10-Q

FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

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 Number 1-985

INGERSOLL-RAND COMPANY LIMITED
(Exact name of registrant as specified in its charter)
 

Bermuda                        (State or other jurisdiction of                  incorporation or organization)	75-2993910 (I.R.S. Employer Identification No.)
Clarendon House                                           2 Church Street                                              Hamilton HM 11, Bermuda                                            (Address of principal executive offices)

(441) 295-2838
(Registrant's telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act).  Yes   X     No       

The number of Class A common shares outstanding as of July 30, 2004 was 173,316,275.
 

INGERSOLL-RAND COMPANY LIMITED
FORM 10-Q
INDEX
PART I	FINANCIAL INFORMATION
	Item 1 - Financial Statements
	Condensed Consolidated Income Statement for the three and six months ended
	June 30, 2004 and 2003
	Condensed Consolidated Balance Sheet at June 30, 2004 and December 31,
	2003
	Condensed Consolidated Statement of Cash Flows for the six months
	ended June 30, 2004 and 2003
	Notes to Condensed Consolidated Financial Statements
	Item 2 - Management's Discussion and Analysis of Financial Condition
	and Results of Operations
	Item 3 - Quantitative and Qualitative Disclosures about Market Risk
	Item 4 - Controls and Procedures
PART II	OTHER INFORMATION
	Item 1 - Legal Proceedings
	Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases
	of Equity Securities
	Item 4 - Submission of Matters to a Vote of Security Holders
	Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES

Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements

INGERSOLL-RAND COMPANY LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
	Three months ended		Six months ended
	June 30,		June 30,
In millions, except per share amounts	2004	2003	2004	2003
Net revenues	$ 2,713.9	$ 2,433.9	$ 5,005.9	$ 4,553.5
Cost of goods sold	2,002.6	1,842.8	3,684.6	3,473.4
Selling and administrative expenses	376.8	382.6	749.9	711.7
Operating income	334.5	208.5	571.4	368.4
Interest expense	(40.0)	(44.0)	(80.8)	(94.0)
Other income (expense), net	(1.2)	2.5	(6.5)	(4.1)
Earnings before income taxes	293.3	167.0	484.1	270.3
Provision for income taxes	42.9	21.2	68.7	34.5
Earnings from continuing operations	250.4	145.8	415.4	235.8
Discontinued operations, net of tax	35.8	(6.5)	50.3	56.7
Net earnings	$    286.2	$    139.3	$    465.7	$    292.5
Basic earnings per common share:
Earnings from continuing operations	$      1.45	$      0.86	$      2.39	$      1.39
Discontinued operations, net of tax	0.20	(0.04)	0.29	0.34
Net earnings	$      1.65	$      0.82	$      2.68	$      1.73
Diluted earnings per common share:
Earnings from continuing operations	$      1.43	$      0.85	$      2.36	$      1.39
Discontinued operations, net of tax	0.20	(0.04)	0.28	0.33
Net earnings	$      1.63	$      0.81	$      2.64	$      1.72
Dividends per common share	$      0.19	$      0.17	$      0.38	$      0.34
See accompanying notes to condensed consolidated financial statements.

INGERSOLL-RAND COMPANY LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET
In millions	June 30, 2004		December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents		$      390.7		$      459.6
Accounts and notes receivable, net		1,767.7		1,645.6
Inventories		1,051.2		975.1
Prepaid expenses and deferred income taxes		358.0		356.8
Assets held for sale		13.3		145.8
Total current assets		3,580.9		3,582.9
Property, plant and equipment, net		1,111.8		1,171.1
Goodwill		4,161.1		4,187.3
Intangible assets, net		869.1		882.9
Other assets		866.5		840.7
Total assets		$ 10,589.4		$ 10,664.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$      740.5		$      725.4
Accrued expenses and other current liabilities		1,370.4		1,501.6
Loans payable		691.6		800.7
Liabilities held for sale		1.0		25.3
Total current liabilities		2,803.5		3,053.0
Long-term debt		1,366.6		1,518.6
Postemployment and other benefit liabilities		1,133.6		1,127.9
Other noncurrent liabilities		525.7		472.1
Total liabilities		5,829.4		6,171.6
Shareholders' equity:
Class A common shares		176.6		174.5
Other shareholders' equity		4,867.8		4,589.3
Accumulated other comprehensive income		(284.4)		(270.5)
Total shareholders' equity		4,760.0		4,493.3
Total liabilities and shareholders' equity		$ 10,589.4		$ 10,664.9
See accompanying notes to condensed consolidated financial statements.

INGERSOLL-RAND COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
	Six months ended June 30,
In millions	2004	2003
Cash flows from operating activities:
Earnings from continuing operations	415.4	$  235.8
Adjustments to arrive at net cash used in operating activities:
Depreciation and amortization	101.2	100.3
Changes in other assets and liabilities, net	(302.2)	(388.6)
Other, net	36.1	13.5
Net cash provided by (used in) operating activities	250.5	(39.0)
Cash flows from investing activities:
Capital expenditures	(46.4)	(49.5)
Acquisitions, net of cash	(21.2)	-
Proceeds from business disposition	196.5	699.3
Proceeds from sale of property, plant and equipment	27.5	19.8
Other, net	2.0	(4.9)
Net cash provided by investing activities	158.4	664.7
Cash flows from financing activities:
(Decrease) increase in short-term borrowings	(5.5)	21.0
Proceeds from long-term debt	1.1	3.3
Payments of long-term debt	(253.2)	(742.4)
Net change in debt	(257.6)	(718.1)
Dividends paid	(66.1)	(57.6)
Proceeds from exercise of stock options	90.9	13.7
Purchase of treasury shares	(215.8)	-
Net cash used in financing activities	(448.6)	(762.0)
Net cash used in discontinued operations	(3.8)	(107.1)
Effect of exchange rate changes on cash and cash equivalents	(1.6)	9.3
Effect of change in fiscal year end of business	(23.8)	-
Net decrease in cash and cash equivalents	(68.9)	(234.1)
Cash and cash equivalents - beginning of period	459.6	342.2
Cash and cash equivalents - end of period	$ 390.7	$  108.1
See accompanying notes to condensed consolidated financial statements.

INGERSOLL-RAND COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the consolidated unaudited financial statements at June 30, 2004 and for the quarter and six-month period ended June 30, 2004.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Ingersoll-Rand Company Limited (the Company or IR-Limited) Annual Report on Form 10-K for the year ended December 31, 2003.  The accompanying condensed consolidated financial statements restate the three and six months ended June 30, 2003, and the December 31, 2003 amounts previously presented in order to report the Company's Waterjet business unit, Laidlaw business unit, and Drilling Solutions business unit (Drilling Solutions) as discontinued operations.

The accompanying condensed consolidated financial statements include the results of Hussmann International, Inc. (Hussmann) and its majority-owned subsidiaries.  Since the 2000 acquisition, all Hussmann operations were included in the consolidated financial statements on a 15-day lag basis for U.S. operations and a one-month lag basis for all non-U.S. operations.  Due to process improvements, the 15-day and one-month lags were eliminated as of the beginning of fiscal 2004 for Hussmann and its majority-owned subsidiaries.  The resulting net loss of $16.4 million was recorded directly to retained earnings during the first quarter of 2004.

Note 2 - Under the Company's incentive stock plans, approved in 1995 and 1998, key employees have been granted options to purchase Class A common shares.  The Company continues to account for these plans under the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees."  Accordingly, no compensation expense is recognized for employee stock options since options granted are at prices not less than fair market value at the date of grant.  The plans also authorize stock appreciation rights and stock awards, which result in compensation expense.  Additionally, the Company maintains a shareholder-approved Management Incentive Unit Award Plan, which results in compensation expense.  Compensation expense is recognized as a result of vesting and the Company's Class A common share price.  Fluctuations in the Company's Class A common share price increase or decrease the compensation expense.

The following table is presented in accordance with Statement of Financial Accounting Standard (SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" and illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation:

	Three months		Six months
	ended June 30,		ended June 30,
In millions, except per share amounts	2004	2003	2004	2003
Net earnings, as reported	$ 286.2	$ 139.3	$ 465.7	$  292.5
Add: Stock-based employee compensation
expense included in reported net
income, net of tax	0.7	9.7	11.0	7.2
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of tax	7.8	16.2	24.0	20.7
Pro forma net earnings	$ 279.1	$ 132.8	$ 452.7	$  279.0
Basic earnings per share:
As reported	$   1.65	$   0.82	$   2.68	$    1.73
Pro forma	1.59	0.78	2.57	1.64
Diluted earnings per share:
As reported	$   1.63	$   0.81	$   2.64	$    1.72
Pro forma	1.59	0.78	2.57	1.64

Note 3 - On February 19, 2004, the Company agreed to sell Drilling Solutions, to Atlas Copco AB, for approximately $225 million.  The sale of the U.S. and most international operations was completed on June 30, 2004.  The sale of Drilling Solutions assets held by Ingersoll-Rand (India) Limited, subject to approval by the Indian company's shareholders, is expected in the third quarter of 2004.  Drilling Solutions, which was previously included in the Company's Infrastructure Segment, is now shown as discontinued operations, net of tax, for all periods.  The Company realized an after-tax gain of $37.0 million on the disposition, which is included in "Discontinued operations, net of tax".  The gain is subject to working capital and other final purchase price adjustments.  Drilling Solutions manufactures drilling equipment and accessories for the worldwide construction, mining, quarrying, and water-well drilling industries.  Drilling Solutions had 2003 revenues of approximately $300 million and employed approximately 950 people.  

