the Plan is hereby changed to Ingersoll-Rand Company Limited Incentive Stock Plan of 1995 and Ingersoll-Rand Company Limited shall assume the rights and obligations of the Company under the Plan and shall become the Plan sponsor. 2. As of the Effective Time, the word "members" shall be substituted for the word "shareholders" in Section 1 of the Plan to reflect the fact that at the Effective Time all shareholders in Ingersoll-Rand Company shall automatically become members of the Company. 3. The definition of "Change in Control of the Company" in Section 2 of the Plan is hereby amended as of the date hereof by adding the following to the end thereof: "Notwithstanding any provision of this Section or any other Section of the Plan to the contrary, none of the transactions contemplated by the Merger Agreement which are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on or after the Effective Time shall trigger, constitute or be deemed a Change in Control of the Company'." 4. The definition of "Common Stock" in Section 2 of the Plan is hereby amended and restated to read as follows in its entirety as of the Effective Time: "Common Stock: The Class A common shares of the Company, par value $1.00 per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of paragraph (a) of Section 10." 5. The definition of "Company" in Section 2 of the Plan is hereby amended and restated to read as follows in its entirety as of the Effective Time: "Company: Ingersoll-Rand Company Limited, a Bermuda company." 6. Section 2 of the Plan is hereby amended as of the date hereof to include the following definitions in proper alphabetical progression: "Effective Time: The Effective Time as such term is defined in the Merger Agreement." "Merger Agreement: That certain Agreement and Plan of Merger among Ingersoll-Rand Company, Ingersoll-Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which Ingersoll-Rand Company will become an indirect wholly-owned subsidiary of Ingersoll- Rand Company Limited." 7. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company and Ingersoll-Rand Company Limited have had their duly authorized representatives sign this Amendment on December 21, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary INGERSOLL-RAND COMPANY LIMITED By: /S/ Patricia Nachtigal Senior Vice President and General Counsel EX-10 16 exh10-22.txt IR COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM EXHIBIT 10.22 FIRST AMENDMENT TO THE INGERSOLL-RAND COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM WHEREAS, Ingersoll-Rand Company ("Company") maintains the Ingersoll-Rand Company Elected Officers Supplemental Program, effective June 30, 1995 (the "Program"), for the benefit of its eligible employees; and WHEREAS, the Board of Directors of the Company retained the right to amend the Program pursuant to Section 8.1 thereof; and WHEREAS, the Board of Directors of the Company, acting through its Compensation & Nominating Committee, desires to amend the Program; NOW, THEREFORE, the Program is hereby amended in the following respects, effective January 1, 1997: 1. The following new Section 1.6 is hereby added, and all applicable Sections in Section 1 of the Program shall be renumbered accordingly: "1.6 `Deferral Plan' means the Ingersoll-Rand Company Executive Deferred Compensation and Stock Bonus Plan." 2. Section 1.9 (formerly Section 1.8) is amended to read in its entirety as follows: "1.9 `Final Average Pay' means, except as provided in Section 5.3 for purposes of disability, the sum of the following: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee or are a Deferral Amount (as such term is defined in the Deferral Plan)) during the six most recent calendar years, including the year during which the Employee's retirement or death occurs, or a Change in Control occurs, but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and (b) the Employee's annualized base salary in effect immediately prior to the date of determination." 3. Section 1.12 (formerly Section 1.11) is amended to read in its entirety as follows: "1.12 `Year of Service' shall be determined in accordance with the provisions of the qualified defined benefit pension plan(s) (as defined below) in which an individual participates while an Employee that are applicable to determining years of vesting service under such plan. For purposes of this Section a qualified defined benefit pension plan means a plan (a) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, or any other entity designated by the Company and (b) which is defined in Section 414(j) of the Internal Revenue Code of 1986, as amended. Notwithstanding any provision of the Program to the contrary, in the event an Employee earns one or more hours of service during a calendar year, he shall be credited with a Year of Service with respect to such year for purposes of the Program." 4. Section 5.3 "Disability" is amended to read in its entirety as follows: "5.3 Disability An Employee who becomes disabled and who remains continuously disabled until attaining age 65 shall continue to accrue benefits under the Program as if he continued to be employed by the Company. Such Employee shall receive an immediate lump sum payment determined under Section 5.2 of the Program as of the Employee's 65th birthday. Notwithstanding any other provision of the Program to the contrary, when determining Final Average Pay for an Employee who is disabled under the provisions of this Section, Final Average Pay means the sum of: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee or are a Deferral Amount (as such term is defined in the Deferral Plan)) during the six most recent calendar years including the year during which the Employee's disability occurs, (or, if the average of the five highest bonus awards would be greater, the six most recent calendar years prior to the year in which the Employee's disability occurs), but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and (b) the Employee's annualized base salary in effect as of the date he becomes disabled. An Employee who is no longer disabled under this Section and who returns to the employ of the Company or an affiliated company, shall be entitled to accrue benefits under this Section for the period of his disability. An Employee who is no longer disabled under this Section and who does not return to the employ of the Company or an affiliated company, shall not be entitled to accrue any benefits under this Section for any portion of the period of his disability. For purposes of the Program, an Employee shall be disabled if he is unable to continue to perform the duties of his position due to a physical or mental impairment." 5. Except as provided herein, the Program shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this amendment to be executed by its duly authorized representative on this 22 day of March, 1999. INGERSOLL-RAND COMPANY By: /S/ Donald H. Rice Vice President Human Resources EX-10 17 exh10-23.txt IR COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM EXHIBIT 10.23 SECOND AMENDMENT TO THE INGERSOLL-RAND COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM WHEREAS, Ingersoll-Rand Company ("Company") maintains the Ingersoll-Rand Company Elected Officers Supplemental Program, effective June 30, 1995, and as amended by the First Amendment effective January 1, 1997, (the "Program"), for the benefit of its eligible employees; and WHEREAS, the Board of Directors of the Company retained the right to amend the Program pursuant to Section 8.1 thereof; and WHEREAS, the Board of Directors of the Company, acting through its Compensation & Nominating Committee, desires to amend the Program; NOW, THEREFORE, the Program is hereby amended in the following respects, effective December 1, 1997 (except as otherwise indicated below): 1. Section 1.3 is amended, effective March 3, 1999, to read in its entirety as follows: "1.3 `Change in Control' shall have the same meaning as such term is defined in the most recent Company Incentive Stock Plan, unless a different definition is used for purposes of a change of control event in any severance or employment agreement between an Employer and an Employee, in which event as to such Employee such definition shall apply." 2. The following new Section 1.9 is hereby added, and all applicable Sections in Section 1 shall be renumbered accordingly: "1.9 `Estate Program' means the Ingersoll-Rand Company Estate Enhancement Program." 3. Section 1.10 (formerly Section 1.9) is amended to read in its entirety as follows: "1.10 `Final Average Pay' means, except as provided in Section 5.3 for purposes of disability, the sum of the following: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forego a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee's retirement or death occurs, or a Change in Control occurs, but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and (b) the Employee's annualized base salary in effect immediately prior to the date of determination." 4. Section 3.1 "Amount of Benefit" is amended, effective November 4, 1998, to read in its entirety as follows: "3.1 Amount of Benefit An Employee shall be entitled to receive a benefit under the Program equal to (a) minus (b) minus (c) below: (a) the product of: (i) his Final Average Pay, (ii) his Years of Service (up to a maximum of 35 Years of Service), and (iii) 1.9% (b) the amount set forth in Appendix A as attached hereto (c)the benefit he would be entitled to receive under Section 5.2 of the Program but for his election to forego such benefit pursuant to the Estate Program." 5. The second paragraph of Section 5.3 "Disability" is amended to read in its entirety as follows: "Notwithstanding any other provision of the Program to the contrary, when determining Final Average Pay for an Employee who is disabled under the provisions of this Section, Final Average Pay means the sum of: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forego a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee's disability occurs, (or, if the average of the five highest bonus awards would be greater, the six most recent calendar years prior to the year in which the Employee's disability occurs), but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and (b) the Employee's annualized base salary in effect as of the date he becomes disabled." 6. Section 5.1(b)(i) is amended, effective November 4, 1998, to read in its entirety as follows: "(i) the amount determined under Section 3.1(a) shall be reduced by 0.429% for each month that the benefit commences prior to age 62," 7. Appendix A is amended, effective November 4, 1998, to read in its entirety as follows: "APPENDIX A Unless otherwise specified in another Appendix attached hereto, the sum of the following shall be used for purposes of Section 3.1(b) of the Program: (a) All employer-paid benefits under any qualified defined benefit plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) and associated supplemental plans sponsored by the Company, Ingersoll-Dresser Pump Company, and Dresser Industries, Inc., provided that the Employee's intervening employment between employment with Dresser Industries, Inc. and the Company is solely with Ingersoll-Dresser Pump Company. For purposes of this Paragraph (a), the amount of any pension payable under the Clark Equipment Company Retirement Program for Salaried Employees shall be determined without reduction by the lifetime pension equivalent of the Employee's vested interest in his PPOA Account (as such term is defined in the I-R/Clark Leveraged Employee Stock Ownership Plan). For purposes of determining the benefit under Section 3.1 of the Program, the Employee's benefit, if any, under any qualified defined benefit plan and associated supplemental plans described in the previous paragraph, shall be determined as a life annuity at the date of determination. (b) The Social Security Primary Insurance Amount as defined in the Pension Plan estimated at age 65, multiplied by a fraction, the numerator of which is his Years of Service (up to a maximum of 35 Years of Service), and the denominator of which is 35. For purposes of the Program, "Social Security Primary Insurance Amount" means the amount of the Employee's annual primary old age insurance determined under the Social Security Act in effect at the date of determination and payable in accordance with (i) or (ii) below. (i) For benefits determined on or after age 65, payable for the year following his date of retirement. (ii) For benefits determined before the Employee attains age 65, payable for the year following his retirement or death (or which would be payable when he first would have become eligible if he were then unemployed), assuming he will not receive after retirement (or death) any income that would be treated as wages for purposes of the Social Security Act. For purposes of determining the Social Security Benefit under paragraphs (i) and (ii) above, an Employee's covered earnings under said Act for each calendar year preceding the Employee's first full calendar year of employment shall be determined by multiplying his covered earnings subsequent to the year being determined by the ratio of the average per worker total wages as reported by the Social Security Administration for the calendar year being determined to such average for the calendar year subsequent to the year being determined. (c) An Employee's accrued benefit under any qualified defined benefit pension plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) and any nonqualified pension plan with respect to any business that was acquired by the Company ("Acquired Business"), (each such pension plan shall be referred to in this Paragraph (c) as a "Former Plan"), shall be used for purposes of Section 3.1(b) of the Program if the Employee: (i) was an employee of the Acquired Business on the date it was acquired by the Company, (ii) became an employee of the Company as a result of the acquisition of the Acquired Business, and (iii) was granted vesting service under any qualified defined benefit pension plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, and any other entity designated by the Company for service performed while an employee of the Acquired Business. The Employee's accrued benefit under the Former Plan shall be determined as a life annuity payable as of the date of determination, using the Former Plan's early retirement factors, if applicable. Notwithstanding anything to the contrary in this Paragraph (c), if the Committee determines that the accrued benefit under a Former Plan cannot reasonably be calculated due to lack of information about the Former Plan or otherwise, the provisions of this Paragraph (c) shall not apply with respect to such Former Plan." 8. Except as provided herein, the Program shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this amendment to be executed by its duly authorized representative on this 22 day of March, 1999. INGERSOLL-RAND COMPANY By: /S/ Donald H. Rice Vice President Human Resources EX-10 18 exh10-24.txt IR COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM EXHIBIT 10.24 THIRD AMENDMENT TO THE INGERSOLL-RAND COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM WHEREAS, Ingersoll-Rand Company, a New Jersey corporation adopted the Ingersoll-Rand Company Elected Officers Supplemental Program, as amended and restated effective March 3, 1999 (the "Plan"); and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section 8.1 of the Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. Section 1.3 of the Plan, "Change in Control" is hereby amended by adding the following to the end thereof: "Notwithstanding any other provision in this Plan to the contrary, none of the transactions contemplated by the Merger Agreement that are undertaken by (i) Ingersoll- Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on and after the Effective Time, shall trigger, constitute or be deemed a `Change in Control'. On and after the Effective Time, the term `Change in Control' shall refer solely to a `Change in Control' of Ingersoll-Rand Company Limited." 