During 2003, the Company sold three businesses.  Effective February 16, 2003, the Company sold its Engineered Solutions Business (Engineered Solutions), previously included as part of the Company's Industrial Solutions Sector, to The Timken Company (Timken).  For the year ended December 31, 2003, the Company recognized an after-tax gain of $58.2 million on the disposition, which was included in "Discontinued operations, net of tax."  The gain is subject to working capital and other final purchase price adjustments.  The Company is currently involved in a dispute resolution procedure relating to the final purchase price adjustment based on the working capital of Engineered Solutions as of the closing date of the transaction.  The Company expects a resolution in the third quarter of 2004.  Any adjustment to be recorded is not expected to be material and would be reflected as an increase or decrease to "Discontinued operations, net of tax" in 2004.  During the first quarter of 2004, the Company received pre-tax payments of approximately $31.5 million for claims filed under the Continued Dumping and Subsidy Offset Act of 2000 on behalf of a subsidiary included in Engineered Solutions.  These payments have been included in "Discontinued operations, net of tax."  The antidumping duty is levied when the U.S. Department of Commerce determines that imported products are being sold in the United States at less than fair value causing material injury to a United States industry.

Also during 2003, the Company sold its Laidlaw business unit, previously included as part of the Company's Security and Safety Segment.  The Company recorded an after-tax loss of $7.6 million on the disposition, which was included in "Discontinued operations, net of tax" for the year ended December 31, 2003.  Also in 2003, the Company sold its Waterjet business unit, previously included as part of the Company's Industrial Solutions Sector, for approximately $46.5 million.  The Company recognized an after-tax gain of $18.2 million (subject to a working capital adjustment) on the disposition, which was included in "Discontinued operations, net of tax" for the year ended December 31, 2003.  During the first quarter of 2004, the working capital adjustment was finalized, which resulted in an additional $0.4 million of after-tax income being recorded. 

Discontinued operations also include costs related to Ingersoll-Dresser Pump Company (IDP), which was sold in 2000.  These include retained employee benefits and product liability costs, primarily related to asbestos claims.

Net revenues and pretax (loss) earnings for discontinued operations are as follows:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Net revenues	$ 85.2	$   91.2	$ 153.0	$ 315.4
Pretax (loss) earnings	(5.3)	(9.2)	16.7	6.1

Total results from discontinued operations for the three months ended June 30, 2004 and 2003 were $35.8 million (net of $23.1 million of tax expense) and $(6.5) million (net of $2.9 million of tax benefit), respectively.  For the six months ended June 30, 2004 and 2003, the total results from discontinued operations were $50.3 million (net of $31.0 million of tax expense) and $56.7 million (net of $67.4 million of tax expense), respectively.

The assets and liabilities of discontinued operations included in "Assets held for sale" and "Liabilities held for sale" represent the assets and liabilities of Drilling Solutions at December 31, 2003 and those remaining assets and liabilities of Drilling Solutions, which are expected to be transferred in the third quarter of 2004, and are as follows:

In millions	June 30, 2004		December 31, 2003
Assets
Current assets		$   13.3		$ 101.5
Property, plant and equipment, net		-		42.0
Other assets and deferred income taxes		-		2.3
Assets held for sale		$   13.3		$ 145.8
Liabilities
Current liabilities		$     1.0		$   25.3
Liabilities held for sale		$     1.0		$   25.3

In accordance with the Drilling Solutions' purchase agreement, certain assets and liabilities, such as environmental and product liability costs of Drilling Solutions, were retained by the Company, and have been excluded from the above presentation.

Note 4 - Inventories are stated at cost, which is not in excess of market.  Most U.S. manufactured inventories are valued on the last-in, first-out (LIFO) method.  Major exceptions to this are in the Climate Control and Dresser-Rand Segments, where U.S. manufactured inventories are valued on the first-in, first-out (FIFO) method.  All other inventories are valued using the FIFO method.  The composition of inventories is as follows:

In millions	June 30, 2004		December 31, 2003
Raw materials and supplies		$    300.1		$    286.5
Work-in-process		252.1		203.1
Finished goods		579.7		554.9
		1,131.9		1,044.5
Less - LIFO reserve		80.7		69.4
Total		$ 1,051.2		$    975.1

Note 5 - The changes in the carrying amount of goodwill for the six months ended June 30, 2004, is as follows:

		Air and
	Climate	Productivity		Dresser-				Security
In millions	Control	Solutions			Rand	Infrastructure			and Safety	Total
Balance at December 31, 2003	$ 2,577.6		$ 112.4		$ 24.5		$ 901.6		$ 571.2	$ 4,187.3
Translation and adjustments*	(17.3)		(1.4)		4.0		(4.7)		(6.8)	(26.2)
Balance at June 30, 2004	$ 2,560.3		$ 111.0		$ 28.5		$ 896.9		$ 564.4	$ 4,161.1
* Represents adjustments as a result of final allocations of purchase price.

The following table sets forth the gross amount and accumulated amortization of the Company's intangible assets:

		June 30, 2004				December 31, 2003
	Gross		Accumulated		Gross		Accumulated
In millions	amount		amortization		amount		amortization
Customer relationships		$    384.9		$   39.7		$    384.9		$   34.4
Installed service base		238.6		24.0		235.8		22.7
Software		129.4		46.5		121.1		35.1
Trademarks		7.1		6.4		7.1		6.2
Other		67.0		36.6		71.4		34.3
Total amortizable intangible assets		827.0		153.2		820.3		132.7
Total indefinite lived intangible assets - trademarks		195.3		-		195.3		-
Total		$ 1,022.3		$ 153.2		$ 1,015.6		$ 132.7

Intangible asset amortization expense for the three months ended June 30, 2004 and 2003 was $9.2 million and $11.3 million, respectively.  Intangible asset amortization expense for the six months ended June 30, 2004 and 2003 was $20.1 million and $22.1 million, respectively.  Estimated intangible asset amortization expense for each of the next five fiscal years is expected to be $43.3 million in 2005, $42.7 million in 2006, $29.4 million in 2007, $24.8 million in 2008, and $21.8 million in 2009.

During the six months ended June 30, 2004, the Company recorded software additions in the amount of $8.0 million, with an amortization period of five years.

Note 6 - Information on basic and diluted shares is as follows:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Weighted-average number of basic shares	173.1	169.5	173.8	169.4
Shares Issuable under incentive stock plans	2.2	1.4	2.3	0.9
Weighted-average number of diluted shares	175.3	170.9	176.1	170.3

Diluted earnings per share computations for the six months ended June 30, 2004 and 2003 excluded the weighted-average effect of the assumed exercise of approximately 0.1 million and 6.7 million shares issuable under stock benefit plans, respectively.  Excluded for the three months ended June 30, 2003 were 5.5 million shares and for the three months ended June 30, 2004 there were no shares excluded.  These shares were excluded because the effect on the computation of earnings per share would be anti-dilutive.

Note 7 - The components of comprehensive income are as follows:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Net earnings	$ 286.2	$139.3	$ 465.7	$  292.5
Other comprehensive income:
Foreign currency translation adjustment	(21.1)	122.3	(26.3)	179.3
Change in fair value of derivatives qualifying
as cash flow hedges, net of tax	1.7	(11.4)	12.4	(15.4)
Unrealized gain on marketable securities, net of tax	-	10.9	-	15.1
Minimum pension liability adjustment, net of tax	-	-	-	(57.6)
Comprehensive income	$ 266.8	$261.1	$ 451.8	$  413.9

Included in accumulated other comprehensive income at June 30, 2004, is $3.1 million related to the fair value of derivatives qualifying as cash flow hedges, of which $3.6 million of expense is expected to be reclassified to earnings over the twelve-month period ending June 30, 2005.  The actual amounts that will be reclassified to earnings over the next 12 months may vary from this amount as a result of changes in market conditions.  Additionally, $0.5 million, related to an interest rate swap used as a cash flow hedge of the forecasted issuance of debt, will be reclassified to earnings between July 1, 2004 and May 15, 2006.  No amounts were reclassified to earnings during the quarter in connection with forecasted transactions that were no longer considered probable of occurring.  At June 30, 2004, the maximum term of derivative instruments that hedge forecasted transactions for foreign currency hedges was 20 months.  At June 30, 2004, the maximum term of derivative instruments that hedge forecasted transactions for commodity hedges was six months. 

In connection with the sale of Engineered Solutions to Timken, the Company received approximately 9.4 million shares of Timken common stock valued at $140 million at the time of sale.  For the three and six months ended June 30, 2003, the Company recorded unrealized gains of $10.9 million, net of tax, and $15.1 million, net of tax, respectively, on the change in price of the Timken shares.  In October of 2003, the Company sold all of the Timken shares resulting in pre-tax proceeds of approximately $147.6 million.

Note 8 - The Company is involved in various litigations, claims and administrative proceedings, including environmental and product liability matters.  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 the liability, which may result from these legal matters, would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.

In assessing its potential environmental liability, the Company bases its estimates on current laws and regulations and current remediation technologies.  The Company does not discount its liability or assume any insurance recoveries.

Ingersoll-Rand Company (IR-New Jersey), a Company subsidiary, is a defendant in numerous asbestos-related lawsuits in state and federal courts.  In virtually all of the suits a large number of other companies have also been named as defendants.  The claims against IR-New Jersey generally allege injury caused by exposure to asbestos contained in certain of IR-New Jersey's products.  Although IR-New Jersey was neither a producer nor a manufacturer of asbestos, some of its formerly manufactured products utilized asbestos-containing components, such as gaskets, purchased from third-party suppliers.

In assessing its potential asbestos liability, the Company bases its estimates on current laws, an assessment of the nature of current claims, its claims settlement experience and insurance coverage.  All claims resolved to date have been dismissed or settled, and IR-New Jersey's average settlement amount per claim has been nominal.  For the six months ended June 30, 2004, total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $7.9 million.  The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities and the costs of defending against them.

The Company sells product on a continuous basis 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 $9.6 million, including 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 since the fair value of the underlying equipment that serves as collateral is generally in excess of the contingent liability.  Management believes these guarantees will not adversely affect the condensed consolidated financial statements.

Beginning in 2005, the Company could be required, based on the attainment of certain operating results, to purchase a majority interest in a joint venture.  Currently, the Company estimates the target purchase price for the remaining 70% interest to be approximately $240 million.  However, this price is contingent upon the future operating performance of the joint venture.

The Company has remained contingently liable for approximately $44.0 million relating to performance bonds associated with prior sale of products of IDP, which the Company divested in 2000.  The acquirer of IDP is the primary obligor under these performance bonds.  However, should the acquirer default under these arrangements the Company would be required to satisfy these financial obligations.  The Company estimates that $16.4 million of the obligation will expire during the second half of 2004.  The remainder extends through 2008.

The Company is contingently liable for customs duties in certain non-U.S. countries which totaled $4.5 million at June 30, 2004.  These amounts are not accrued as the Company intends on exporting the product to another country for final sale.  In the normal course of business, the Company has issued several third party guarantees, on behalf of suppliers, distributors and a joint venture partner, which were $5.2 million at June 30, 2004. 

In connection with the disposition of certain businesses and facilities, the Company has indemnified the purchasers for the expected cost of remediation of environmental contamination, if any, existing on the date of disposition.  Such expected costs are accrued when environmental assessments are made or remedial efforts are probable and the costs can be reasonably estimated.

The following table represents the changes in the product warranty liability for the six months ended June 30:

In millions	2004	2003
Beginning balance	$ 167.8	$ 133.6
Reductions for payments	(61.6)	(37.5)
Accruals for warranties issued during the period	58.7	40.1
Changes to accruals related to preexisting warranties	5.2	6.5
Translation	1.5	7.9
Ending balance	$ 171.6	$ 150.6

Note 9 - The Company sponsors several postretirement plans that cover certain eligible employees.  These plans provide for health care benefits, and in some instances, life insurance benefits.  Postretirement health plans generally are contributory and contributions are adjusted annually.  Life insurance plans for retirees are primarily noncontributory.  The Company funds the postretirement benefit costs principally on a pay-as-you-go basis.  The components of net periodic postretirement benefits cost for the three and six months ended June 30, were as follows:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Service cost	$     2.6	$    3.0	$     5.3	$      5.9
Interest cost	14.1	15.3	29.0	30.2
Net amortization and deferral losses	2.2	0.8	5.9	1.4
Net periodic postretirement benefit costs	18.9	19.1	40.2	37.5
Curtailment gains	-	-	-	(6.9)
Net postretirement benefit expense	$   18.9	$  19.1	$   40.2	$    30.6

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") was enacted.  The Act introduced a government provided subsidy based on a percentage of a beneficiary's annual prescription drug benefits, within defined limits, and the opportunity for a retiree to obtain prescription drug benefits under Medicare.  The Company adopted FASB Staff Position 106-2 as of April 1, 2004, the beginning of its second quarter.  The Company and its actuarial advisors determined that most benefits provided by the plan were at least actuarially equivalent to Medicare Part D.  The Company remeasured the accumulated benefit obligation effects of the Act as of April 1, 2004.  The effect of the federal subsidy to which the Company is entitled has been accounted for as an actuarial gain of $68.2 million.  The subsidy will have the effect of reducing postretirement benefit expense for 2004 by $7.9 million.  The components of the reduction in expense were a decrease in the amortization of the actuarial loss of $4.6 million, a reduction in service cost of $0.2 million and a reduction in the interest cost on the benefit obligation of $3.1 million.  Approximately $2.6 million was recorded in the second quarter of 2004 as a reduction in net postretirement benefit expense.  Net postretirement benefit expense for the three months ended September 30, 2004 and December 31, 2004 will include a similar reduction in expense due to the effects of the Act.

The assumptions used for 2004 expense are a discount rate and health care cost trend rate of 6.00% and 11.00%, respectively.  The assumptions used for the first quarter of 2004 were determined to be appropriate as of April 1, 2004 when the postretirement plan was remeasured to reflect the federal subsidy.  In 2003, the postretirement plan was remeasured as of the date of sale of Engineered Solutions and the discount rate used was decreased from 6.75% to 6.50%, while the health care cost trend rate remained at 11.00% for 2003.  The curtailment gains in 2003 relate to the sale of Engineered Solutions in February 2003.

Note 10 - The Company has noncontributory pension plans covering substantially all U.S. employees.  In addition, certain non-U.S. employees in other countries are covered by pension plans.  The Company's pension plans for U.S. non-collectively bargained employees provide benefits on a modest final average pay formula.  The Company's U.S. collectively bargained pension plans principally provide benefits based on a flat benefit formula.  Non-U.S. plans provide benefits based on earnings and years of service.  In addition, the Company maintains other supplemental benefit plans for officers and other key employees.  The components of the Company's pension related costs for the three and six months ended June 30, include the following:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Service cost	$   12.7	$  12.4	$   26.3	$    24.8
Interest cost	44.9	43.6	89.9	87.2
Expected return on plan assets	(56.0)	(43.2)	(111.9)	(86.5)
Net amortization of unrecognized:
Prior service costs	2.1	1.9	4.3	3.9
Transition amount	0.2	0.2	0.4	0.4
Plan net losses	5.5	8.1	10.9	16.1
Net pension cost	9.4	23.0	19.9	45.9
Curtailment/settlement losses/(gains)	0.6	-	0.6	(11.1)
Net pension cost after curtailments/settlements	$   10.0	$  23.0	$   20.5	$    34.8

The curtailment loss in the second quarter of 2004 relates to the sale of the Drilling Solutions in one of its non-U.S. locations.  The curtailment and settlement gains in the first quarter of 2003 relate to the sale of Engineered Solutions. 

The discount rate, rate of compensation increase and the expected rate of return on plan assets used to calculate pension expense for U.S. plans for 2004 are 6.00%, 4.00% and 8.75%, respectively.  The net periodic pension cost for non-U.S. plans for 2004 is based on the benefit obligation assumptions used at December 31, 2003.  The benefit assumptions for the non-U.S. plan remeasured due to the sale of Drilling Solutions remained the same due to similar economic conditions. 

The Engineered Solutions employees participated in the largest U.S. pension plan and a remeasurement of that plan was required as of the sale date.  Prior to the remeasurement date of February 15, 2003, the discount rate used for all plans was 6.75%.  Upon remeasurement, the Company's largest plan used a 6.50% discount rate.  The rate of compensation increase and the expected rate of return on plan assets used to calculate pension expense for U.S. plans for 2003 were 4.00% and 8.75%, respectively.  The net periodic pension cost for non-U.S. plans for 2003 was based on the benefit obligation assumptions used at December 31, 2002.

The Company contributed an additional discretionary $40.0 million to its pension plans in the six months ended June 30, 2004, as well as  $17.0 million in required employer contributions. 

Note 11 - A summary of operations by reportable segment is as follows:

	Three months ended		Six months ended
	June 30,		June 30,
In millions	2004	2003	2004	2003
Net revenues
Climate Control	$    727.3	$    655.6	$ 1,364.8	$ 1,213.1
Industrial Solutions:
Air and Productivity Solutions	380.1	343.6	723.6	654.3
Dresser-Rand	277.4	337.1	447.1	615.2
	657.5	680.7	1,170.7	1,269.5
Infrastructure	886.5	716.5	1,613.1	1,315.1
Security and Safety	442.6	381.1	857.3	755.8
Total	$ 2,713.9	$ 2,433.9	$ 5,005.9	$ 4,553.5
Operating income
Climate Control	$      91.5	$      55.3	$    149.5	$      80.4
Industrial Solutions:
Air and Productivity Solutions	42.3	18.4	76.1	39.6
Dresser-Rand	16.8	8.0	25.2	12.2
	59.1	26.4	101.3	51.8
Infrastructure	135.7	92.0	227.3	157.1
Security and Safety	62.6	67.3	134.7	138.2
Unallocated corporate expense	(14.4)	(32.5)	(41.4)	(59.1)
Total	$    334.5	$    208.5	$    571.4	$    368.4
No significant changes in long-lived assets by geographic area have occurred since December 31, 2003.