2. Article 1 of the Plan is amended to include the following new definitions in proper alphabetical progression: "1.6A `Effective Time' means the Effective Time as such term is defined in the Merger Agreement." "1.10A `Merger Agreement' means that certain Agreement and Plan of Merger among the Company, Ingersoll- Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 3. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, Ingersoll-Rand Company has had its duly authorized representative sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary EX-10 19 exh10-26.txt IR EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10.26 FIRST AMENDMENT TO THE IR EXECUTIVE DEFERRED COMPENSATION PLAN WHEREAS, Ingersoll-Rand Company, a New Jersey corporation adopted the IR Executive Deferred Compensation Plan (the "Plan") which was originally effective on January 1, 1997; and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section 9.1 of the Plan; and WHEREAS, the Plan has been amended and restated most recently effective January 1, 2001; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. Section 1 of the Plan, "Statement of Purpose", is hereby amended as of the Effective Time as follows in its entirety: "STATEMENT OF PURPOSE The purpose of the IR Executive Deferred Compensation Plan (the "Plan") is to further increase the mutuality of interest between Ingersoll-Rand Company (the "Company"), its employees, the employees of a Participating Employer and members of Ingersoll-Rand Company Limited by providing a select group of management and highly compensated employees of the Company or a Participating Employer the opportunity to elect to defer receipt of cash compensation. The Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. The Plan, originally known as the Ingersoll- Rand Company Executive Deferred Compensation and Stock Bonus Plan, became effective on January 1, 1997 and was amended and restated effective January 1, 2001." 2. Section 2.3 of the Plan, "Base Salary", is hereby amended and restated as of the Effective Time as follows in its entirety: "2.3 `Base Salary' means a Participant's annual base salary, excluding bonuses, commissions, incentive compensation and all other remuneration for services rendered to the Company or a Participating Employer and prior to a reduction for any salary contributions to a plan established pursuant to Code Section 125 or qualified pursuant to Code Section 401(k)." 3. Section 2.7 of the Plan, "Change in Control," is hereby amended as of the date hereof by adding the following to the end thereof: "Notwithstanding any other provision of this Section 2.7 or any other provisions of the Plan to the contrary, none of the transactions contemplated by the Merger Agreement which are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on or after the Effective Time shall trigger, constitute or be deemed a Change in Control. On and after the Effective Time, solely for proposes of this Section 2.7, the term `Company' shall mean Ingersoll-Rand Company Limited." 4. Section 2.12 of the Plan, "Disability", is hereby amended and restated as of the Effective Time as follows in its entirety: "2.12 `Disability' means the Participant is eligible to receive benefits under a long-term disability plan maintained by the Company or a Participating Employer." 5. Section 2.19 of the Plan, "Eligible Employee", is hereby amended and restated as of the Effective Time as follows in its entirety: "2.19 `Eligible Employee' means an Elected Officer or an individual who is among a select group of management and highly compensated employees of the Company or a Participating Employer who has been selected by the Administrative Committee, in its sole and absolute discretion, to participate in the Plan." 6. Section 2.22 of the Plan is hereby amended and restated in its entirety as of the Effective Time: "2.22 `IR Stock' means the Class A common shares, par value $1,00 per share, of Ingersoll-Rand Company Limited, a Bermuda company." 7. A new Section 2.24A of the Plan, "Participating Employer" is hereby added as of the Effective Time as follows in its entirety: "2.24A `Participating Employer' means any direct or indirect parent, subsidiary or affiliate of the Company." 8. Section 2.28 of the Plan, "Service", is hereby amended and restated as of the Effective Time as follows in its entirety: "2.28 `Service' means periods of service with the Company or a Participating Employer as determined by the Administrative Committee in its sole and absolute discretion." 9. Section 2 of the Plan is hereby amended as of the date hereof to include the following new sections for additional definitions in proper alphabetical progression: "2.16A `Effective Time' means the Effective Time as such time as defined in the Merger Agreement." "2.23A `Merger Agreement' means that certain Agreement and Plan of Merger among the Company, Ingersoll-Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited." 10. Section 7.6 of the Plan, "Form of Payments of IR Stock", is hereby amended as of the Effective Time by adding the following to the end thereof: "Each share of IR Stock acquired by the Plan after the Effective Time may be purchased for the Plan on the open market or may be issued directly to the Plan by Ingersoll- Rand Company Limited, in the sole and exclusive discretion of Ingersoll-Rand Company Limited." 11. A new section 7.3A of the Plan, "Transfer of Employment", is hereby added as of the Effective Time as follows in its entirety: "7.3A Transfer of Employment. Notwithstanding any provision of Sections 7.1, 7.2 or 7.3 to the contrary, a Participant shall not be considered to have terminated employment during a Plan Year, if such Participant is continuously employed during that Plan Year by the Company, a Participating Employer, or any subsidiaries or affiliates of a Participating Employer, or any combination thereof." 12. The last sentence of Section 10.1 of the Plan, "Unsecured General Creditor", is hereby amended and restated as of the Effective Time as follows: "No Participant shall have any rights or privileges of a stockholder of the Company or of a member of Ingersoll- Rand Company Limited under the Plan, including as a result of the crediting of units to a Participant's IR Stock Account or Supplemental Contribution Account, except at such time as distribution is actually made from the Participant's IR Stock Account or Supplemental Contribution Account, as applicable." 13. Section 10.4 of the Plan, "No Contract of Employment", is hereby amended and restated as of the Effective Time as follows in its entirety: "No Contract of Employment. The establishment of the Plan or any modification hereof shall not give any Participant or other person the right to remain in the service of the Company, a Participating Employer, or any subsidiaries or affiliates of a Participating Employer, and all Participants and other persons shall remain subject to discharge to the same extent as if the Plan had never been adopted." 14. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company and Ingersoll- Rand Company Limited have had their duly authorized representatives sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary The Plan, as amended herein, is hereby acknowledged and accepted by Ingersoll-Rand Company Limited as of the Effective Time, as defined above, solely for the purpose of Ingersoll-Rand Company Limited issuing its Class A common shares, in its sole and exclusive discretion, in order to pay benefits to eligible employees as defined in and pursuant to the provisions of the Plan. INGERSOLL-RAND COMPANY LIMITED By: /S/ Gerald E. Swimmer President EX-10 20 exh10-28.txt INCENTIVE STOCK PLAN OF 1998 EXHIBIT 10.28 AMENDMENT OF INGERSOLL-RAND COMPANY INCENTIVE STOCK PLAN OF 1998 May 2, 2001 The Ingersoll-Rand Company Incentive Stock Plan of 1998 (the "Plan") is hereby amended, effective as of the date first above written: 1. Section 4(a) of the Plan is amended to change the number "13,000,000" to "18,000,000." 2. Section 11 of the Plan is amended to change the date "April 30, 2003" to "April 30,2004." EX-10 21 exh10-29.txt IR COMPANY INCENTIVE STOCK PLAN OF 1998 EXHIBIT 10.29 REORGANIZATION AMENDMENT TO THE INGERSOLL-RAND COMPANY INCENTIVE STOCK PLAN OF 1998 WHEREAS, Ingersoll-Rand Company, a New Jersey corporation, adopted the Ingersoll-Rand Company Incentive Stock Plan of 1998 (the "Plan"); and WHEREAS, Ingersoll-Rand Company reserved the right at any time and from time to time to amend the Plan in accordance with Section 14 of the Plan; and WHEREAS, Ingersoll-Rand Company, acting on authority of its Board of Directors and shareholders, desires to amend the Plan. NOW, THEREFORE, the Plan shall be amended in the following respects effective as of the date hereof or such other dates as noted below: 1. As of the Effective Time, the name of the Plan is hereby changed to Ingersoll-Rand Company Limited Incentive Stock Plan of 1998 and Ingersoll-Rand Company Limited shall assume the rights and obligations of Ingersoll-Rand Company under the Plan and shall become the Plan sponsor. 2. As of the Effective Time, the word "members" shall be substituted for the word "shareholders" in Section 1 of the Plan to reflect the fact that at the Effective Time all shareholders in Ingersoll-Rand Company shall automatically become members of the Company. 3. The definition of "Change in Control of the Company" in Section 2 of the Plan is hereby amended as of the date hereof by adding the following sentence to the end thereof: "Notwithstanding any other provision of this Section or any other Section of the Plan to the contrary, none of the transactions contemplated by the Merger Agreement which are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on or after the Effective Time shall trigger, constitute or be deemed a `Change in Control of the Company'." 4. The definition of "Common Stock" in Section 2 of the Plan is hereby amended and restated to read as follows in its entirety as of the Effective Time: "Common Stock: The Class A common shares of the Company, par value $1.00 per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of paragraph (a) of Section 10." 5. The definition of "Company" in Section 2 of the Plan is hereby amended and restated to read as follows in its entirety as of the Effective Time: "Company: Ingersoll-Rand Company Limited, a Bermuda company." 6. Section 2 of the Plan is hereby amended as of the date hereof to include the following definitions in proper alphabetical progression: "Effective Time: The Effective Time as such term is defined in the Merger Agreement." "Merger Agreement: That certain Agreement and Plan of Merger among Ingersoll-Rand Company, Ingersoll-Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which Ingersoll-Rand Company will become an indirect wholly-owned subsidiary of Ingersoll- Rand Company Limited." 7. Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects. IN WITNESS WHEREOF, Ingersoll-Rand Company and Ingersoll-Rand Company Limited have had their duly authorized representatives sign this Amendment on December 31, 2001. INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller Vice President and Secretary INGERSOLL-RAND COMPANY LIMITED By: /S/ Patricia Nachtigal Senior Vice President and General Counsel EX-12 22 exh-12.txt COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES EXHIBIT 12 INGERSOLL-RAND COMPANY COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar amounts in millions) Years Ended December 31, Fixed charges: 2001 2000 1999 1998 1997 Interest expense........................... $254.3 $ 286.6 $ 204.5 $ 225.9 $137.5 Amortization of debt discount and expense.. 8.8 6.1 6.7 7.0 2.0 Rentals (one-third of rentals)............. 36.3 28.2 23.9 23.8 23.3 Capitalized interest....................... 4.0 4.4 4.0 4.0 3.2 Equity-linked security charges............ 8.3 25.6 25.6 19.7 0.0 Total fixed charges.......................... $311.7 $ 350.9 $ 264.7 $ 280.4 $166.0 Net earnings from continuing operations $246.2 $ 546.2 $ 563.1 $ 481.6 $367.6 Add: Minority income of majority- owned subsidiaries.................. 20.1 39.3 29.1 23.5 3.6 Taxes on income from continuing operations.......................... (2.9) 284.4 307.1 257.6 220.2 Fixed charges......................... 311.7 350.9 264.7 280.4 166.0 Less: Capitalized interest.................. 4.0 4.4 4.0 4.0 3.2 Undistributed earnings (losses) from less than 50% owned affiliates...... 0.8 9.2 27.1 33.8 16.6 Earnings available for fixed charges ........ $570.3 $1,270.2 $1,132.9 $1,055.3 $737.6 Ratio of earnings to fixed charges .......... 1.83 3.44 4.28 3.59 4.44 Undistributed earnings (losses) from less than 50% owned affiliates: Equity in earnings (losses)............ $ 3.3 $ 11.7 $ 29.3 $ 37.0 $ 18.7 Less: Amounts distributed............... 2.5 2.5 2.2 3.2 $ 2.1 Undistributed earnings (losses) from less-than 50% owned affiliates........... $ 0.8 $ 9.2 $ 27.1 $ 33.8 $ 16.6