Note 12 - As part of a corporate reorganization, IR-Limited guaranteed all of the issued public debt securities of IR-New Jersey.  The subsidiary issuer, IR-New Jersey, is 100% owned by the parent, IR-Limited, the guarantees are full and unconditional, and no other subsidiary of the Company guarantees the securities. The following condensed consolidated financial information for IR-Limited, IR-New Jersey, and all their other subsidiaries is included so that separate financial statements of IR-New Jersey are not required to be filed with the U.S. Securities and Exchange Commission. 

IR-Limited issued Class B common shares to IR-New Jersey in exchange for a $3.6 billion note and shares of certain IR-New Jersey subsidiaries.  The note, which is due in 2011, has a fixed rate of interest of 11 % per annum payable semi-annually and imposes certain restrictive covenants upon IR-New Jersey.  The Class B common shares are non-voting and pay dividends comparable to the Class A common shares.  In 2002, IR-Limited contributed the note to a wholly owned subsidiary, which subsequently transferred portions of the note to several other subsidiaries, all of which are included in "Other Subsidiaries" below.  Accordingly, the subsidiaries of IR-Limited remain creditors of IR-New Jersey.

The condensed consolidating financial statements present IR-Limited and IR-New Jersey investments in their subsidiaries using the equity method of accounting.  Intercompany investments in the non-voting Class B common shares are accounted for on the cost method and are reduced by intercompany dividends.

Condensed Consolidating Income Statement
For the three months ended June 30, 2004
		IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited		New Jersey		Subsidiaries		Adjustments		Consolidated
Net revenues		$         -		$    362.6		$ 2,351.3		$           -		$ 2,713.9
Cost of goods sold		-		280.9		1,721.7		-		2,002.6
Selling and administrative expenses		(0.1)		76.5		300.4		-		376.8
Operating income		0.1		5.2		329.2		-		334.5
Equity earnings in affiliates (net of tax)		288.3		185.2		153.4		(626.9)		-
Interest expense		(0.2)		(31.7)		(8.1)		-		(40.0)
Intercompany interest and fees		(1.0)		(89.4)		90.4		-		-
Other income (expense), net		(1.0)		29.5		(29.7)		-		(1.2)
Earnings before income taxes		286.2		98.8		535.2		(626.9)		293.3
(Benefit) provision for income taxes		-		(29.4)		72.3		-		42.9
Earnings (loss) from continuing operations		286.2		128.2		462.9		(626.9)		250.4
Discontinued operations, net of tax		-		25.2		10.6		-		35.8
Net earnings		$  286.2		$    153.4		$    473.5		$  (626.9)		$    286.2

Condensed Consolidating Income Statement
For the three months ended June 30, 2003
		IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited		New Jersey		Subsidiaries		Adjustments		Consolidated
Net revenues		$         -		$    298.4		$ 2,135.5		$           -		$ 2,433.9
Cost of goods sold		-		238.5		1,604.3		-		1,842.8
Selling and administrative expenses		-		97.6		285.0		-		382.6
Operating income		-		(37.7)		246.2		-		208.5
Equity earnings in affiliates (net of tax)		141.0		133.8		18.2		(293.0)		-
Interest expense		-		(34.3)		(9.7)		-		(44.0)
Intercompany interest and fees		(1.4)		(98.6)		100.0		-		-
Other income (expense), net		(0.3)		(16.0)		18.8		-		2.5
Earnings before income taxes		139.3		(52.8)		373.5		(293.0)		167.0
(Benefit) provision for income taxes		-		(67.4)		88.6		-		21.2
Earnings (loss) from continuing operations		139.3		14.6		284.9		(293.0)		145.8
Discontinued operations, net of tax		-		(9.9)		(28.5)		31.9		(6.5)
Net earnings		$  139.3		$        4.7		$    256.4		$  (261.1)		$    139.3

Condensed Consolidating Income Statement
For the six months ended June 30, 2004
		IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited		New Jersey		Subsidiaries		Adjustments		Consolidated
Net revenues		$         -		$    662.6		$ 4,343.3		$           -		$ 5,005.9
Cost of goods sold		-		520.9		3,163.7		-		3,684.6
Selling and administrative expenses		-		162.7		587.2		-		749.9
Operating income		-		(21.0)		592.4		-		571.4
Equity earnings in affiliates (net of tax)		471.0		288.9		166.9		(926.8)		-
Interest expense		(0.2)		(64.9)		(15.7)		-		(80.8)
Intercompany interest and fees		(2.7)		(182.2)		184.9		-		-
Other income (expense), net		(2.4)		36.0		(40.1)		-		(6.5)
Earnings before income taxes		465.7		56.8		888.4		(926.8)		484.1
(Benefit) provision for income taxes		-		(89.9)		158.6		-		68.7
Earnings (loss) from continuing operations		465.7		146.7		729.8		(926.8)		415.4
Discontinued operations, net of tax		-		20.2		30.1		-		50.3
Net earnings		$  465.7		$    166.9		$    759.9		$  (926.8)		$    465.7

Condensed Consolidating Income Statement
For the six months ended June 30, 2003
		IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited		New Jersey		Subsidiaries		Adjustments		Consolidated
Net revenues		$         -		$    556.7		$ 3,996.8		$           -		$ 4,553.5
Cost of goods sold		-		457.5		3,015.9		-		3,473.4
Selling and administrative expenses		-		165.0		546.7		-		711.7
Operating income		-		(65.8)		434.2		-		368.4
Equity earnings in affiliates (net of tax)		295.5		206.9		(32.8)		(469.6)		-
Interest expense		-		(75.8)		(18.2)		-		(94.0)
Intercompany interest and fees		(2.8)		(217.1)		219.9		-		-
Other income (expense), net		(0.2)		(23.9)		20.0		-		(4.1)
Earnings before income taxes		292.5		(175.7)		623.1		(469.6)		270.3
(Benefit) provision for income taxes		-		(138.0)		172.5		-		34.5
Earnings (loss) from continuing operations		292.5		(37.7)		450.6		(469.6)		235.8
Discontinued operations, net of tax		-		83.1		(2.9)		(23.5)		56.7
Net earnings		$  292.5		$      45.4		$    447.7		$  (493.1)		$    292.5

Condensed Consolidating Balance Sheet
June 30, 2004
					Other		Consolidating		IR-Limited
In millions	IR-Limited		IR-New Jersey		Subsidiaries		Adjustments		Consolidated
Current assets:
Cash and cash equivalents		$        0.4		$      191.2		$      199.1		$              -		$      390.7
Accounts and notes receivable, net		5.0		265.5		1,497.2		-		1,767.7
Inventories, net		-		123.5		927.7		-		1,051.2
Prepaid expenses and deferred income taxes		0.2		95.8		262.0		-		358.0
Assets held for sale		-		1.4		11.9		-		13.3
Accounts and notes receivable affiliates		15.2		-		11,841.8		(11,857.0)		-
Total current assets		20.8		677.4		14,739.7		(11,857.0)		3,580.9
Investment in affiliates		5,076.0		11,411.4		15,375.2		(31,862.6)		-
Property, plant and equipment, net		-		223.7		888.1		-		1,111.8
Intangible assets, net		-		155.7		4,874.5		-		5,030.2
Other assets		-		192.6		673.9		-		866.5
Total assets		$ 5,096.8		$ 12,660.8		$ 36,551.4		$ (43,719.6)		$ 10,589.4
Current liabilities:
Accounts payable and accruals		$        4.5		$      145.0		$   1,961.4		$              -		$   2,110.9
Loans payable		-		612.9		78.7		-		691.6
Liabilities held for sale		-		-		1.0		-		1.0
Accounts and note payable affiliates		332.3		1,074.6		10,450.3		(11,857.2)		-
Total current liabilities		336.8		1,832.5		12,491.4		(11,857.2)		2,803.5
Long-term debt		-		1,140.3		226.3		-		1,366.6
Notes payable affiliates		-		3,647.4		-		(3,647.4)		-
Other noncurrent liabilities		-		136.4		1,522.9		-		1,659.3
Total liabilities		336.8		6,756.6		14,240.6		(15,504.6)		5,829.4
Shareholders' equity:
Class A common shares		176.6		-		-		-		176.6
Class B common shares		135.3		-		-		(135.3)		-
Common shares		-		-		2,362.8		(2,362.8)		-
Other shareholders' equity		9,449.0		6,710.1		24,528.4		(35,819.7)		4,867.8
Accumulated other comprehensive income		37.0		(339.7)		(8.9)		27.2		(284.4)
		9,797.9		6,370.4		26,882.3		(38,290.6)		4,760.0
Less:  Contra account		(5,037.9)		(466.2)		(4,571.5)		10,075.6		-
Total shareholders' equity		4,760.0		5,904.2		22,310.8		(28,215.0)		4,760.0
Total liabilities and equity		$ 5,096.8		$ 12,660.8		$ 36,551.4		$ (43,719.6)		$ 10,589.4

Condensed Consolidating Balance Sheet
December 31, 2003
		IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited		New Jersey		Subsidiaries		Adjustments		Consolidated
Current assets:
Cash and cash equivalents		$    160.5		$      104.1		$      195.0		$              -		$      459.6
Accounts and notes receivable, net		3.4		221.4		1,420.8		-		1,645.6
Inventories, net		-		106.6		868.5		-		975.1
Prepaid expenses and deferred income taxes		0.2		132.1		224.5		-		356.8
Assets held for sale		-		69.5		76.3		-		145.8
Accounts and notes receivable affiliates		(0.4)		-		9,062.5		(9,062.1)		-
Total current assets		163.7		633.7		11,847.6		(9,062.1)		3,582.9
Investment in affiliates		4,777.2		9,917.3		15,651.2		(30,345.7)		-
Property, plant and equipment, net		-		229.3		941.8		-		1,171.1
Intangible assets, net		-		160.6		4,909.6		-		5,070.2
Other assets		-		105.2		735.5		-		840.7
Total assets		$ 4,940.9		$ 11,046.1		$ 34,085.7		$ (39,407.8)		$ 10,664.9
Current liabilities:
Accounts payable and accruals		$        4.3		$      (22.4)		$   2,245.1		$              -		$   2,227.0
Loans payable		-		713.2		87.5		-		800.7
Liabilities held for sale		-		11.3		14.0		-		25.3
Accounts and note payable affiliates		443.3		774.7		7,844.1		(9,062.1)		-
Total current liabilities		447.6		1,476.8		10,190.7		(9,062.1)		3,053.0
Long-term debt		-		1,290.3		228.3		-		1,518.6
Notes payable affiliates		-		3,647.4		-		(3,647.4)		-
Other noncurrent liabilities		-		207.9		1,392.1		-		1,600.0
Total liabilities		447.6		6,622.4		11,811.1		(12,709.5)		6,171.6
Shareholders' equity:
Class A common shares		174.5		-		-		-		174.5
Class B common shares		135.3		-		-		(135.3)		-
Common shares		-		-		2,362.8		(2,362.8)		-
Other shareholders' equity		9,221.8		5,304.9		24,454.6		(34,392.0)		4,589.3
Accumulated other comprehensive income		50.9		(410.2)		75.4		13.4		(270.5)
		9,582.5		4,894.7		26,892.8		(36,876.7)		4,493.3
Less:  Contra account		(5,089.2)		(471.0)		(4,618.2)		10,178.4		-
Total shareholders' equity		4,493.3		4,423.7		22,274.6		(26,698.3)		4,493.3
Total liabilities and equity		$ 4,940.9		$ 11,046.1		$ 34,085.7		$ (39,407.8)		$ 10,664.9

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2004
	IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited	New Jersey		Subsidiaries		Adjustments		Consolidated
Net cash (used in) provided by operating activities	$(133.5)		$ 145.7		$  238.3		$      -		$  250.5
Cash flows from investing activities:
Capital expenditures	-		(9.7)		(36.7)		-		(46.4)
Acquisitions, net of cash	-		-		(21.2)		-		(21.2)
Proceeds from business disposition	-		189.0		7.5		-		196.5
Proceeds from sale of property, plant and
equipment	-		17.7		9.8		-		27.5
Other, net	-		-		2.0		-		2.0
Net cash provided by (used in) investing activities	-		197.0		(38.6)		-		158.4
Cash flows from financing activities:
Net change in debt	-		(250.8)		(6.8)		-		(257.6)
Dividends (paid) received	(117.5)		4.4		47.0		-		(66.1)
Purchase of treasury shares	-		-		(215.8)		-		(215.8)
Proceeds from the exercise of stock options	90.9		-		-		-		90.9
Net cash (used in) provided by financing activities	(26.6)		(246.4)		(175.6)		-		(448.6)
Net cash (used in) provided by discontinued operations	-		(9.2)		5.4		-		(3.8)
Effect of exchange rate changes on cash and
cash equivalents	-		-		(1.6)		-		(1.6)
Effect of change in fiscal year end of business	-		-		(23.8)		-		(23.8)
Net (decrease) increase in cash and cash equivalents	(160.1)		87.1		4.1		-		(68.9)
Cash and cash equivalents - beginning of period	160.5		104.1		195.0		-		459.6
Cash and cash equivalents - end of period	$      0.4		$ 191.2		$  199.1		$      -		$  390.7

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2003
	IR-		IR-	Other		Consolidating		IR-Limited
In millions	Limited	New Jersey		Subsidiaries		Adjustments		Consolidated
Net cash provided by (used in) operating activities	$    34.9		$ 176.0		$ (249.9)		$      -		$ (39.0)
Cash flows from investing activities:
Capital expenditures	-		(9.9)		(39.6)		-		(49.5)
Acquisitions, net of cash	-		-		-		-		-
Proceeds from business disposition	43.0		395.5		260.8		-		699.3
Proceeds from sale of property, plant and
equipment	-		-		19.8		-		19.8
Other, net	-		-		(4.9)		-		(4.9)
Net cash provided by investing activities	43.0		385.6		236.1		-		664.7
Cash flows from financing activities:
Net change in debt	12.0		(758.7)		28.6		-		(718.1)
Dividends (paid) received	(103.6)		4.0		42.0		-		(57.6)
Proceeds from the exercise of stock options	13.7		-		-		-		13.7
Net cash (used in) provided by financing activities	(77.9)		(754.7)		70.6		-		(762.0)
Net cash used in discontinued operations	-		(10.5)		(96.6)		-		(107.1)
Effect of exchange rate changes on cash and
cash equivalents	-		-		9.3		-		9.3
Net (decrease) increase in cash and cash equivalents	-		(203.6)		(30.5)		-		(234.1)
Cash and cash equivalents - beginning of period	-		209.0		133.2		-		342.2
Cash and cash equivalents - end of period	$         -		$     5.4		$  102.7		$      -		$ 108.1

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

INGERSOLL-RAND COMPANY LIMITED
MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary and Outlook
Ingersoll-Rand Company Limited (IR or the Company) is a leading innovation and solutions provider for the major global markets of Climate Control, Industrial Solutions, Infrastructure, and Security and Safety.  The Company's diverse product portfolio encompasses such leading industrial and commercial brands as Thermo King® transport temperature control equipment, Hussmann® commercial and retail refrigeration equipment, PowerWorks® microturbines, Dresser-Rand® turbomachinery, Ingersoll-Rand® industrial and construction equipment, Bobcat® compact construction equipment, Club Car® golf cars and utility vehicles, Schlage® locks and security solutions, and Kryptonite® portable security products.  In addition, IR offers products and services under many other premium brands for customers in industrial and commercial markets.

The Company seeks to drive shareholder value through three areas of emphasis: Dramatic Growth, by developing innovative solutions that improve our customers' operations; Operational Excellence, by fostering a culture of continuous improvement and cost consciousness; and Dual Citizenship, by encouraging our employees' active collaboration with colleagues across business units and geographic regions to achieve superior business outcomes.

The following significant events occurred during the first six months of 2004:

- On February 19, 2004, consistent with its business portfolio realignment, the Company agreed to sell its Drilling Solutions business unit (Drilling Solutions) to Atlas Copco AB, for approximately $225 million. The sale of the U.S. and most international operations was completed on June 30, 2004.  The sale of Drilling Solutions assets held by Ingersoll-Rand (India) Limited, subject to approval by the Indian company's shareholders, is expected in the third quarter of 2004.  Drilling Solutions, which was previously included in the Company's Infrastructure Segment, is now shown as discontinued operations, net of tax, for all periods.  The Company realized an after-tax gain of $37.0 million on the disposition, which is included in "Discontinued operations, net of tax".  The gain is subject to working capital and other final purchase price adjustments.  Drilling Solutions manufactures drilling equipment and accessories for the worldwide construction, mining, quarrying, and water-well drilling industries. Drilling Solutions had 2003 revenues of approximately $300 million and employed approximately 950 people.

- - During the first quarter of 2004, the Company received payments of approximately $31.5 million for claims filed under the Continued Dumping and Subsidy Offset Act of 2000 on behalf of a subsidiary included in the Engineered Solutions business (Engineered Solutions), which was sold in 2003.  The antidumping duty is levied when the U.S. Department of Commerce determines that imported products are being sold in the United States at less than fair value causing material injury to a United States industry.  These payments are reflected in "Discontinued operations, net of tax."

- During the six months ended June 30, 2004, the Company repurchased approximately 3.3 million Class A common shares at a cost of approximately $215.8 million.  The Company has also repaid over $250 million of debt during the first half of 2004.

- The Company contributed an additional discretionary $40.0 million to its pension plans in the six months ended June 30, 2004, as well as  $17.0 million in required employer contributions. 

All of the Company's business segments, except Dresser-Rand, experienced double-digit revenue growth in the quarter and year to date compared to 2003.  The favorable effects of currency translation continued to increase revenue.  The Company has been able to increase prices and add surcharges to help offset the impact of material cost inflation.  The Company attributes the improved revenue growth to its leadership position as a proven source of innovation in worldwide markets and gains in the recurring revenue stream.  Dresser-Rand revenues declined compared to last year's quarter and year to date, consistent with the Company's plan to eliminate low-margin projects and buyout components.