EX-13 23 exh-13.txt 2001 FINANCIAL REPORT EXHIBIT 13 INGERSOLL-RAND COMPANY LIMITED 2001 FINANCIAL REPORT Consolidated Statement of Income In millions except per share amounts For the years ended December 31 2001 2000 1999 Net sales $9,682.0 $9,597.6 $7,819.0 Cost of goods sold 7,611.5 7,141.4 5,673.2 Selling and administrative expenses 1,454.2 1,279.6 1,066.1 Restructuring charges 93.1 87.2 - Operating income 523.2 1,089.4 1,079.7 Interest expense (253.0) (255.3) (183.5) Other income (expense), net (6.8) 35.8 3.1 Minority interests (20.1) (39.3) (29.1) Earnings before income taxes 243.3 830.6 870.2 (Benefit)/provision for income taxes (2.9) 284.4 307.1 Earnings from continuing operations 246.2 546.2 563.1 Discontinued operations (net of tax) - 123.2 28.0 Net earnings $ 246.2 $ 669.4 $ 591.1 Basic earnings per share: Continuing operations $1.49 $3.39 $3.44 Discontinued operations - 0.76 0.17 $1.49 $4.15 $3.61 Diluted earnings per share: Continuing operations $1.48 $3.36 $3.40 Discontinued operations - 0.76 0.17 $1.48 $4.12 $3.57 See accompanying Notes to Consolidated Financial Statements. Consolidated Balance Sheet In millions except share amounts December 31 2001 2000 Assets Current assets: Cash and cash equivalents $ 114.0 $ 97.0 Marketable securities 7.4 130.4 Accounts and notes receivable, less allowances of $54.3 in 2001 and $48.5 in 2000 1,482.9 1,671.0 Inventories 1,295.3 1,242.3 Prepaid expenses and deferred income taxes 288.2 235.5 3,187.8 3,376.2 Property, plant and equipment, net 1,633.0 1,653.4 Intangible assets, net 5,689.3 5,372.2 Deferred income taxes - 152.9 Other assets 553.6 497.9 $11,063.7 $11,052.6 Liabilities and Equity Current liabilities: Accounts payable $ 761.0 $ 681.4 Accrued expenses and other current liabilities 1,526.3 1,561.0 Loans payable 563.7 2,126.1 2,851.0 4,368.5 Long-term debt 2,900.7 1,540.4 Deferred income taxes 170.1 - Postemployment and other benefit liabilities 920.4 957.8 Minority interests 110.5 113.4 Other liabilities 194.4 188.8 7,147.1 7,168.9 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company - 402.5 Shareholders' equity: Common shares (168,003,884 and 171,466,627 shares issued in 2001 and 2000, respectively) 168.0 343.1 Capital in excess of par value 324.2 258.8 Retained earnings 3,745.8 3,612.7 4,238.0 4,214.6 Unallocated LESOP shares, at cost - (1.8) Treasury stock, at cost - (471.0) Accumulated other comprehensive income (321.4) (260.6) Shareholders' equity 3,916.6 3,481.2 $11,063.7 $11,052.6 See accompanying Notes to Consolidated Financial Statements. Consolidated Statement of Shareholders' Equity In millions Capital in Accumulated Total excess other shareholders' Common stock of par Retained Unallocated Treasury comprehensive Comprehensive equity Amount Shares value earnings LESOP stock income income Balance at December 31, 1998 $2,721.8 $337.8 168.9 $133.4 $2,567.3 $(27.0) $(150.9) $(138.8) Net earnings 591.1 591.1 $591.1 Foreign currency translation (48.0) (48.0) (48.0) Total comprehensive income $543.1 Shares issued under stock and incentive plans 94.8 4.5 2.3 90.3 Allocation of LESOP shares 24.6 14.1 10.5 Purchase of treasury shares (205.8) (205.8) Cash dividends (105.3) (105.3) Balance at December 31, 1999 3,073.2 342.3 171.2 237.8 3,053.1 (16.5) (356.7) (186.8) Net earnings 669.4 669.4 $669.4 Foreign currency translation (90.2) (90.2) (90.2) Unrealized gain on marketable securities 16.4 16.4 16.4 Total comprehensive income $595.6 Acquisition of business 6.4 6.4 Shares issued under stock and incentive plans 11.7 0.8 0.3 10.3 0.6 Allocation of LESOP shares 25.4 10.7 14.7 Purchase of treasury shares (121.3) (121.3) Cash dividends (109.8) (109.8) Balance at December 31, 2000 3,481.2 343.1 171.5 258.8 3,612.7 (1.8) (471.0) (260.6) Net earnings 246.2 246.2 $246.2 Foreign currency translation (45.9) (45.9) (45.9) Cumulative effect of change in accounting principal (SFAS 133), net of tax (1.2) (1.2) (1.2) Cash flow hedges, net of tax: Unrealized (loss) gain 1.5 1.5 1.5 Reclassification adjustments 1.2 1.2 1.2 Reclassification to realized on marketable securities, net of tax (16.4) (16.4) (16.4) Total comprehensive income $185.4 Acquisition of business 15.3 15.3 Shares issued under stock and incentive plans 15.3 0.6 0.4 14.7 Allocation of LESOP shares 2.5 0.7 1.8 Purchase of treasury shares (72.5) (72.5) Stock issued related to equity- linked securities 402.5 16.7 8.3 385.8 Treasury stock cancellation - (24.4) (12.2) (503.8) 528.2 Common stock conversion - (168.0) 168.0 Cash dividends (113.1) (113.1) Balance at December 31, 2001 $3,916.6 $168.0 168.0 $324.2 $3,745.8 $ - $ - (321.4)
See accompanying Notes to Consolidated Financial Statements. Consolidated Statement of Cash Flows In millions For the years ended December 31 2001 2000 1999 Cash flows from operating activities: Income from continuing operations $ 246.2 $ 546.2 $563.1 Adjustments to arrive at net cash provided by operating activities: Restructure charges 93.1 87.2 - Depreciation and amortization 362.5 327.1 272.4 Gain on sale of businesses - (42.9) (14.6) Loss/(gain) on sale of property, plant and equipment 1.6 (5.1) (3.4) Minority interests, net of dividends (3.4) 4.9 (0.2) Equity earnings/losses, net of dividends (1.5) 0.8 (28.5) Deferred income taxes 23.4 13.6 62.2 Other items 10.6 35.7 40.9 Changes in assets and liabilities (Increase)/decrease in: Accounts and notes receivable 229.4 (31.6) (57.7) Inventories (24.1) (160.2) 56.7 Other current and noncurrent assets (172.9) 3.1 12.8 Increase/(decrease) in: Accounts payable and accruals 40.0 50.3 (55.6) Other current and noncurrent liabilities (203.3) (92.1) 6.6 Net cash provided by operating activities 601.6 737.0 854.7 Cash flows from investing activities: Capital expenditures (200.6) (201.3) (190.5) Proceeds from sales of property, plant and equipment 41.7 28.5 30.4 Acquisitions, net of cash * (158.3) (2,288.0) (161.2) Proceeds from business dispositions 17.5 977.3 84.8 Decrease/(increase) in marketable securities 97.2 (6.3) 1.5 Cash provided by/(invested in) or advances from/(to) equity companies 15.7 12.2 (2.0) Net cash used in investing activities (186.8) (1,477.6) (237.0) Cash flows from financing activities: (Decrease)/increase in short-term borrowings (1,026.1) 950.2 (36.8) Proceeds from long-term debt 1,493.8 3.1 21.5 Payments of long-term debt (681.8) (80.9) (252.2) Net change in debt (214.1) 872.4 (267.5) Proceeds from exercise of stock options 9.7 8.3 70.2 Dividends paid (113.1) (109.8) (105.3) Purchase of treasury stock (72.5) (121.3) (205.8) Other - - 63.3 Net cash (used in)/provided by financing activities (390.0) 649.6 (445.1) Net cash (used in)/provided by discontinued operations - (22.1) 14.6 Effect of exchange rate changes on cash and cash equivalents (7.8) (12.8) (7.8) Net increase/(decrease) in cash and cash equivalents 17.0 (125.9) 179.4 Cash and cash equivalents-beginning of year 97.0 222.9 43.5 Cash and cash equivalents-end of year $ 114.0 $ 97.0 $ 222.9 *Acquisitions: Working capital, other than cash $ (5.9) $ (376.8) $ (61.0) Property, plant and equipment (41.6) (487.2) (13.0) Intangibles and other assets (126.6) (1,806.2) (101.4) Long-term debt and other liabilities 0.5 375.7 14.2 Treasury stock issued 15.3 6.5 - Net cash used to acquire businesses $ (158.3) $(2,288.0) $(161.2) Cash paid during the year for: Interest, net of amounts capitalized $ 293.4 $ 346.8 $ 230.4 Income taxes 154.6 175.7 217.7 In 1999, the company acquired the remaining 49% interest in Ingersoll-Dresser Pump Company in a noncash transaction by issuing a note for $377.0 million. See accompanying Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A summary of significant accounting policies used in the preparation of the accompanying financial statements follows: Basis of Presentation: The consolidated financial statements of Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited or the company), have been prepared in accordance with generally accepted accounting principles in the United States. IR-Limited is the successor to Ingersoll-Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization (the reorganization) that became effective on December 31, 2001. The reorganization was accomplished through a merger of a newly-formed merger subsidiary into IR-New Jersey. IR-New Jersey, the surviving company, continues to exist as an indirect, wholly-owned subsidiary of IR-Limited. IR-Limited and its subsidiaries continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries. The reorganization has been accounted for as a reorganization of entities under common control and accordingly it did not result in any changes to the consolidated amounts of assets, liabilities and shareholders' equity. Principles of Consolidation: The consolidated financial statements include all wholly owned and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated. Partially owned equity affiliates are accounted for under the equity method. In conformity with generally accepted accounting principles, management has used estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Significant estimates include accounting for doubtful accounts, amortization and depreciation, warranty, sales allowances, taxes, environmental, product liability and other contingencies. Actual results could differ from those estimates. Reclassifications: Reclassifications were made to prior year amounts to conform with the 2001 presentation. The accompanying consolidated financial statements restate the previously presented amounts to report Dresser-Rand Company (Dresser-Rand) on a fully consolidated basis since acquisition. Previously, the company reported the results and net assets of Dresser-Rand as assets held for sale. The company adopted Emerging Issues Task Force Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" in the fourth quarter of 2001. Upon adoption, financial statements for all periods presented were restated to comply with the income statement classification of reseller finance costs and cooperative advertising programs, which resulted in decreases to net sales of $28.6 million, $24.0 million and $23.6 million, decreases in cost of goods sold of $13.1 million, $15.8 million and $17.7 million, increases in selling and administrative expenses of $18.5 million, $21.3 million and $13.7 million, and decreases in interest expense of $34.0 million, $29.5 million and $19.6 million in 2001, 2000 and 1999, respectively. Cash Equivalents: The company considers all highly liquid investments, consisting primarily of time deposits and commercial paper with maturities of three months or less when purchased, to be cash equivalents. Cash equivalents were $0.5 million and $1.0 million at December 31, 2001 and 2000, respectively. Inventories: Inventories are stated at cost, which is not in excess of market. Most U.S. manufactured inventories, excluding the Climate Control and Dresser-Rand Segments, are valued on the last-in, first-out (LIFO) method. All other inventories are valued using the first-in, first-out (FIFO) method. Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. The company principally uses accelerated depreciation methods for assets placed in service prior to December 31, 1994. Assets acquired subsequent to that date are depreciated using the straight-line method over their estimated useful lives. At December 31, 2001 and 2000, gross land and buildings totaled $761.7 million and $738.9 million, respectively, while gross machinery and equipment totaled $1,887.2 million and $1,827.7 million, respectively. Accumulated depreciation at December 31, 2001 and 2000 was $1,015.9 million and $913.2 million, respectively. Intangible Assets: Goodwill, net, was $4.8 billion and $5.3 billion at December 31, 2001 and 2000, respectively. Accumulated amortization amounted to $554.4 million and $448.4 million at December 31, 2001 and 2000, respectively. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," goodwill associated with acquisitions consummated after June 30, 2001 is not being amortized. All other goodwill has been amortized on a straight-line basis over periods not to exceed 40 years through December 31, 2001. Amortization expense for goodwill for 2001, 2000 and 1999 was $135.1 million, $135.3 million and $102.3 million, respectively. Other intangible assets, net, were $877.7 million and $104.2 million at December 31, 2001 and 2000, respectively. These amounts include capitalized software, debt issuance costs, and costs allocated to patents, trademarks and other specifically identifiable assets arising from acquisitions, which are being amortized on a straight-line basis over their estimated useful lives. At December 31, 2001 and 2000, accumulated amortization of other intangibles amounted to $86.0 million and $43.0 million, respectively. During 2001, the company reclassified certain amounts from goodwill to other intangible assets as a result of final valuations on the 2000 acquisitions and increased goodwill associated with deferred tax liabilities. The carrying value of goodwill and other intangibles is reviewed if the facts and circumstances, such as significant decline in sales, earnings or cash flows or material adverse changes in the business climate, suggest that it may be impaired. If this review indicates that goodwill will not be recoverable as determined based on the estimated undiscounted cash flows of the entity acquired, impairment is measured by comparing the carrying value of goodwill to fair value. Fair value is determined based on quoted market values, discounted cash flows or appraisals. Income Taxes: Deferred taxes are provided on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. A valuation allowance is established for deferred tax assets for which realization is not likely. Environmental Costs: Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not contribute to current or future revenues, are expensed. Costs to prepare environmental site evaluations and feasibility studies are accrued when the company commits to perform them. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the company's commitment to a plan of action. The assessment of this liability, which is calculated based on existing technology, does not reflect any offset for possible recoveries from insurance companies and is not discounted. Revenue Recognition: Revenues are recognized on sales of product at the time the goods are shipped and title has passed to the customer or when services are performed. Provisions for discounts and rebates to customers and other adjustments are provided for at the time of sale as a reduction of revenue. Research and Development Costs: Research and development expenditures, including qualifying engineering costs, are expensed when incurred and amounted to $215.4 million in 2001, $198.2 million in 2000 and $186.2 million in 1999. Comprehensive Income: Comprehensive income includes net income, foreign currency translation adjustments, amounts relating to cash flow hedges, and unrealized holding gains and losses on marketable securities. Foreign Currency: Assets and liabilities of non-U.S. entities, where the local currency is the functional currency, have been translated at year-end exchange rates, and income and expenses have been translated using weighted average-for-the-year exchange rates. Adjustments resulting from translation have been recorded in accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying foreign investment. For non-U.S. entities where the U.S. dollar is the functional currency, inventory and property balances and related income statement accounts have been translated using historical exchange rates, and resulting gains and losses have been credited or charged to net earnings. Foreign currency transactions and translations recorded in the income statement decreased net earnings by $2.3 million and $7.6 million in 2001 and 2000 respectively, and increased net earnings by $2.5 million in 1999. Accumulated other comprehensive income decreased in 2001 and 2000 by $60.8 million and $73.8 million, respectively, primarily due to foreign currency equity adjustments related to translation. Earnings Per Share: Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding as well as potentially dilutive common shares, which in the company's case comprise shares issuable under stock benefit plans. The weighted average number of common shares outstanding for basic earnings per share calculations were 165.1 million, 161.2 million and 163.6 million for 2001, 2000 and 1999, respectively. For diluted earnings per share purposes, these balances increased by 1.2 million, 1.2 million and 2.1 million shares for 2001, 2000 and 1999, respectively. At December 31, 2001, 2000 and 1999, 5.6 million, 6.5 million and 0.2 million shares, respectively, were excluded because the effect would be anti-dilutive. Stock-based Compensation: The company continues to apply the principles of APB No. 25 "Accounting for Stock Issued to Employees," and has provided pro forma fair value disclosures in Note 14. New Accounting Standards: In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued, which provides guidance on the accounting for the impairment or disposal of long-lived assets and was adopted January 1, 2002, by the company. Adoption of SFAS No. 144 did not have a material effect on the company's consolidated financial position or results of operations. In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. The standard requires that legal obligations associated with the retirement of tangible long-lived assets be recorded at fair value when incurred and is effective January 1, 2003 for the company. The company is currently reviewing the provisions of SFAS No. 143 to determine the standard's impact upon adoption. Also in June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." The requirements and effects of these pronouncements are discussed in Note 4. In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This statement is effective for transfers and services of financial assets occurring after March 31, 2001, and is discussed in Note 10. The company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" and its amendments as of January 1, 2001. The requirements and effects of such adoption are discussed in Note 7. NOTE 2 - RESTRUCTURING: During 2001, the company continued a restructuring program that was initiated in 2000, which includes such actions as employee severance, plant rationalizations, organizational realignments consistent with the company's market-based structure and the consolidation of back-office processes. In response to continued weakness in its major end markets, the company initiated a second phase of restructuring in the fourth quarter of 2001, which is focussed on reducing general and administrative expense and is expected to be completed by the end of 2002. The programs have resulted in the closure of 20 plants and a workforce reduction of more than 3,900 employees. Charges for restructuring for full-year 2001 totaled $93.1 million. The company recorded pretax restructuring charges by business segment for the year ended December 31, as follows: In millions 2001 2000 Climate Control $31.7 $ 36.6 Industrial Solutions Air and Productivity Solutions 16.2 16.5 Dresser-Rand 2.1 11.0 Engineered Solutions 19.6 11.5 Infrastructure 5.7 11.4 Security and Safety 3.0 15.1 Corporate 14.8 18.1 Total $93.1 $87.2 A reconciliation of the restructuring provision is as follows: Employee termination Facility In millions costs exit costs Total Provision $74.2 $13.0 $87.2 Cash payments (33.7) (1.7) (35.4) Non-cash write-offs (5.2) (8.6) (13.8) Balance at December 31, 2000 35.3 2.7 38.0 Provision 80.0 13.1 93.1 Cash payments (74.7) (6.7) (81.4) Non-cash write-offs (6.1) (2.0) (8.1) Balance at December 31, 2001 $34.5 $ 7.1 $41.6 NOTE 3 - DISCONTINUED OPERATIONS: In August 1999, the company announced its plan to divest Ingersoll-Dresser Pump Company (IDP). On August 8, 2000, the company sold IDP for $775.0 million. The company realized an after-tax gain of $124.8 million. The net assets of IDP had been classified as assets held for sale. IDP's results have been reported as discontinued operations (net of tax) in the accompanying financial statements. Earnings from discontinued operations included the following results for the years ended December 31: In millions 2000 1999 Net sales $421.8 $837.9 Operating income 5.3 63.9 Other income (expense), net (1.2) 7.4 Interest expense (10.1) (1.4) Minority interest - (23.7) Earnings (loss) before income taxes (6.0) 46.2 Income taxes (4.4) 18.2 Earnings (loss) from operations (1.6) 28.0 Gain on disposal of discontinued operations (net of tax) 124.8 - Net earnings from discontinued operations $123.2 $ 28.0 NOTE 4 - ACQUISITIONS OF BUSINESSES: In 2001, the company acquired 12 entities for cash of $158.3 million and treasury stock of $15.3 million. The following acquisitions account for the majority of all acquisitions during the year. Climate Control O Grenco Transportkoeling B.V., based in the Netherlands, a transport refrigeration sales and service business. O National Refrigeration Services, Inc. (NRS), based in Atlanta, Georgia, a leading provider of commercial refrigeration products and services for food storage, distribution and display throughout the United States. O Taylor Industries Inc., based in Des Moines, Iowa and an affiliated business, Taylor Refrigeration (Taylor), distributes, installs and services refrigeration equipment, food service equipment and electric doors. Engineered Solutions O Nadella S.A., based in France, supplies precision needle bearings for automotive and industrial applications. Nadella was previously 50% owned by the company. Infrastructure O Superstav spol. s.r.o., based in the Czech Republic, and Earth Force American, Inc., based in South Carolina, both of which are manufacturers of compact tractor loader backhoes. Security and Safety O Kryptonite Corporation, based in Massachusetts, a leading manufacturer of locks for recreational and portable security applications. O ITO Emniyet Kilit Sistemleri A., based in Turkey, a leading manufacturer and distributor of locks, cylinders and keys. In June 2000, the company acquired Hussmann International, Inc. (Hussmann), for approximately $1.7 billion in cash after consideration of amounts paid for outstanding stock options, debt retirement, employee contracts and transaction costs. Hussmann's business is the design, production, installation and service of merchandising and refrigeration systems for the global food industry. Hussmann is included in Climate Control. The results of Hussmann's operations have been included in the consolidated financial statements from acquisition date. The following unaudited pro forma consolidated results for the years ended December 31, 2000 and 1999 reflect the acquisition as though it occurred at the beginning of the respective periods after adjustments for interest on acquisition debt, and depreciation and amortization of assets, including goodwill: In millions except per share amounts 2000 1999 Sales $10,231.4 $9,134.0 Net earnings 614.1 534.5 Continuing operations Basic earnings per common share $3.04 $3.10 Diluted earnings per common share 3.02 3.05 The above pro forma results are not necessarily indicative of what the actual results would have been had the acquisition occurred at the beginning of the respective periods. Further, the pro forma results are not intended to be a projection of future results of the combined companies. In connection with the Hussmann acquisition, purchase accounting reserves were created for the closure and restructure of a number of Hussmann facilities. The amounts are as follows: Employee termination Facility In millions costs exit costs Total Original reserves recorded $ 6.6 $17.3 $23.9 Cash payments (1.1) (0.6) (1.7) Balance at December 31, 2000 5.5 16.7 22.2 Reserves 14.2 28.5 42.7 Cash payments (7.6) (22.1) (29.7) Balance at December 31, 2001 $12.1 $23.1 $35.2 In February 2000, the company completed the purchase of the 51% of Dresser-Rand not previously owned by acquiring the joint venture partner's share for a net purchase price of approximately $543.0 million in cash. For all business combinations subsequent to June 30, 2001, the company applied the provisions of SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." Under the provisions of these standards, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization, while all other intangible assets are to be amortized over their estimated useful lives. Amortization related to goodwill was $135.1 million in 2001, $135.3 million in 2000 and $102.3 million in 1999. Additional provisions of SFAS No. 141 and No. 142, including annual impairment testing for goodwill and intangible assets, became effective for the company on January 1, 2002. The company is currently determining the impact of adopting these provisions under the transition provisions of the statements, and anticipates that it may record an impairment charge. NOTE 5 - DISPOSITIONS: During 2000, the company sold the Compression Services business of Dresser-Rand for a gain of $50.4 million, as well as the Corona Clipper business for approximately $43.0 million, which approximated book value. The company also sold its interests in three joint ventures relating to the manufacture of full steering-column assemblies for approximately $37.0 million in cash. In August 2000, the company sold IDP for $775.0 million (Note 3). During 1999, the company received proceeds of $47.0 million, which approximated book value, on the sale of a portion of the Harrow assets. In December 1999, the company also sold certain net assets of the Automation Division of the Air and Productivity Solutions Segment. The transaction resulted in a net gain of approximately $4.4 million. The company also made several minor dispositions during 1999. NOTE 6 - INVENTORIES: At December 31, inventories were as follows: In millions 2001 2000 Raw materials and supplies $ 307.9 $ 358.4 Work-in-process 395.5 372.9 Finished goods 733.1 654.4 1,436.5 1,385.7 Less-LIFO reserve 141.2 143.4 Total $1,295.3 $1,242.3 Work-in-process inventories are stated after deducting customer progress payments of $139.5 million in 2001 and $127.3 million in 2000. At December 31, 2001 and 2000, LIFO inventories comprised approximately 33% and 36%, respectively, of consolidated inventories. There were no material liquidations of LIFO layers for all periods presented. NOTE 7 - FINANCIAL INSTRUMENTS: The company, as a large multinational company, maintains significant operations in countries other than the United States. As a result of these global activities, the company is exposed to changes in foreign currency exchange rates, which affect the results of operations and financial condition. The company manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through the use of financial instruments. Generally, the only financial instruments the company utilizes are forward exchange contracts and options. The purpose of the company's currency hedging activities is to mitigate the impact of changes in foreign currency exchange rates. The company attempts to hedge transaction exposures through natural offsets. To the extent that this is not practicable, major exposure areas considered for hedging include foreign currency denominated receivables and payables, intercompany loans, firm committed transactions, and forecasted sales and purchases. The following table summarizes by major currency the contractual amounts of the company's forward contracts in U.S. dollars. Foreign currency amounts are translated at year-end rates at the respective reporting date. The "buy" amounts represent the U.S. equivalent of commitments to purchase foreign currencies, and the "sell" amounts represent the U.S. equivalent of commitments to sell foreign currencies. Some of the forward contracts involve the exchange of two foreign currencies according to local needs in foreign subsidiaries. At December 31, the contractual amounts were: In millions 2001 2000 Buy Sell Buy Sell British pounds 14.0 $ 8.8 $ 59.5 $ 4.6 Canadian dollars 137.6 9.6 106.8 33.1 Euro and euro-linked currencies 23.0 185.6 75.8 157.7 Japanese yen 21.6 27.3 27.6 0.3 Other 12.2 18.7 7.4 27.3 Total $208.4 $250.0 $277.1 $223.0 Starting in late 1999, the company began purchasing on a limited basis, commodity contracts to hedge the costs of metals used in its products. Gains and losses on the derivatives are included in cost of sales in the same period as the hedged transaction. The following table summarized commodity contracts by maturity: Commodity Contracts 2002 2003 Total Aluminum Contract amount in millions $17.7 - $17.7 Contract quantity (in 