The Company continues to benefit from higher volumes and product mix, the continuing operational improvements, productivity enhancements in our worldwide operations, reduced interest expense from repayment of debt and the effects of our tax strategies.  In 2004, IR maintained the strength of its balance sheet, by lowering its debt-to-capital ratio to 29.6% at June 30, 2004.        

For the six months ended June 30, 2004, Climate Control, Air and Productivity Solutions, and Infrastructure generated improved revenues, operating income and operating margins compared to 2003.  These improvements were largely attributable to higher volumes and product mix.  Dresser-Rand revenue decreased, while operating income and operating margins improved, due to the elimination of low-margin projects.   Security and Safety revenues improved while operating income and operating margins declined due to litigation expense as well as a plant closing and the discontinuance of a product line.  Absent these items, the Company expects operating margins to return to previous levels.

Results of Operations - Three Months Ended June 30, 2004 and 2003
Earnings from continuing operations for the second quarter of 2004 were $250.4 million, or diluted earnings per share of $1.43, compared with $145.8 million and $0.85 diluted earnings per share in the comparable quarter of 2003.

	Three months ended June 30,
Dollar amounts in millions	2004	2003
Net revenues	$ 2,713.9	$ 2,433.9
Cost of goods sold	2,002.6	1,842.8
Selling and administrative expenses	376.8	382.6
Operating income	$    334.5	$    208.5
Operating margin	12.3%	8.6%

Net Revenues
Revenues for the second quarter of 2004 increased by approximately 12% over the comparable quarter of 2003.  Higher volumes and product mix accounted for approximately 8% of the increase, while currency translation and pricing accounted for the remainder of the increase. Excluding Dresser-Rand, sales across all business segments were higher.  The Company continues to make progress in increasing recurring revenues, which includes revenues derived from installation, parts and service.

Cost of Goods Sold
Cost of goods sold in the second quarter of 2004 was 73.8% of revenue as compared to 75.7% in 2003.  The decrease was mainly due to the improved productivity and higher volumes, which was partially offset by currency translation.

Selling and Administrative Expenses
Selling and administrative expenses in the second quarter of 2004 were 13.9% of revenues as compared to 15.7% in 2003.  Selling and administrative expenses were reduced by the gain on the sale of corporate real estate of approximately $13 million.  Higher volume helped to offset the impact of increased cost associated with operational improvement programs, employee benefit cost, and the effects of currency translation.

Operating Income
Operating income for the second quarter of 2004 increased by approximately 60%. The increase was mainly due to higher volumes, product mix, pricing, and the benefits associated with improved productivity.  These positive effects were partially offset by additional cost associated with operational improvement programs, employee benefit cost, as well as continued investments by the Company in new products and solutions.

Interest Expense
Interest expense for the second quarter of 2004 was $40.0 million, a decrease of $4 million from the second quarter of 2003. The decrease is primarily attributable to lower year-over-year debt levels.

Other Income (Expense), net
Other income (expense), net includes foreign exchange activities, equity in earnings of partially owned affiliates, minority interests, and other miscellaneous income and expense items.  Other income (expense), net aggregated $1.2 million of expense in the second quarter of 2004 as compared with $2.5 million of income in 2003.  The change is primarily due to less favorable foreign currency activity in the current period.

Provision for Income Taxes
The Company's second quarter 2004 provision for income taxes was $42.9 million, as compared to $21.2 million in 2003.  The Company's effective tax rate of 14.6% is higher in the second quarter of 2004 compared to 12.7% in the second quarter of 2003.  The rate change is a result of an increase in the 2004 earnings outlook, especially in the United States, reduced by a tax benefit of $8.8 million.

Backlog
Incoming orders for the second quarter of 2004 totaled $2.7 billion, which was approximately $400 million greater than the second quarter of 2003.  The Company's backlog of orders at June 30, 2004, believed to be firm, was $1.7 billion, which is approximately $400 million greater than the balance at December 31, 2003.

Discontinued Operations
On February 19, 2004, the Company agreed to sell Drilling Solutions, to Atlas Copco AB, for approximately $225 million.  The transaction was completed on June 30, 2004.  This transaction includes the planned disposition of Drilling Solutions assets held by Ingersoll-Rand (India) Limited, subject to approval by the Indian company's shareholders in the third quarter of 2004. Drilling Solutions, which was previously included in the Company's Infrastructure Segment, manufactures drilling equipment and accessories for the worldwide construction, mining, quarrying, and water-well drilling industries.  The Company realized an after-tax gain of $37.0 million on the disposition, which is included in "Discontinued operations, net of tax".  The gain is subject to working capital and other final purchase price adjustments.  Drilling Solutions' net earnings for the second quarter of 2004 and 2003, included in "Discontinued operations, net of tax," were $5.0 million and $5.9 million, respectively.

During 2003, the Company continued its business portfolio realignment by selling three businesses.  As of December 31, 2003, the Company had recognized an after-tax gain of $58.2 million on the disposition of  Engineered Solutions, which was included in "Discontinued operations, net of tax."  The gain is subject to working capital and other final purchase price adjustments.  The Company is currently involved in a dispute resolution procedure relating to the final purchase price adjustment based on the working capital of Engineered Solutions that was sold in February 2003.  The Company expects a resolution by the third quarter of 2004.  Any adjustment to be recorded is not expected to be material and would be reflected as an increase or decrease to "Discontinued operations, net of tax," in 2004.  Net earnings and continuing costs associated with Engineered Solutions, included in "Discontinued operations, net of tax," for the second quarter of 2004 and 2003 were expense of $0.3 million and $6.3 million, respectively.

The Company recognized an after-tax loss of $7.6 million on the disposition of its Laidlaw business unit (Laidlaw), which was included in "Discontinued operations, net of tax," in the third quarter of 2003.  Laidlaw's net loss for the second quarter of 2003, included in "Discontinued operations, net of tax," was $0.5 million.

The Company recognized an after-tax gain of $18.2 million (subject to a working capital adjustment) on the disposition of its Waterjet business unit (Waterjet), which was included in "Discontinued operations, net of tax" in the third quarter of 2003.  During the first quarter of 2004, the working capital adjustment was finalized, which resulted in an additional $0.4 million of after-tax income being recorded.  Net earnings and continuing costs associated with Waterjet, included in "Discontinued operations, net of tax," were $0.2 million of expense and $1.9 million of income for the second quarter of 2004 and 2003, respectively.

Discontinued operations, net of tax, for the second quarter of 2004 amounted to $35.8 million of income. This includes the results of Drilling Solutions, purchase price adjustments and continuing costs related to the businesses sold in 2003, and retained costs of IDP of $4.9 million.  The retained costs of IDP, which was sold in 2000, include employee benefits and product liability costs, primarily related to asbestos claims.  Discontinued operations, net of tax, for the second quarter of 2003 amounted to $6.5 million of expense, which includes the results of Drilling Solutions, the results of the businesses sold in 2003, the gain on the sale of Engineered Solutions, and IDP costs of $7.3 million.

Results of Operations - Six Months Ended June 30, 2004 and 2003
Earnings from continuing operations for the six months ended June 30, 2004 were $415.4 million, or diluted earnings per share of $2.36, compared with $235.8 million and $1.39 diluted earnings per share in the comparable quarter of 2003.
 

	Six months ended June 30,
Dollar amounts in millions	2004	2003
Net revenues	$ 5,005.9	$ 4,553.5
Cost of goods sold	3,684.6	3,473.4
Selling and administrative expenses	749.9	711.7
Operating income	$    571.4	$    368.4
Operating margin	11.4%	8.1%

Net Revenues
Revenues for the six months ended June 30, 2004 increased by approximately 10% over the comparable period of 2003. Higher volumes and product mix accounted for approximately 6% of the increase, while currency translation and pricing accounted for the remainder of the increase.  Excluding Dresser-Rand, revenues for all business segments were higher.  The Company continues to make progress in increasing recurring revenues, which includes revenues derived from installation, parts and service.

Cost of Goods Sold
Cost of goods sold for the six months ended June 30, 2004 was 73.6% of revenues as compared to 76.3% in 2003.  The decrease was mainly due to the improved productivity and higher volumes, which was partially offset by currency translation.

Selling and Administrative Expenses
Selling and administrative expenses for the six months ended June 30, 2004 were 15.0% of revenues as compared to 15.6% in 2003.  Selling and administrative expenses were reduced by the gain on the sale of corporate real estate of approximately $13 million.  Higher volumes helped to offset the impact of increased cost associated with operational improvement programs, employee benefit cost, and the effects of currency translation.

Operating Income
Operating income for the six months ended June 30, 2004 increased by approximately 55%.  The increase was mainly due to higher volumes, product mix, pricing, and the benefits associated with improved productivity.  These positive effects were partially offset by additional cost associated with operational improvement programs, and employee benefit cost, as well as continued investments by the Company in new products and solutions.

Interest Expense
Interest expense for the six months ended June 30, 2004 was $80.8 million, a decrease of  $13.2 million from the second quarter of 2003.  The decrease is primarily attributable to lower year-over-year debt levels.

Other Income (Expense), net
Other income (expense), net, aggregated $6.5 million of expense for the six months ended June 30, 2004, as compared with $4.1 million of expense in 2003. The change is primarily due to less favorable foreign currency activity in the current period.

Provision for Income Taxes
The Company's provision for income taxes for the six months ended June 30, 2004 was $68.7 million, as compared to $34.5 million in 2003.  The Company's effective tax rate of 14.2% is higher for the six months ended June 30, 2004, compared to 12.8% for the six months ended June 30, 2003, due to an increase in the 2004 earnings outlook, especially in the United States, reduced by tax benefits of $8.8 million.

Discontinued Operations
Discontinued operations, net of tax, for the six months ended June 30, 2004 amounted to $50.3 million of income. This includes primarily the results of Drilling Solutions, purchase price adjustments and retained costs of IDP.  The results of Drilling Solutions include a gain of $37.0 million and earnings of $8.1 million. The retained costs of IDP, which was sold in 2000, include employee benefits and product liability costs, primarily related to asbestos claims of approximately $12 million.  Discontinued operations, net of tax, for the six months ended June 30, 2003 amounted to $56.7 million of income, which includes the results of Drilling Solutions ($8.5 million), the results of the businesses sold in 2003 ($5.2 million), the gain on the sale of Engineered Solutions ($53.1 million), and IDP costs ($10.0 million). 

Review of Business Segments

Climate Control
Climate Control is engaged in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display cases, beverage coolers, and walk-in storage coolers and freezers.

Climate Control revenues and operating income continue to benefit from higher volumes and favorable product mix across all of its major geographic areas.  North American operations' improvements were driven by strong market conditions for its truck and trailer product lines.  European markets for heavy truck, trailers and supermarket display cases continue to improve, while increases in Asian revenues were mainly attributable to growth in display cases. 

	Three months ended		Six months ended
	June 30,		June 30,
Dollar amounts in millions	2004	2003	2004	2003
Net revenues	$ 727.3	$ 655.6	$ 1,364.8	$ 1,213.1
Operating income	91.5	55.3	149.5	80.4
Operating margin	12.6%	8.4%	11.0%	6.6%

Climate Control revenues for the second quarter of 2004 increased by approximately 11% compared to 2003.  The increase was attributable to higher volumes and product mix, which accounted for approximately 5% of the increase, and the effects of currency translation, which accounted for approximately 3% of the increase.  The remaining increase was primarily due to pricing.  Operating income and margins for the second quarter of 2004 also increased significantly.  Higher volumes and favorable product mix increased operating income by $17.6 million.  Pricing and the savings associated with operational improvements increased operating income by $16.0 million and approximately $7.2 million, respectively.  These positive effects were partially offset by other expenses, such as increased costs associated with operational improvement programs.

Climate Control revenues for the six months ended June 30, 2004 increased by approximately 13% compared to 2003. The increase was attributable to higher volumes and product mix, which accounted for approximately 6% of the increase and the effects of currency translation, which accounted for approximately 4% of the increase.  The remaining increase was primarily due to pricing.  Operating income and margins also increased significantly in 2004.  Higher volumes and favorable product mix increased operating income by $41.9 million.  Pricing and the savings associated with operational improvements increased operating income by $25.7 million and approximately $9.2 million, respectively.  These positive effects were partially offset by other expenses, such as increased costs associated with operational improvement programs.

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 Air and Productivity Solutions Segment and the Dresser-Rand Segment. 

Air and Productivity Solutions
Air and Productivity Solutions is engaged in the design, manufacture, sale and service of air compressors, microturbines and industrial tools. 

Air and Productivity Solutions' revenues and operating income continued to benefit from higher volumes and favorable product mix.  These gains were most evident in the Air Solutions business and were primarily attributable to higher new product sales of complete units, increased revenues from the aftermarket business, and the benefits of a weaker U.S. dollar.  Additionally, recurring revenues for the segment also continued to increase.

	Three months ended		Six months ended
	June 30,		June 30,
Dollar amounts in millions	2004	2003	2004	2003
Net revenues	$ 380.1	$ 343.6	$ 723.6	$ 654.3
Operating income	42.3	18.4	76.1	39.6
Operating margin	11.1%	5.4%	10.5%	6.1%

Air and Productivity Solutions' revenues for the second quarter of 2004 increased by approximately 11% compared to 2003.  The increase was mainly attributable to higher volumes and favorable product mix, which accounted for approximately 10% of the increase.  The remaining increase was due to effects of currency translation.  Operating income and margins for the second quarter of 2004 also increased significantly.  Higher volumes and favorable product mix increased operating income by $12.2 million, which accounted for the majority of the increase. The remaining increase was primarily attributable to productivity savings associated with operational improvements and the effects of currency translation. 

Air and Productivity Solutions' revenues for the six months ended June 30, 2004 increased by approximately 11% compared to 2003.  The increase was mainly attributable to higher volumes and favorable product mix, which accounted for approximately 9% of the increase.  The remaining increase was due to the effects of currency translation.  Operating income and margins for the six months ended June 30, 2004 also increased significantly.  Higher volumes and favorable product mix increased operating income by $19.0 million, which accounted for the majority of the increase.  The remaining increase was primarily attributable to productivity savings associated with operational improvements and the effects of currency translation. 

Dresser-Rand
Dresser-Rand is engaged in the design, manufacture, sale and service of gas compressors, gas and steam turbines, and generators.

Dresser-Rand's decline in revenues was expected as it implemented its plan to eliminate the sales of low margin projects and buyout components, which were previously passed through to its customers at minimal margins.  Dresser-Rand continues to improve operating profit by focusing on higher margin business.  Dresser Rand's markets remain strong due to high energy prices.

	Three months ended		Six months ended
	June 30,		June 30,
Dollar amounts in millions	2004	2003	2004	2003
Net revenues	$ 277.4	$ 337.1	$ 447.1	$ 615.2
Operating income	16.8	8.0	25.2	12.2
Operating margin	6.1%	2.4%	5.6%	2.0%

Dresser-Rand revenues for the second quarter of 2004 decreased by approximately 18% compared to 2003.  The decrease was primarily attributable to lower volumes, which was slightly offset by the positive effects of currency translation and pricing.   Operating income and margins for the second quarter of 2004 increased significantly.  Savings associated with improved productivity and the reduction of excess capacity increased operating income by approximately $8.8 million, while pricing also had a positive impact.  These positive effects were partially offset by lower volumes of $5.6 million, as well as costs associated with the elimination of excess capacity. 

Dresser-Rand revenues for the six months ended June 30, 2004 decreased by approximately 27% compared to 2003.  The decrease was primarily attributable to lower volumes, which was slightly offset by the positive effects of currency translation and pricing.   Operating income and margins for the six months ended June 30, 2004 increased significantly.  Improved pricing increased operating income by approximately $13 million, while savings associated with improved productivity and the reduction of excess capacity also had a positive impact.  These positive effects were partially offset by lower volumes.

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, and road construction and repair equipment.  It is comprised of Bobcat, Club Car, Utility Equipment, and Road Development business units.  This Segment previously included Drilling Solutions, whose results are now included in "Discontinued operations, net of tax."

Infrastructure revenues and operating income increases continue to be led by the improvements in the Bobcat and Road Development businesses.  Bobcat revenues and operating income continue to improve due to new product introductions, improving North American markets, and the benefit of a weaker U.S. dollar.  Road Development revenues continue to increase substantially as a result of improved North American and Asian markets, as well as favorable currency translation.  Road Development operating income and margins continue to improve reflecting higher volumes and the effect of plant consolidations in the paving business and other cost reduction measures.  Club Car revenue increased due to the new Precedent golf car introduced in the first quarter of 2004.

	Three months ended		Six months ended
	June 30,		June 30,
Dollar amounts in millions	2004	2003	2004	2003
Net revenues	$ 886.5	$ 716.5	$ 1,613.1	$ 1,315.1
Operating income	135.7	92.0	227.3	157.1
Operating margin	15.3%	12.8%	14.1%	11.9%

Infrastructure revenues for the second quarter of 2004 increased by approximately 24% compared to 2003.  The increase was mainly attributable to higher volumes, which accounted for approximately 19% of the increase.  The remaining increase was due to the effects of currency translation and pricing, which each accounted for approximately 2%.  Operating income and margins for the second quarter of 2004 also increased significantly.  Higher volumes and favorable product mix increased operating income by $39.0 million during the quarter.  Additionally, pricing and the effects of currency translation had a positive impact.  These positive effects were partially offset by other items such as increased employee benefit cost, as well as increased investment in certain business unit initiatives.

Infrastructure revenues for the six months ended June 30, 2004 increased by approximately 23% compared to 2003.  The increase was mainly attributable to higher volumes, which accounted for approximately 18% of the increase.  The remaining increase was due to the effects of currency translation and pricing, which accounted for approximately 3% and 2%, respectively.  Operating income and margins for the second quarter of 2004 also increased significantly.  Higher volumes and favorable product mix increased operating income by approximately $70.0 million during the quarter.  Additionally, pricing and the effects of currency translation had a positive impact.  These positive effects were partially offset by other items such as increased employee benefit cost, as well as increased investment in certain business unit initiatives.

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, electronic and biometric access control systems, and time and attendance systems.