000 lbs.) 28.9 - 28.9 Copper Contract amount in millions $ 8.3 - $ 8.3 Contract quantity (in 000 lbs.) 10.9 - 10.9 Zinc Contract amount in millions - $2.1 $ 2.1 Contract quantity (in 000 lbs.) - 5.5 5.5 Total Contract amount in millions $26.0 $2.1 $28.1 Contract quantity (in 000 lbs.) 39.8 5.5 45.3 SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," and its amendments, became effective for the company on January 1, 2001. The statement requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives will be recognized in earnings or other comprehensive income, depending on the designated purpose of the derivative. If a derivative qualifies for cash flow hedge accounting the effective portion of changes in fair value is recorded temporarily in other comprehensive income, then recognized in earnings along with the related effects of the hedged items. If a derivative qualifies for fair value hedge accounting, the changes in fair value of the derivative and the hedged item are recognized currently in earnings. There was no ineffective portion of hedges reported in earnings in 2001. The $1.2 million, after tax, recorded in equity at January 1, 2001, upon the adoption of these new standards, was reclassified to earnings during the year. Of the $1.5 million recorded in equity at December 31, 2001, $0.3 million is expected to be reclassified to earnings over the twelve month period ending December 31, 2002, while $1.2 million, related to an interest rate swap used as a cash flow hedge of the forecasted issuance of debt that occurred in the second quarter, will be reclassified to earnings over the next four years. The actual amounts that will be reclassified to earnings over the next twelve months will vary from this amount as a result of changes in market conditions. No amounts were reclassified to earnings during the year in connection with forecasted transactions that were no longer considered probable of occurring. At December 31, 2001, the maximum term of derivative instruments that hedge forecasted transactions, for foreign currency hedges, was 12 months. At December 31, 2001, the maximum term of derivative instruments that hedge forecasted transactions, for commodity hedges, was 24 months. Derivatives not designated as hedges primarily consist of options and forward contracts. Although these instruments are effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS No. 133, as amended. The counterparties to the company's forward contracts consist of a number of major international financial institutions. The company could be exposed to loss in the event of nonperformance by the counterparties. However, credit ratings and concentration of risk of these financial institutions are monitored on a continuing basis and present no significant credit risk to the company. The carrying value of cash and cash equivalents, marketable securities, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short- term nature of these instruments. The following table summarizes the estimated fair value of the company's remaining financial instruments at December 31: In millions 2001 2000 Long-term debt: Carrying value $2,900.7 $1,540.4 Estimated fair value 2,996.7 1,537.4 Currency contracts: Contract (notional) amounts: Buy contracts $ 208.4 $ 277.1 Sell contracts 250.0 223.0 Fair (market) values: Buy contracts 206.7 289.7 Sell contracts 247.5 242.3 Commodity contracts: Contract (notional) amounts: Buy contracts $ 28.1 $ 34.0 Fair (market) values: Buy contracts 25.5 34.2 Fair value of long-term debt was determined by reference to the December 31, 2001 and 2000, market values of comparably rated debt instruments. Fair values of forward contracts are based on dealer quotes at the respective reporting dates. NOTE 8 - LONG-TERM DEBT AND CREDIT FACILITIES: At December 31, long-term debt consisted of: In millions 2001 2000 5.75% Notes Due 2003 $ 600.0 $ - 6 7/8% Notes Due 2003 100.0 100.0 5.80% Notes Due 2004 249.8 - 6.25% Notes Due 2006 574.4 - 9% Debentures Due 2021 125.0 125.0 7.20% Debentures Due 2025 150.0 150.0 6.48% Debentures Due 2025 150.0 150.0 6.391% Debentures Due 2027 200.0 200.0 6.443% Debentures Due 2027 200.0 200.0 Medium-term Notes Due 2003-2028, at an average rate of 6.56% 296.7 377.0 6.75% Senior Notes Due 2008 124.4 124.0 6.29% Securities Due 2003 32.5 - Medium-term Notes Due 2023, at an average rate of 8.22% 50.2 50.2 Other loans and notes, at end- of-year average interest rates of 3.997% in 2001 and 6.248% in 2000, maturing in various amounts to 2015 47.7 64.2 $2,900.7 $1,540.4 Debt retirements for the next five years are as follows: $192.3 million in 2002, $838.3 million in 2003, $573.2 million in 2004, $207.2 million in 2005 and $588.2 million in 2006. In February 2001, the company issued $600 million of 5.75% notes due February 2003. In May 2001, the company issued notes with a par value of $575 million at 6.25% per annum due May 2006, and $250 million at 5.80% per annum due June 2004. The proceeds from these financings were used to refinance short-term borrowings related to the acquisition of Hussmann. At December 31, 2001, the company's committed revolving credit lines consisted of a 364-day line totaling $1.25 billion and a five-year line totaling $1.25 billion. These lines were unused and provide support for commercial paper and indirectly provide support for other financing instruments, such as letters of credit and comfort letters, as required in the normal course of business. The company compensates banks for these lines with fees equal to a weighted average of 0.08% per annum. Available foreign lines of credit were $1.0 billion, of which $786.5 million were unused at December 31, 2001. No major cash balances were subject to withdrawal restrictions. At December 31, 2001 and 2000, the average rate of interest for loans payable, excluding the current portion of long-term debt, was 4.704% and 6.914%, respectively. Capitalized interest on construction and other capital projects amounted to $4.0 million, $4.4 million and $4.0 million in 2001, 2000 and 1999, respectively. Interest income, included in other income (expense), net, was $9.8 million, $8.7 million and $5.4 million in 2001, 2000 and 1999, respectively. NOTE 9 - COMMITMENTS AND CONTINGENCIES: The company is involved in various litigations, claims and administrative proceedings, including environmental matters, arising in the normal course of business. In assessing its potential environmental liability, the company bases its estimates on current technologies and does not discount its liability or assume any insurance recoveries. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that recovery or liability with respect to these matters would not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. As of December 31, 2001, the company had no significant concentrations of credit risk in trade receivables due to the large number of customers which comprised its receivables base and their dispersion across different industries and countries. In the normal course of business, the company has issued several direct and indirect guarantees, including performance letters of credit, totaling approximately $239.0 million at December 31, 2001. The company sells product under various arrangements through institutions that provide leasing and product financing alternatives to retail and wholesale customers. Under these arrangements, the company is contingently liable for loan guarantees and residual values of equipment of approximately $29.3 million after consideration of ultimate net loss provisions. The risk of loss to the company is minimal, and historically, only immaterial losses have been incurred relating to these arrangements. Management believes these guarantees will not adversely affect the consolidated financial statements. Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased. Total rental expense was $108.8 million in 2001, $84.6 million in 2000 and $71.6 million in 1999. Minimum lease payments required under noncancellable operating leases with terms in excess of one year for the next five years and thereafter, are as follows: $77.9 million in 2002, $58.6 million in 2003, $39.7 million in 2004, $24.7 million in 2005, $19.4 million in 2006 and $36.3 million thereafter. NOTE 10 - SALES OF RECEIVABLES: The FASB issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", which became effective for the company on March 31, 2001. The statement revises the accounting standards for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. Adoption of SFAS No. 140 had no effect on the company's consolidated financial position, consolidated results of operations, or liquidity. The company has agreements under which several of its operating subsidiaries sell a defined pool of trade accounts receivable to two wholly owned special purpose subsidiaries of the company. The subsidiaries, are separate legal entities, that hold these receivables and sell undivided interests in such accounts receivable to financiers who, in turn, purchase and receive ownership and security interests in those receivables. As collections reduce accounts receivable included in the pool, the operating subsidiaries sell new receivables to the special purpose subsidiaries. The special purpose subsidiaries have the risk of credit loss on the receivables and, accordingly, the full amount of the allowance for doubtful accounts has been retained in the Consolidated Balance Sheets. The operating subsidiaries retain collection and administrative responsibilities for the participating interests in the defined pool. The availability under the programs in 2001 is $300 million. At December 31, 2001, 2000 and 1999, $275 million, $210 million and $170 million, respectively, were utilized under the program. Increases under the program are reflected as operating activities in the Consolidated Statement of Cash Flows. The proceeds of sale are less than the face amount of accounts receivable sold by an amount to issue commercial paper backed by these accounts receivable. The discount from the face amount is accounted for as a loss on the sale of receivables and has been included in other income (expense), net, in the Consolidated Statements of Income, and amounted to $10.6 million, $11.4 million and $10.2 million in 2001, 2000 and 1999, respectively. The weighted average discount rate was 4.68%, 6.21% and 5.99% during the years 2001, 2000 and 1999, respectively. The agreements between the special purpose corporations and the financial institutions do not have a predefined expiration date. The company is retained as the servicer of the pooled receivables. During 2001, 2000 and 1999, such sales of receivables amounted to $1,439.0 million, $753.0 million and $781.8 million, respectively. Receivables, excluding the designated pool of accounts and note receivable, sold during 2001 and 2000 with recourse amounted to $310.7 million and $240.3 million, respectively. At December 31, 2001 and 2000, $115.6 million and $108.2 million, respectively, of such receivables sold remained uncollected and on the Consolidated Balance Sheet. NOTE 11 - EQUITY-LINKED SECURITIES: In March 1998, IR-New Jersey, together with Ingersoll-Rand Financing I, a Delaware statutory business trust of IR-New Jersey (Finance Trust), issued an aggregate of (a) 16,100,000 equity-linked securities, and (b) 1,610,000 Finance Trust 6.22% capital securities, each with a $25 stated liquidation amount (the capital securities). The equity-linked securities consisted of (a) 14,490,000 income equity-linked securities (income securities), and (b) 1,610,000 growth equity-linked securities (growth securities). In May 2001, equity-linked securities in the amount of $402.5 million of Ingersoll-Rand Financing I, a Delaware statutory business trust of IR-New Jersey, were exchanged for 8.3 million shares of common stock issued by IR-New Jersey in accordance with common stock purchase contracts issued by IR-New Jersey. Following the completion of these transactions, $32.5 million of securities remain outstanding and are included in long term debt. The securities bear a distribution rate of 6.29% per annum and will mature in May 2003. NOTE 12 - COMMON STOCK: Effective December 31, 2001, IR-Limited became the successor to IR-New Jersey, following a corporate reorganization. The reorganization was accomplished through a merger of a newly-formed merger subsidiary into IR-New Jersey. Upon consummation of the merger the shares of IR-New Jersey common stock automatically became IR- Limited Class A common shares. As part of the reorganization, IR-New Jersey and certain of its subsidiaries, immediately prior to the merger transferred shares of certain IR-New Jersey subsidiaries and issued certain debt in exchange for which IR-Limited issued 135,250,003 Class B common shares. The Class B common shares are non- voting and will pay comparable dividends to the Class A common shares. The authorized share capital of IR-Limited is $1,175,010,000, consisting of (1) 1,175,000,000 common shares, par value $1.00 per share, which common shares consist of (a) 600,000,000 Class A common shares and (b) 575,000,000 Class B common shares, and (2) 10,000,000 preference shares, par value $0.001 per share, which preference shares consist of 600,000 Series A preference shares and such other series of preference shares as may be designated from time to time with the respective rights and restrictions determined by the board of directors. Class A common shares (and associated preference share purchase rights) were issued to holders of IR-New Jersey common stock in the merger. None of the preference shares were outstanding at December 31, 2001. Class A common shares issued were 168,003,884 at $1.00 par value at December 31, 2001 compared to 171,466,627 common shares at $2.00 par value at December 31, 2000. The decrease in the par value of common shares from, $2.00 to $1.00 is recorded as an increase to capital in excess of par value and a decrease in common stock on the Consolidated Statement of Shareholders' Equity. At December 31, 2001, treasury shares outstanding of 12.2 million were retired due to the reorganization by reducing capital in excess of par by $503.8 million and common stock by $24.4 million. The company has adopted a shareholder rights plan to protect shareholders from attempts to acquire control of the company at an inadequate price. The plan will expire on December 22, 2008, unless earlier redeemed or exchanged by the company, as provided in the rights plan. NOTE 13 - LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN: The company sponsors a Leveraged Employee Stock Ownership Plan (LESOP) for eligible employees. The LESOP was used to fund certain employee benefit plans. At December 31, 2001, the LESOP had allocated all shares to employee accounts. NOTE 14 - INCENTIVE STOCK PLANS: Under the company's Incentive Stock Plans, key employees have been granted options to purchase Class A common shares at prices not less than the fair market value at the date of the grant. Options issued before December 31, 1998, became exercisable one year after the date of the grant and expire at the end of 10 years. Options issued after January 1, 1999, become exercisable ratably over a three-year period from their date of grant and expire at the end of 10 years. The plans, approved in 1990, 1995 and 1998, also authorize stock appreciation rights (SARs) and stock awards, which result in compensation expense. Under SFAS No. 123, compensation cost for the applicable provisions of the company's incentive stock plans would be determined based upon the fair value at the grant date for awards issued since 1996. Applying this methodology would have reduced net earnings and diluted earnings per share by approximately $30.5 million and $0.18 per share for 2001; $16.7 million and $0.10 per share for 2000; and $8.5 million and $0.05 per share for 1999. The average fair values of the options granted during 2001, 2000, and 1999 were estimated at $14.60, $16.89, and $14.15, respectively, on the date of grant, using the Black-Scholes option-pricing model, which included the following assumptions: 2001 2000 1999 Dividend yield 1.65% 1.32% 1.27% Volatility 37.59% 34.31% 29.59% Risk-free interest rate 5.01% 6.45% 4.93% Expected life 5 years 4 years 4 years Changes in options outstanding under the plans were as follows: Shares subject Option Price Weighted average to option range per share exercise price January 1, 1999 6,834,525 $14.77 - $47.03 $32.43 Granted 2,816,480 49.09 - 69.75 50.50 Exercised (2,216,558) 14.77 - 46.00 31.74 Cancelled (93,590) 26.21 - 26.63 48.99 December 31, 1999 7,340,857 $15.13 - $69.75 $39.35 Granted 2,626,785 37.63 - 53.03 51.41 Exercised (243,499) 15.13 - 42.31 28.78 Cancelled (392,630) 20.67 - 62.59 46.77 December 31, 2000 9,331,513 $15.13 - $69.75 $42.75 Granted 4,245,465 40.42 - 49.14 41.31 Exercised (346,266) 15.13 - 42.31 27.52 Cancelled (159,736) 33.67 - 53.03 49.40 December 31, 2001 13,070,976 $20.67 - $69.75 $42.77 At December 31, 2001, there were 761,239 SARs outstanding with no stock options attached. The company has reserved 8,397,409 shares for future awards at December 31, 2001. In addition, 295,416 shares of Class A common shares were reserved for future issue, contingent upon attainment of certain performance goals and future service and 342,476 shares have been earned but deferred at December 31, 2001. The following table summarizes information concerning currently outstanding and exercisable options: Options Options outstanding exercisable Weighted Weighted Weighted Number average average Number average Range of outstanding remaining exercise exercisable exercise exercise price at 12/31/01 life price at 12/31/01 price $20.67-$26.21 1,559,150 2.99 $24.06 1,559,150 $24.06 28.54- 40.47 1,000,900 5.85 34.68 891,198 34.13 40.53- 40.53 3,093,053 9.01 40.53 - - 40.75- 42.31 1,587,170 6.56 42.00 1,332,544 42.24 42.84- 48.13 1,091,926 8.57 45.47 712,896 45.11 49.09- 49.09 1,857,310 6.94 49.09 1,352,993 49.09 49.14- 51.09 443,100 7.92 50.46 266,666 51.09 53.03- 53.03 2,199,117 8.05 53.03 785,303 53.03 53.62- 65.41 221,250 7.54 62.21 147,493 62.21 69.75- 69.75 18,000 7.34 69.75 18,000 69.75 $20.67-$69.75 13,070,976 7.19 $42.77 7,066,243 $40.83 The weighted average number of shares exercisable and the weighted average exercise prices were 5,466,455 shares at a price of $36.87 for December 31, 2000, and 4,524,667 shares at a price of $32.53 for December 31, 1999. The company also maintains a shareholder-approved Management Incentive Unit Award Plan. Under the plan, participating executives are awarded incentive units. When dividends are paid on Class A common shares, dividends are awarded to unit holders, one-half of which is paid in cash, the remaining half of which is credited to the participant's account in the form of so-called Class A common share equivalents. The fair value of accumulated common share equivalents is paid in cash upon the participant's retirement. The number of common share equivalents credited to participants' accounts at December 31, 2001 and 2000, are 347,177 and 399,352, respectively. NOTE 15 - INCOME TAXES: Earnings before income taxes for the years ended December 31, were taxed within the following jurisdictions: In millions 2001 2000 1999 United States $ 88.7 $674.8 $694.4 Non-U.S. 154.6 155.8 175.8 Total $243.3 $830.6 $870.2 The provision for income taxes was as follows: In millions 2001 2000 1999 Current tax expense: United States $(24.1) $228.4 $227.7 Non-U.S. 46.5 43.5 37.6 Total current 22.4 271.9 265.3 Deferred tax expense: United States (15.2) 17.5 26.4 Non-U.S. (10.1) (5.0) 15.4 Total deferred (25.3) 12.5 41.8 Total provision for income taxes $ (2.9) $284.4 $307.1 The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory income tax rate to pretax income, as a result of the following differences: Percent of pretax income 2001 2000 1999 Statutory U.S. rate 35.0% 35.0% 35.0% Increase (decrease) in rates resulting from: Amortization of goodwill 10.5 2.8 2.0 Non-U.S. operations (31.6) (0.8) (1.0) Foreign sales corporation (9.5) (3.1) (1.7) State and local income taxes, net of U.S. tax (3.8) 2.2 2.1 Puerto Rico - Sec 936 Credit (6.0) (1.7) (1.7) Other 4.2 (0.2) 0.6 Effective tax rate (1.2)% 34.2% 35.3% A summary of the deferred tax accounts at December 31, follows: In millions 2001 2000 1999 Current deferred assets and (liabilities): Differences between book and tax bases of inventories and receivables $ 34.2 $ 34.4 $ 31.0 Differences between book and tax expense for other employee related benefits and allowances 67.3 75.8 43.6 Other reserves and valuuation allowances in excess of tax deductions 71.7 26.3 42.0 Other differences between tax and financial statement values 21.7 9.2 (11.1) Gross current deferred net tax assets 194.9 145.7 105.5 Noncurrent deferred tax assets and (liabilities): Postretirement and postemployment benefits other than pensions in excess of tax deductions 300.0 312.6 287.3 Other reserves in excess of tax expense 153.3 125.9 119.2 Tax depreciation/amortization in excess of book depreciation/amortization (511.7) (166.9) (128.1) Pension contributions in excess of book expense (41.0) (44.2) (38.5) Taxes provided for undistributed accumulated subsidiary earnings (5.8) (22.5) (22.5) Gross noncurrent deferred net tax assets and (liabilityies) (105.2) 204.9 217.4 Less: deferred tax valuation allowances (64.9) (52.0) (37.9) Total net deferred tax assets $ 24.8 $298.6 $285.0 A total of $5.8 million of deferred taxes have been provided for a portion of the undistributed earnings of the company's subsidiaries. As to the remainder, these earnings have been, and under current plans, will continue to be reinvested and it is not practicable to estimate the amount of additional taxes which may be payable upon distribution. During 2001, the company determined that it no longer required deferred taxes of $16.7 million, which had been recorded with respect to such earnings in prior years and accordingly reduced the deferred tax liability recording a current tax benefit for such amount. As a result of the reincorporation from New Jersey to Bermuda, the company recorded a one time tax benefit of $59.8 million related to the utilization of previously limited foreign tax credits and net operating loss carryforwards in certain non-U.S. jurisdictions. NOTE 16 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The company sponsors several postretirement plans that cover most U.S. employees. These plans provide for health care benefits and in some instances, life insurance benefits. Postretirement health plans are contributory and are adjusted annually. Life insurance plans are noncontributory. When fulltime employees retire from the company between age 55 and 65, most are eligible to receive, at a cost to the retiree, certain health care benefits identical to those available to active employees. After attaining age 65, an eligible retiree's health care benefit coverage becomes coordinated with Medicare. The company funds the benefit costs principally on a pay-as-you-go basis. The company retained retiree health care benefits as a liability for all qualified retired IDP employees. Summary information on the company's plans at December 31, was as follows: In millions 2001 2000 Change in benefit obligations: Benefit obligation at beginning of year $ 730.0 $ 566.4 Service cost 9.9 9.3 Interest cost 56.1 48.9 Plan participants' contributions 4.3 4.3 Acquisitions - 140.1 Actuarial losses 181.4 3.1 Benefits paid (68.6) (55.2) Curtailment/special termination benefits - 13.3 Other 0.5 (0.2) Benefit obligation at end of year $ 913.6 $ 730.0 Funded status: Plan assets less than benefit obligations $(913.6) $(730.0) Unrecognized: Prior service gains (45.4) (49.9) Plan net losses/(gains) 131.4 (55.0) Accrued costs in the balance sheet $(827.6) $(834.9) Weighted-average assumptions: Discount rate 7.25% 7.75% Current year medical inflation 11.00% 6.75% Ultimate inflation rate (2008) 5.25% 5.25% The components of net periodic postretirement benefits cost for the years ended December 31, were as follows: In millions 2001 2000 1999 Service cost $ 9.9 $ 9.3 $ 8.8 Interest cost 56.1 48.9 38.0 Net amortization of unrecognized prior service (gains) (4.5) (4.4) (4.2) Net periodic postretirement benefits cost $61.5 $53.8 $42.6 A 1% change in the medical trend rate assumed for postretirement benefits would have the following effects at December 31, 2001: In millions 1% Increase 1% Decrease Effect on total of service and interest cost components $ 5.1 $ 4.5 Effect on postretirement benefit obligation 74.3 58.2 NOTE 17 - PENSION PLANS: The company has noncontributory pension plans covering substantially all U.S. employees. In addition, certain employees in other countries are covered by pension plans. The company's U.S. salaried plans principally provide benefits based on a career average earnings formula. The company's hourly pension plans provide benefits under flat benefit formulas. Non-U.S. plans provide benefits based on earnings and years of service. Most of the non-U.S. plans require employee contributions based on the employee's earnings. In addition, the company maintains other supplemental benefit plans for officers and other key employees. The company's policy is to fund an amount which could be in excess of the pension cost expensed, subject to the limitations imposed by current statutes or tax regulations. The company retained the pension plan liabilities and related plan assets for all vested IDP plan participants. Information regarding the company's pension plans at December 31, was as follows: In millions 2001 2000 Change in benefit obligations: Benefit obligation at beginning of year $2,372.7 $1,934.7 Service cost 47.0 42.6 Interest cost 170.6 151.7 Employee contributions 4.4 4.7 Amendments 8.1 1.3 Acquisitions 10.8 386.1 Expenses paid (3.6) (2.3) Actuarial losses/(gains) 99.1 (17.9) Benefits paid (201.1) (157.1) Foreign exchange impact (17.5) (44.4) IDP obligation - 65.7 Curtailments and other 5.0 7.6 Benefit obligation at end of year $2,495.5 $2,372.7 Change in plan assets: Fair value at beginning of year $2,640.0 $2,246.9 Actual return on assets 10.8 106.4 Company contributions 64.2 27.5 Employee contributions 4.4 4.7 Acquisitions 12.7 407.2 Expenses paid (3.6) (1.9) Benefits paid (204.6) (160.8) Foreign exchange impact (14.2) (40.8) Assets from IDP - 50.8 Other 0.1 - Fair value of assets at end of year $2,509.8 $2,640.0 In millions 2001 2000 Funded status: Plan assets in excess of benefit obligations $ 14.3 $ 267.3 Unrecognized: Net transition asset 5.1 19.0 Prior service costs 52.4 50.6 Plan net losses (gains) 119.5 (238.5) Net amount recognized $ 191.3 $ 98.4 Costs included in the balance sheet: Prepaid benefit cost $ 270.9 $ 196.9 Accrued benefit liability (79.6) (103.3) Intangible asset - 4.8 Net amount recognized $ 191.3 $ 98.4 Weighted-average assumptions: Discount rate: U.S. plans 7.25% 7.75% International plans 6.00% 6.00% Rate of compensation increase: U.S. plans 5.00% 5.50% International plans 3.50% 3.50% Expected return on plan assets: U.S. plans 9.00% 9.00% International plans 7.75% 7.75% The components of the company's pension related costs (income) for the years ended December 31, include the following: In millions 2001 2000 1999 Service cost $ 47.0 $ 42.6 $ 42.0 Interest cost 170.6 151.7 132.1 Expected return on plan assets (226.7) (213.5) (183.0) Net amortization of unrecognized: Prior service costs 6.0 6.1 5.9 Transition amount 0.2 0.7 0.7 Plan net (gains)/losses (4.6) (8.5) 2.9 Net pension (income) cost (7.5) (20.9) 0.6 Curtailment losses 11.2 11.5 0.4 Net pension cost (income) after curtailments $ 3.7 $ (9.4) $ 1.0 The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations more than plan assets were $435.7 million, $397.1 million and $317.2 million, respectively, as of December 31, 2001 and $199.5 million, $161.5 million and $75.8 million, respectively, as of December 31, 2000. Plan investment assets of U.S. plans are balanced between equity securities and cash equivalents or debt securities. Assets of non-U.S. plans are invested principally in equity securities. Most of the company's U.S. employees are covered by savings and other defined contribution plans. Employer contributions and costs are determined based on criteria specific to the individual plans and amounted to approximately $44.0 million, $44.7 million and $25.1 million in 2001, 2000 and 1999, respectively. The company's costs relating to non-U.S. defined contribution plans, insured plans and other non-U.S. benefit plans were $6.5 million, $6.7 million and $4.1 million in 2001, 2000 and 1999, respectively. NOTE 18 - BUSINESS SEGMENT INFORMATION: During 2001, the company expanded its Industrial Solutions Sector to include Dresser-Rand, renamed its Bearings and Components Segment to Engineered Solutions and aggregated its tools and related production equipment operations, previously reported as part of the Industrial Products Segment, in the Air and Productivity Solution Segment. Club Car has been added to the Infrastructure Segment. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that the operating segments' results are prepared on a management basis that is consistent with the manner in which the company disaggregates financial information for internal review and decision making. The company evaluates performance based on operating income and operating income contribution rates. Intercompany sales transactions are entirely contained within each segment and are eliminated at the segment level. A description of the company's reportable segments is as follows: Climate Control is engaged in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers. The segment includes Thermo King and Hussmann. Industrial Solutions is composed of a group of businesses focused on providing solutions for customers to enhance industrial efficiency. Industrial Solutions consists of the following: Air and Productivity Solutions is engaged in the design, manufacture, sale and service of air compressors, fluid products, microturbines, and industrial tools. It comprises Industrial Air Solutions and Productivity Solutions, and has been aggregated based primarily on the nature of products and services, and the nature of their production processes. Dresser-Rand is engaged in the design, manufacture, sale and service of gas compressors, gas and steam turbines, and generators. Engineered Solutions is engaged in the design, manufacture, sale and service of precision bearing products and motion control components and assemblies. The segment includes both Automotive and Industrial Engineered Solutions. Operating income in 2001 includes a $25 million benefit from payments received from the U.S. Customs for antidumping claims. Infrastructure is engaged in the design, manufacture, sale and service of skid-steer loaders, mini-excavators, electric and gasoline powered golf and utility vehicles, portable compressors and light towers, road construction and repair equipment, and a broad line of drills and drill accessories. It comprises Bobcat, Club Car, Portable Power, Road Development, and Specialty Equipment. Security and Safety is engaged in the design, manufacture, sale and service of locks, door closers, exit devices, door control hardware, doors and frames, decorative hardware, and electronic and biometric access control systems. Sales by destination and long-lived assets by geographic area for the years ended December 31 were as follows: In millions 2001 2000 1999 Sales United States $6,124.8 $5,989.4 $4,719.3 Non-U.S. 3,557.2 3,608.2 3,099.7 Total $9,682.0 $9,597.6 $7,819.0 In millions 2001 2000 Long-lived assets United States $1,352.6 $1,432.1 Non-U.S. 689.3 545.1 Total $2,041.9 $1,977.2 A summary of operations by reportable segments for the years ended December 31, were as follows: Dollar amounts in millions 2001 2000 1999 Climate Control Sales $2,438.2 $2,002.4 $1,202.6 Operating income 21.7 206.3 166.5 Operating income as % of sales 0.9% 10.3% 13.8% Depreciation and amortization 148.5 114.5 78.9 Industrial Solutions Air and Productivity Solutions Sales 1,308.0 1,412.9 1,381.4 Operating income 52.7 162.5 159.3 Operating income as % of sales 4.0% 11.5% 11.5% Dresser-Rand Sales 881.3 834.0 - Operating income 21.4 4.6 - Operating income as % of sales 2.4% 0.6% - Engineered Solutions Sales 1,077.8 1,185.4 1,239.5 Operating income 78.0 159.8 145.8 Operating income as % of sales 7.2% 13.5% 11.8% Total Industrial Solutions Sales 3,267.1 3,432.3 2,620.9 Operating income 152.1 326.9 305.1 Operating income as % of sales 4.7% 9.5% 11.6% Depreciation and amortization 107.5 105.2 86.2 Infrastructure Sales 2,570.3 2,752.5 2,707.3 Operating income 219.7 389.7 416.9 Operating income as % of sales 8.5% 14.2% 15.4% Depreciation and amortization 66.1 66.4 64.7 Security and Safety Sales 1,406.4 1,410.4 1,288.2 Operating income 230.8 271.6 248.4 Operating income as % of sales 16.4% 19.3% 19.3% Depreciation and amortization 27.8 35.1 39.4 Total sales $9,682.0 $9,597.6 $7,819.0 Operating income from reportable segments 624.3 1,194.5 1,136.9 Unallocated corporate expenses (101.1) (105.1) (57.2) Total operating income $ 523.2 $1,089.4 $1,079.7 Total operating income as % of sales 5.4% 11.4% 13.8% Depreciation and amortization from reportable segments 349.9 321.2 269.2 Unallocated depreciation and amortization 12.6 5.9 3.2 Total depreciation and amortization $ 362.5 $ 327.1 $ 272.4 NOTE 19 - INGERSOLL-RAND NEW JERSEY: As part of the reorganization IR- Limited unconditionally guaranteed all of the issued public debt securities of IR-New Jersey. The following condensed consolidated financial information for IR-Limited (Parent), IR-New Jersey (Issuer), and all their other subsidiaries is included so that separate financial statements of IR-New Jersey are not required to be filed with the Securities Exchange Commission. The condensed consolidating financial statements present the Parent and Issuer investments in their subsidiaries using the equity method of accounting. Condensed Consolidating Balance Sheet December 31, 2001 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Current assets: Cash and cash equivalents $ - $ 23.4 $ 90.6 $ - $114.0 Marketable securities - - 7.4 - 7.4 Accounts and notes receivable, net - 128.3 1,354.6 - 1,482.9 Inventories - 134.8 1,160.5 - 1,295.3 Prepaid expenses and deferred income taxes - 57.8 230.4 - 288.2 Accounts and notes receivable affiliates - - 2,957.9 (2,957.9) - Total current assets - 344.3 5,801.4 (2,957.9) 3,187.8 Investment in affiliates 5,547.5 12,825.5 8,708.2 (27,081.2) - Property, plant and equipment, net - 238.9 1,394.1 - 1,633.0 Intangible assets, net - 145.0 5,544.3 - 5,689.3 Note receivable affiliate 3,647.4 - - (3,647.4) - Other assets - 196.5 357.1 - 553.6 Total assets $9,194.9 $13,750.2 $21,805.1 $(33,686.5) $11,063.7 Current liabilities: Accounts payable $ - $ 100.8 $ 660.2 $ - $ 761.0 Accrued expenses and other current liabilities - 218.5 1,307.8 - 1,526.3 Loans payable - 449.7 114.0 - 563.7 Accounts and notes payable affiliates - 2,650.0 307.9 (2,957.9) - Total current liabilities - 3,419.0 2,389.9 (2,957.9) 2,851.0 Long-term debt - 2,650.6 250.1 - 2,900.7 Deferred income taxes - - 170.1 - 170.1 Minority interests - - 110.5 - 110.5 Note payable affiliate - 3,647.4 - (3,647.4) - Other liabilities - 116.6 998.2 - 1,114.8 - 9,833.6 3,918.8 (6,605.3) 7,147.1 Shareholders' equity: Class A common shares 168.0 - - - 168.0 Class B common shares 135.3 - - (135.3) - Common shares - - 2,362.8 (2,362.8) - Other shareholders' equity 8,891.6 4,039.4 15,787.8 (24,648.8) 4,070.0 Accumulated other comprehensive income - (122.8) (264.3) 65.7 (321.4) Total shareholders' equity 9,194.9 3,916.6 17,886.3 (27,081.2) 3,916.6 Total liabilities and equity $9,194.9 $13,750.2 $21,805.1 $(33,686.5) $11,063.7
Condensed Consolidating Balance Sheet December 31, 2000 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Current assets: Cash and cash equivalents$ - $ - $ 97.0 $ - $ 97.0 Marketable securities - 120.3 10.1 - 130.4 Accounts and notes receivable, net - 154.7 1,516.3 - 1,671.0 Inventories - 120.5 1,121.8 - 1,242.3 Prepaid expenses and deferred income taxes - 223.7 11.8 - 235.5 Accounts and notes receivable affiliates - - 2,028.0 (2,028.0) - Total current assets - 619.2 4,785.0 (2,028.0) 3,376.2 Investment in affiliates - 8,281.7 - (8,281.7) - Property, plant and equipment, net - 243.5 1,409.9 - 1,653.4 Intangible assets, net - 112.5 5,259.7 - 5,372.2 Deferred income taxes - - 152.9 - 152.9 Other assets - 99.7 398.2 - 497.9 Total assets $ - $9,356.6 $12,005.7 $(10,309.7) $11,052.6 Current liabilities: Accounts payable $ - $ 123.2 $ 558.2 $ - $ 681.4 Accrued expenses and other current liabilities - 508.7 1,052.3 - 1,561.0 Loans payable - 1,880.6 245.5 - 2,126.1 Accounts and notes payable affiliates - 2,028.0 - (2,028.0) - Total current liabilities - 4,540.5 1,856.0 (2,028.0) 4,368.5 Long-term debt - 1,306.6 233.8 - 1,540.4 Minority interests - - 113.4 - 113.4 Other liabilities - 28.3 1,118.3 - 1,146.6 - 5,875.4 3,321.5 (2,028.0) 7,168.9 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company - - 402.5 - 402.5 Shareholders' equity: Common stock - 343.1 164.9 (164.9) 343.1 Other shareholders' equity - 3,398.7 8,368.3 (8,368.3) 3,398.7 Accumulated other comprehensive income - (260.6) (251.5) 251.5 (260.6) Total shareholders' equity - 3,481.2 8,281.7 (8,281.7) 3,481.2 Total liabilities and equity $ - $9,356.6 $12,005.7 $(10,309.7) $11,052.6
Condensed Consolidating Income Statement For the year ended December 31, 2001 Other Consolidating (In millions) IR- Limited IR-New Jersey Subsidiaries Adjustments Total Net sales $ - $1,200.0 $8,482.0 $ - $9,682.0 Cost of goods sold - 892.5 6,719.0 - 7,611.5 Selling and administrative expenses - 245.3 1,208.9 - 1,454.2 Restructuring charges - 25.5 67.6 - 93.1 Operating income - 36.7 486.5 - 523.2 Equity earnings in affiliates (net of tax) - 336.9 - (336.9) - Interest expense - (203.0) (50.0) - (253.0) Intercompany interest and fees - (17.6) 17.6 - - Other income (expense), net - (85.0) 78.2 - (6.8) Minority interests - - (20.1) - (20.1) Earnings before income taxes - 68.0 512.2 (336.9) 243.3 (Benefit)/provision for income taxes - (178.2) 175.3 - (2.9) Net earnings $ - $ 246.2 $ 336.9 $(336.9) $ 246.2
Condensed Consolidating Income Statement For the year ended December 31, 2000 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Net sales $ - $1,302.2 $8,295.4 $ - $9,597.6 Cost of goods sold - 845.1 6,296.3 - 7,141.4 Selling and administrative expenses - 212.8 1,066.8 - 1,279.6 Restructuring charges - 35.5 51.7 - 87.2 Operating income - 208.8 880.6 - 1,089.4 Equity earnings in affiliates (net of tax) - 725.8 - (725.8) - Interest expense - (219.3) (36.0) - (255.3) Intercompany interest and fees - (42.1) 42.1 - - Other income (expense), net - (68.0) 103.8 - 35.8 Minority interests - - (39.3) - (39.3) Earnings before income taxes - 605.2 951.2 (725.8) 830.6 (Benefit)/provision for income taxes - (64.2) 348.6 - 284.4 Earnings from continuing operations - 669.4 602.6 (725.8) 546.2 Discontinued operations (net of tax) - - 123.2 - 123.2 Net earnings $ - $ 669.4 $ 725.8 $(725.8) $ 669.4
Condensed Consolidating Income Statement For the year ended December 31, 1999 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Net sales $ - $1,340.0 $6,479.0 $ - $7,819.0 Cost of goods sold - 944.9 4,728.3 - 5,673.2 Selling and administrative expenses - 240.8 825.3 - 1,066.1 Operating income - 154.3 925.4 - 1,079.7 Equity earnings in affiliates (net of tax) - 640.4 - (640.4) - Interest expense - (153.7) (29.8) - (183.5) Intercompany interest and fees - (34.9) 34.9 - - Other income (expense), net - (26.5) 29.6 - 3.1 Minority interests - - (29.1) - (29.1) Earnings before income taxes - 579.6 931.0 (640.4) 870.2 (Benefit)/provision for income taxes - (11.5) 318.6 - 307.1 Earnings from continuing operations - 591.1 612.4 (640.4) 563.1 Discontinued operations (net of tax) - - 28.0 - 28.0 Net earnings $ - $ 591.1 $ 640.4 $(640.4) $ 591.1
Condensed Consolidating Statement of Cash Flows For the year ended December 31, 2001 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Net cash provided by operating activities $ - $213.0 $388.6 $ - $601.6 Cash flows from investing activities: Capital expenditures - (21.5) (179.1) - (200.6) Proceeds from sale of property, plant and equipment - - 41.7 - 41.7 Acquisitions, net of cash - (9.2) (149.1) - (158.3) Proceeds from business dispositions - - 17.5 - 17.5 Decrease /(increase) in marketable securities - 103.9 (6.7) - 97.2 Other, net - - 15.7 - 15.7 Net cash provided by/(used in) investing activities - 73.2 (260.0) - (186.8) Cash flows from financing activities: Net change in debt - (86.9) (127.2) - (214.1) Proceeds from the exercise of stock options - 9.7 - - 9.7 Dividends paid - (113.1) - - (113.1) Purchase of treasury stock - (72.5) - - (72.5) Net cash (used in)/provided by financing activities - (262.8) (127.2) - (390.0) Effect of exchange rate changes on cash and and cash equivalents - - (7.8) - (7.8) Net increase/(decrease) in cash and cash equivalents - 23.4 (6.4) - 17.0 Cash and cash equivalents - beginning of period - - 97.0 - 97.0 Cash and cash equivalents - end of period $ - $ 23.4 $ 90.6 $ - $114.0
Condensed Consolidating Statement of Cash Flows For the year ended December 31, 2000 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Net cash(used in)/provided by operating activities $ - $(792.4) $1,409.1 $120.3 $737.0 Cash flows from investing activities: Capital expenditures - (19.5) (181.8) - (201.3) Proceeds from sale of property, plant and equipment - 2.7 25.8 - 28.5 Acquisitions, net of cash - - (2,288.0) - (2,288.0) Proceeds from business dispositions - - 977.3 - 977.3 Decrease/(increase) in marketable securities - 120.3 (6.3) (120.3) (6.3) Other, net - - 12.2 - 12.2 Net cash provided by/(used in) investing activities - 103.5 (1,460.8) (120.3) (1,477.6) Cash flows from financing activities: Net change in debt - 794.1 78.3 - 872.4 Proceeds from the exercise of stock options - 8.3 - - 8.3 Dividends paid - (109.8) - - (109.8) Purchase of treasury stock - (121.3) - - (121.3) Net cash provided by financing activities - 571.3 78.3 - 649.6 Net cash used in discontinued operations - - (22.1) - (22.1) Effect of exchange rate changes on cash and cash equivalents - - (12.8) - (12.8) Net decrease in cash and cash equivalents - (117.6) (8.3) - (125.9) Cash and cash equivalents - beginning of period - 117.6 105.3 - 222.9 Cash and cash equivalents - end of period $ - $ - $ 97.0 $ - $ 97.0
Condensed Consolidating Statement of Cash Flows For the year ended December 31, 1999 Other Consolidating (In millions) IR-Limited IR-New Jersey Subsidiaries Adjustments Total Net cash provided by operating activities $ - $663.2 $191.5 $ - $854.7 Cash flows from investing activities: Capital expenditures - (36.1) (154.4) - (190.5) Proceeds from sale of property, plant and equipment - 0.3 30.1 - 30.4 Acquisitions, net of cash - - (161.2) - (161.2) Proceeds from business dispositions - 23.8 61.0 - 84.8 Decrease in marketable securities - - 1.5 - 1.5 Other, net - - (2.0) - (2.0) Net cash (used in) investing activities - (12.0) (225.0) - (237.0) Cash flows from financing activities: Net change in debt - (292.7) 25.2 - (267.5) Proceeds from the exercise of stock options - 70.2 - - 70.2 Dividends paid - (105.3) - - (105.3) Purchase of treasury stock - (205.8) - - (205.8) Other, net - - 63.3 - 63.3 Net cash (used in)/provided by financing activities - (533.6) 88.5 - (445.1) Net cash provided by discontinued operations - - 14.6 - 14.6 Effect of exchange rate changes on cash and and cash equivalents - - (7.8) - (7.8) Net increase in cash and cash equivalents - 117.6 61.8 - 179.4 Cash and cash equivalents - beginning of period - - 43.5 - 43.5 Cash and cash equivalents - end of period $ - $117.6 $105.3 $ - $222.9
Report of Independent Accountants PricewaterhouseCoopers Dorchester House 7 Church Street Hamilton HM 11 Bermuda February 5, 2002 To the Board of Directors and Shareholders of Ingersoll-Rand Company Limited: In our opinion, the accompanying Consolidated Balance Sheet and the related Consolidated Statements of Income, Shareholders' Equity and Cash Flows present fairly, in all material respects, the financial position of Ingersoll-Rand Company Limited and its subsidiaries, the successor company to Ingersoll-Rand Company, at December 31, 2001, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/PricewaterhouseCoopers Report of Independent Accountants PricewaterhouseCoopers LLP 400 Campus Drive Florham Park, NJ 07932 U.S.A. February 6, 2001 To the Board of Directors and Shareholders of Ingersoll-Rand Company Limited: In our opinion, the accompanying Consolidated Balance Sheet and the related Consolidated Statements of Income, Shareholders' Equity and Cash Flows present fairly, in all material respects, the financial position of Ingersoll-Rand Company Limited and its subsidiaries, the successor company to Ingersoll-Rand Company, at December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP EX-21 24 exh-21.txt INGERSOLL-RAND COMPANY LIMITED SUBSIDIARIES Ingersoll-Rand Company Limited EXHIBIT 21 Subsidiaries (100% owned unless otherwise indicated) Name of Subsidiary % owned by IR ARGENTINA: Ingersoll-Rand Argentina S.A.I.C. AUSTRALIA: Ingersoll-Rand (Australia) Ltd. Ingersoll-Rand (Australia) Superannuation Pty. Ltd. Ingersoll-Rand Architectural Hardware (Australia) Pty. Limited McAlpine Australia Pty Limited McAlpine Hussmann (Australia) Pty Limited McAlpine Hussmann Pty Limited Triangle Refrigeration Pty. Ltd. AUSTRIA: Interflex Datensysteme Gesmbh 90.00% BARBADOS: Clark Foreign Sales Corporation Hussmann International Sales Corporation Ingersoll-Rand (Barbados) Corporation Ingersoll-Rand (Barbados) Holding Incorporated NT USA FSC INC. BELGIUM: Dresser-Rand Machinery Repair Belgie N.V. Ingersoll-Rand Benelux, N.V. Interflex Belgium N.V./S.A. Koxka Belgium Societe Belge de Roulements a Aiguilles Nadella Newman Tonks Brussels N.V. (in Dissolution) Thermo King Belgium N.V. BERMUDA: Ingersoll-Rand World Trade Ltd. (Bermuda) IR Techno Holding Limited Woodcliff Insurance Ltd. BRAZIL: Dresser-Rand Comercio e Industria Ltda. Engeturb Turbinas a Vapor Ltda. 75.00% Fastecnica Instalacoes e Assistencia Tecnica Ltda Hussmann do Brasil Ltda. Industria e Comercio Aro do Brasil Ltda. Ingersoll-Rand do Brasil Ltda. Thermo King do Brasil, Ltda. 99.99% CANADA: Aquila Mining Systems Ltd. 16.52% Bobcat Equipment Ltd. Dresser-Rand Canada, Inc. Hussmann Canada Holdings Limited Hussmann Canada Inc. Ingersoll-Rand Canada, Inc. London Compressed Air Technologies Inc. Ingersoll-Rand (NS) Company NT Dor-O-Matic of Toronto Inc. Torrington, Inc. CAYMAN ISLANDS: Dresser-Rand C.I. Limited CHILE: Hussmann Chile Hussmann Region Andina SRL Ingersoll-Rand Company (Chile) y Cia Ltda. CHINA: Dresser-Rand Compressor Co., Ltd. Shanghai 60.00% Guangzhou Hussmann Refrigeration Company, Ltd. Ingersoll-Rand (China) Investment Company Limited Ingersoll-Rand (Guilin) Tools Company Limited 90.00% Ingersoll-Rand (Wuxi) Road Machinery Company 92.00% Limited Ingersoll-Rand Machinery (Shanghai) Company Limited Luoyang Hussmann Refrigeration Company 55.00% Nanjing Ingersoll-Rand Compressor Co., Ltd. 80.00% Shanghai Ingersoll-Rand Compressor Limited 80.00% Thermo King Dalian Transport Refrigeration Company, 70.00% Limited Torrington Wuxi Bearings Company Limited 78.00% Triangle Refrigeration International Trading (Shanghai) Co. Limited Xuanhua Ingersoll-Rand Mining & Construction Mach. 50.00% Ltd. COLOMBIA: Ingersoll-Rand de Colombia S.A. CZECH REPUBLIC: Dresser-Rand Czech S.R.O. Emerson Electric, s.r.o. 10.00% Ingersoll-Rand Czech Republic s.r.o. IRCR Manufacturing s.r.o. SUPERSTAV, spol. s.r.o. Thermo King Czech Republic, s.r.o. Torrington Ceska Republika s.r.o. DENMARK: NT Randi A/S Thermo King Container-Denmark A/S FRANCE: ABG France S.A.R.L. Bobcat France SA Cacir, S.A. Compagnie Ingersoll-Rand Dresser-Rand S.A.-France Etablissements Montabert, S.A. Ingersoll-Rand Equipements de Construction Ingersoll-Rand Equipements de Production S.A. Ingersoll-Rand Europe IR Services S.A.R.L. Koxka France SARL Mustad S.A. Nadella Industries (France) S.A. Nadella S.A. (France) Normbau France S.A. S.A. Etablissements Charles Maire SA CAP France Torrington France S.A.R.L. GERMANY: ABG Allgemeine Baumaschinen Gesellschaft mbH Best Matic Vermogensverwaltungs GmbH Bobcat Parts Service GmbH Dresser-Rand GmbH GHH-Rand Schraubenkompressoren GmbH Ingersoll-Rand Beteiligungs GmbH Ingersoll-Rand Beteiligungs und Grundstucksverwaltungs GmbH Ingersoll-Rand GmbH Ingersoll-Rand Service GmbH Ingersoll-Rand Wasserstrahl-Schneidtechnik GmbH Interflex Datensysteme GmbH & Co. KG IR Deutsche Holding GmbH Koxka Kuhlmobel GmbH Nadella GmbH Normbau Beschlage und Ausstattungs GmbH Thermo King Deutschland GmbH Torrington GmbH Torrington Nadellager GmbH GUAM: Club Car International Inc. Ingersoll-Rand International Foreign Sales Corporation HONG KONG: Hussmann Tempcool (Hong Kong) Limited Koolzone Asia Limited NT Asia (Hong Kong) Limited HUNGARY: Hussmann Refrigeration (Hungary) KFT. 60.00% INDIA: Dresser-Rand India Private Limited Ingersoll-Rand (India) Limited 74.00% Ingersoll-Rand Wadco Tools Private Limited 74.00% NRB Bearings Ltd. 26.00% NRB Torrington Private Limited 50.00% Thermo King India Private Limited INDONESIA: PT Dresser-Rand Services Indonesia IRELAND: Ingersoll-Rand (Ireland) Holding & Trading Corporation Limited Ingersoll-Rand Company (Ireland) Limited Spanashview Thermo King European Manufacturing Limited Thermo King Ireland Limited Thermo King Irish Holdings Thermo King Services Limited Thermo King Total Kare Limited ITALY: Dresser-Rand Italia S.r.l. Industria Cuscinetti S.p.A. 18.095% Ingersoll-Rand Italia S.r.l. Ingersoll-Rand Italiana S.p.A. Nadella S.p.A. JAPAN: Bobcat Corporation Dresser-Rand Japan, Ltd. Ingersoll-Rand Japan, Ltd. NSK/Torrington Company Ltd. 49.00% Zexel Cold Systems Company 70.00% MALAYSIA: Dresser-Rand & Enserv Services Sdn. Bhd. 49.00% Dresser-Rand Asia Pacific Sdn. Bhd. Hussmann Tempcool (Malaysia) Limited Ingersoll-Jati Malaysia Sdn. Bhd. 49.00% MEXICO: Dresser-Rand de Mexico S.A. Dresser-Rand Services srl Hussmann American, S. de R.L. de C.V. Hussmann-Inmobiliaria S.A. de C.V. Hussmann-Mexico, S. de R.L. de C.V. Industrias Frigorificas, S.A. de C.V. Industrias Gilvert S.A. de C.V. Ingersoll-Rand S.A. de C.V. Schlage de Mexico S.A. de C.V. NAMIBIA Ingersoll-Rand Company Namibia (Pty.) Ltd. NETHERLANDS: Dresser-Rand B.V. Dresser-Rand International B.V. Dresser-Rand Services B.V. Grenco Transportkoeling B.V. Hussmann Netherlands B.V. Ingersoll-Rand European Holding Company B.V. Ingersoll-Rand Holdings (Netherlands) B.V. Ingersoll-Rand Service B.V. Interflex Datasystems B.V. Sonna II B.V. Thermo King Netherlands B.V. NEW ZEALAND: A/S Parts Limited Club Car Limited Contract Refrigeration Ltd. Hussmann Australasia Limited 83.50% Ingersoll-Rand Architectural Hardware Limited Koxka New Zealand Ltd. McAlpine Hussmann Ltd. McAlpine Industries Ltd. NIGERIA: Dresser-Rand (Nigeria) Ltd. 50.00% NORWAY: Dresser-Rand A/S PERU: Hussmann Del Peru, SA Ingersoll-Rand Company of Peru S.A. PHILIPPINES: Ingersoll-Rand Philippines, Inc. PORTUGAL: Comingersoll-Comercio e Industria de Equipamentos, 20.65% S.A.R.L. PUERTO RICO: Ingersoll-Rand de Puerto Rico, Inc. RUSSIA: Instrum-Rand 59.80% SINGAPORE: Dresser-Rand (SEA) Pte. Ltd. Hussmann Tempcool Holdings PTE. Ltd. 50.00% Hussmann Tempcool Singapore Pte. Ltd. Ingersoll-Rand South East Asia (Pte.) Ltd. NT Asia (Singapore) Pte. Limited SOUTH AFRICA: Ingersoll-Rand Company South Africa (Pty.) Limited SOUTH KOREA: IR Korea Ltd. SPAIN: Hussmann Koxka, S.L. Industrias del Rodamiento, S.A. Ingersoll-Rand Iberica, S.L. Ingersoll-Rand Servicios, S.A. Koxka Levante S.A. 60.00% Koxka Valladolid, S.A. 51.00% Reftrans, S.A. 85.00% SWEDEN: ABB I-R Waterjet Systems AB 49.00% Ingersoll-Rand AB Ingersoll-Rand Best-Matic AB SWITZERLAND: Dresser-Rand Sales Company S.A. Dresser-Rand Services, S.a.r.l. Ingersoll-Rand Acceptance Company S.A. Ingersoll-Rand Equipment & Consulting S.A.R.L. Ingersoll-Rand Investment Company S.A. Ingersoll-Rand Machinery & Services S.A.R.L. Ingersoll-Rand S.A. Ingersoll-Rand Services & Engineering Company Ingersoll-Rand Technical & Services S.A.R.L. Interflex Datensysteme AG I-R Trading S.A. Klemm Bohrtechnik AG 99.98% Nadella S.A. Torrington Sales Limited THAILAND: Hussmann Thailand Co. Ltd. 75.00% TURKEY: IR Emniyet ve Guvenlik Sistemleri Sanayi A.S. (IR Security & Safety Industrial Company) UNITED KINGDOM: APT Laboratories Limited Best-Matic International Limited Blackrod Europe Limited Blaw-Knox Company Bondpaint Limited Briton Door Controls Limited C.A.P. Sales Limited Capital Metalworks Limited Compressed Air Parts Limited Dresser-Rand (UK) Ltd. Dresser-Rand Company Ltd.-UK GBS Europe Limited Hussmann Europe Limited Hussmann Holdings, Ltd. Ingersoll-Rand (New Zealand) Limited Ingersoll-Rand Company Limited Ingersoll-Rand European Sales Limited Ingersoll-Rand Holdings Limited Ingersoll-Rand Irish Treasury Services Limited Interflex Data Systems Ltd. Interflex Time & Access Ltd. IR Security & Safety Limited Laidlaw Architectural Hardware Laidlaw Thomson Group Limited Nadella UK Limited Newman Tonks (Amersham) Limited Newman Tonks (Kings Norton) Limited Newman Tonks (North Devon) Limited Newman Tonks (Overseas Holdings) Limited Newman Tonks (Woodford Green) Limited Newman Tonks Management Services Limited NT Access Limited NT Acquisition Limited NT Architectural Hardware Limited NT Door Controls Limited NT Dor-O-Matic Limited NT Group Properties Limited NT Laidlaw (Anglia) Limited NT Laidlaw (Eastern) Limited NT Laidlaw (South East) Limited NT Laidlaw (South West) Limited NT Laidlaw (South) Limited NT Laidlaw Limited NT Legge Limited NT Martin Roberts Limited NT Normbau Limited NT Partition Systems Limited NT Projects Limited NT Railing Systems Limited NT Security Limited Randall Taximeters Limited Roconeco Limited Strathclyde Hardware Services Limited The Aro Corporation (UK) Limited The Southwark Bridge Leasehold Property Company Limited The Torrington Company Limited Thomas Laidlaw (Tayforth) Limited Thomas Laidlaw Limited UNITED STATES Armoro, Inc. Aro International Corporation Blaw-Knox Construction Equipment Corporation Bobcat Trading Company CDS Midwest Inc. Checker Flag Parts, Inc. Chesley Industries, Inc. Clark Business Services Corporation Clark Distribution Services Inc. Clark Equipment Company Club Car Inc. Commercial Refrigeration Co. Crystal Refrigeration, Inc. Design & Build Construction, Inc. Dixie Pacific Manufacturing Company, Inc. Dor-O-Matic Inc. Dor-O-Matic of Mid Atlantic States, Inc. DR Acquisition, LLC DR Holding Corp. Dresser-Rand Company Dresser-Rand Global Services, LLC Dresser-Rand Holding Company Dresser-Rand Overseas Sales Company Dresser-Rand Power, Inc. Earth Force America, Inc. Erskine Manufacturing Company, Inc. Falcon Lock Company Harrow Industries, Inc. Harrow Products, Inc. Harrow Products, Inc. (Delaware) Hussmann Corporation Hussmann Holdings, Inc. Hussmann International, Inc. IDP Acquisition, LLC Imperial Heights Realty Corporation Improved Machinery, Inc. Ingersoll-Rand Asia Pacific Inc. Ingersoll-Rand China Limited Ingersoll-Rand Company Ingersoll-Rand Construction Services, Inc. Ingersoll-Rand Energy Systems Corporation Ingersoll-Rand Enhanced Recovery Company Ingersoll-Rand Financial Services Corporation Ingersoll-Rand International Holding Corporation Ingersoll-Rand International Sales Inc. Ingersoll-Rand International, Inc. Ingersoll-Rand Italian Holding LLC Ingersoll-Rand Liability Management Company Ingersoll-Rand Sales Company, LLC Ingersoll-Rand Services Company Ingersoll-Rand Spanish Holding LLC Ingersoll-Rand Transportation Services Company Ingersoll-Rand Western Hemisphere Trade Corporation Ingersoll-Rand Worldwide, Inc. Ingersoll-Rand, Inc. Interflex N.A., Inc. I-R E-Medical, Inc. 99.00% IR Receivables Funding I Corporation IR Receivables Funding II Corporation Kilian Manufacturing Corporation Kryptonite Corporation Krack Corporation McCartney Manufacturing Company, Inc. MFP, Inc. Monarch Hardware and Mfg. Company, Inc. Multiphase Power and Processing Technologies, LLC 50.00% National Refrigeration Services, Inc. Nelson Refrigeration Inc. Newman Tonks, USA, Inc. Newman-Tonks Holdings Inc. Newman-Tonks Investments, Inc. Niject Services Company 50.00% Northwest Arkansas Refrigeration Co. NRS Investments, Inc. NT Dor-O-Matic Greendale Inc. Orlando Fixturing and Construction Inc. Orlando Refrigeration, Inc. Paragon Engineering Services, Inc. 40.00% Perimeter Bobcat, Inc. Precision Refrigeration, Inc. Recognition Systems, Inc. Refrigeration Engineering, Inc. Refrigeration Service & Design, Inc. Roconeco Corporation Rogers Refrigeration Co., Inc. S&S Corporation S.E. Setco Service Company, LLC 50.00% SBG Holding Corp. Schlage Lock Company Silver Holding Corp. Sun Belt Equipment Sales, Inc. Tafco-Mabry & Haynes, LLC Tavant Technologies, Inc. 19.50% Taylor Industries, Inc. Terry D. Carter Service Co., Inc. The Torrington Company (Delaware) Thermo King Corporation Thermo King de Puerto Rico, Inc. Thermo King Enterprises Company Thermo King SVC, Inc. Thermo King Trading Company Torrington Holdings, Inc. Touch-Plate International, Inc. Turbodyne Electric Power Corporation Von Duprin, Inc. UZBEKISTAN: Service Center 49.00% VENEZUELA: Aro de Venezuela, C.A. Dresser-Rand de Venezuela, S.A. VIRGIN ISLANDS: Kryptonite Export Corporation ZAMBIA: Ingersoll-Rand Limited (Zambia) ZIMBABWE: Ingersoll-Rand Zimbabwe (Private) Ltd. -----END PRIVACY-ENHANCED MESSAGE-----