Security and Safety continues to benefit from the improvement in the traditional hardware business in both the residential and commercial markets, while strong electronic access-control results are attributable to growing market demand.  Investment in electronic access-control products and the launch of a maritime security market program also continued.

	Three months ended		Six months ended
	June 30,		June 30,
Dollar amounts in millions	2004	2003	2004	2003
Net revenues	$ 442.6	$ 381.1	$ 857.3	$ 755.8
Operating income	62.6	67.3	134.7	138.2
Operating margin	14.1%	17.7%	15.7%	18.3%

Security and Safety revenues for the second quarter of 2004 increased by approximately 16% compared to 2003.  The increase was mainly attributable to higher volumes, which accounted for approximately 14% of the increase.  The remaining increase was primarily due to the effects of currency translation and pricing.  Operating income and margins declined due to litigation expense of $11.0 million, as well as a plant closing and the discontinuance of a plumbing fixture product line of $7.0 million.  These expenses more than offset the benefits of higher volumes and product mix, which increased operating income by $13.1 million. Savings associated with operational improvements and pricing were also favorable. 

Security and Safety revenues for the six months ended June 30, 2004 increased by approximately 13% compared to 2003.  The increase was mainly attributable to higher volumes, which accounted for approximately 11% of the increase.  The remaining increase was primarily due to the effects of currency translation.  Operating income and margins declined due to litigation expense of $11 million, as well as a plant closing and the discontinuance of a plumbing fixture product line of $7.0 million.  These expenses more than offset the benefits of higher volumes and product mix, which increased operating income by $19.0 million. Savings associated with operational improvements and pricing were also favorable. 

Liquidity and Capital Resources
The Company's primary source for liquidity has been operating cash flow.  Net cash provided by (used in) operating activities for the six months ended June 30, 2004 and 2003 was $250.5 million and $(38.9) million, respectively.  The increase in net cash provided by operating activities in the six months ended June 30,2004, as compared to the six months ended June 30, 2003, is primarily attributable to higher earnings from continuing operations in 2004.

Net cash provided by investing activities in the six months ended June 30, 2004 was $158.4 million compared to $664.7 million in 2003.  Proceeds from business dispositions were $502.8 million higher in the prior year.

Net cash used in financing activities in the six months ended June 30, 2004 was $448.6 million compared to $762.0 million in 2003.  The decrease in net cash used is primarily a result of higher debt repayments in the prior year of $460.5 million, partially offset by treasury share repurchases of $215.8 million in the current year.

The Company's debt-to-total capital ratio at June 30, 2004, was approximately 30%, compared with 33% reported at December 31, 2003.  The improvement is primarily related to the decrease in debt of $257.6 million.  The Company's public debt has no financial covenants and its $2.0 billion revolving credit lines have a debt-to-total capital covenant of 65%, which is calculated excluding non-cash items.  As of June 30, 2004, the Company's debt-to-total capital ratio was significantly below this limit. 

The Company's working capital was $777.4 million at June 30, 2004, compared to $529.9 million at December 31, 2003.  The change was due mainly to lower short-term debt as well as lower accrued expenses.

During the three and six months ended June 30, 2004, foreign currency translation adjustments resulted in a net decrease of $21.1 million and $26.3 million, respectively, in shareholders' equity.  The majority of the change is due to the strengthening of the U.S. dollar against the euro.

Employee Benefit Plans
Pensions
Net periodic pension cost for the three and six months ended June 30, 2004 was $9.4 million and $19.9 million, respectively.    The sale of Drilling Solutions caused a curtailment loss in the second quarter of 2004 for a non-U.S. plan of $0.6 million.  The discount rate, rate of compensation increase and the expected rate of return on plan assets used to calculate pension expense for U. S. plans in 2004 are 6.00%, 4.00% and 8.75%, respectively.  The net periodic pension cost for non-U.S. plans for 2004 is based on the assumptions used at December 31, 2003 to calculate the pension benefit obligation.  The assumptions for the non-U.S. plan remeasured as of the sale date of Drilling Solutions remained the same due to similar economic conditions as of the last measurement date.

Net periodic pension cost for the three and six months ended June 30, 2003 was $23.0 million and $45.9 million, respectively.  The sale of Engineered Solutions in February 2003 caused net pension curtailment and settlement gains of $11.1 million.  The Engineered Solutions employees participated in the largest U.S. pension plan and a remeasurement of that plan was required as of the sale date.  Prior to the remeasurement date of February 15, 2003, the discount rate used for all plans was 6.75%.  Upon remeasurement, the Company's largest plan used a 6.50% discount rate.  The rate of compensation increase and the expected rate of return on plan assets used to calculate pension expense for U.S. plans for 2003 were 4.00% and 8.75%, respectively.  The net periodic pension cost for non-U.S. plans for 2003 was based on the assumptions used at December 31, 2002.

The Company contributed approximately $3.0 million in required employer contributions to its pension plans in the second quarter of 2004.  For the six months ended June 30, 2004, the Company contributed an additional discretionary $40.0 million to its pension plans, as well as $17.0 million in required employer contributions

Postretirement Benefits Other Than Pensions
Net periodic postretirement benefit cost for the three and six months ended June 30, 2004 was  $18.9 million and $40.2 million, respectively.  In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was enacted.  The company adopted FSP- FAS 106-2 as of April 1, 2004, the beginning of its second quarter.  The Company and its actuarial advisors determined that most benefits provided by the plan were at least actuarially equivalent to Medicare Part D.  The Company remeasured the accumulated benefit obligation effects of the Act as of April 1, 2004.  The effect of the federal subsidy to which the Company is entitled has been accounted for as an actuarial gain of $68.2 million.  The subsidy will have the effect of reducing postretirement benefit expense for 2004 by $7.9 million.  The components of the reduction in expense were a decrease in the amortization of the actuarial loss of $4.6 million, a reduction in service cost of $0.2 million and a reduction in the interest cost on the benefit obligation of $3.1 million.  Approximately $2.6 million was recorded in the second quarter of 2004 as a reduction in net postretirement benefit expense.  Net postretirement benefit expense for the three months ended September 30, 2004 and December 31, 2004 will include a similar reduction in expense due to the effects of the Act.

The assumptions used for 2004 expense include a discount rate and health care cost trend rate of 6.00% and 11.00%, respectively.  The assumptions used to remeasure the plan as of April 1, 2004 remained the same as the prior measurement date due to the existence of similar economic conditions.

Net periodic postretirement benefit cost for the three and six months ended June 30, 2003 was $19.1 million and $37.5 million, respectively.  A curtailment gain of $6.9 million relating to the sale of Engineered Solutions was recorded in 2003.  In February 2003, the Company remeasured its postretirement plan due to the sale of Engineered Solutions.  Prior to remeasurement, the assumption used to calculate postretirement benefits was a 6.75% discount rate. Upon remeasurement, the discount rate was decreased to 6.50% to reflect the change in market conditions.  No change was made to the health care cost trend rate at that time.

Environmental and Asbestos Matters
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.  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 assumed it will not 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.

Ingersoll-Rand Company (IR-New Jersey), a Company subsidiary, is a defendant in numerous asbestos-related lawsuits in state and federal courts.  In virtually all of the suits a large number of other companies have also been named as defendants.  The claims against IR-New Jersey generally allege injury caused by exposure to asbestos contained in certain of IR-New Jersey's products.  Although IR-New Jersey was neither a producer nor a manufacturer of asbestos, some of its formerly manufactured products utilized asbestos-containing components, such as gaskets, purchased from third-party suppliers.

All claims resolved to date have been dismissed or settled, and IR-New Jersey's average settlement amount per claim has been nominal.  For the six months ended June 30, 2004, total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $7.9 million.  The Company believes that its reserves and insurance are adequate to cover its asbestos liabilities and the costs of defending against them, and that these asbestos liabilities are not likely to have a material adverse effect on its financial position, results of operations, liquidity or cash flows.

New Accounting Standards
In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities."  FIN 46 provides guidance on consolidating variable interest entities and applies immediately to variable interests created after January 31, 2003.  The interpretation requires variable interest entities to be consolidated if the equity investment at risk is not sufficient to permit an entity to finance its activities without support from other parties or the equity investors lack certain specified characteristics.  The adoption of FIN 46 did not have a material effect on the Company's consolidated financial position or results of operations.

In May 2004, the FASB released FASB Staff Position No. 106-2, which supersedes FASB Staff Position 106-1, entitled, Accounting and Disclosure Requirements Regarding the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The Act introduced a government provided subsidy based on a percentage of a beneficiary's annual prescription drug benefits, within defined limits, and the opportunity for a retiree to obtain prescription drug benefits under Medicare.  The current accounting rules require a company to consider current changes in applicable laws when measuring its postretirement benefit costs and accumulated postretirement benefit obligations.  The Company adopted FASB Staff Position 106-2 as of April 1, 2004.   The subsidy will have the effect of reducing postretirement benefit expense for 2004 by $7.9 million.  Approximately $2.6 million was recorded in the second quarter of 2004 as a reduction in net postretirement benefit expense.

Safe Harbor Statement
Information provided by the Company in reports such as this report on Form 10-Q, in press releases and in statements made by employees in oral discussions, to the extent the information is not historical fact, constitutes "forward looking statements" within the meaning of regulations under the Securities Exchange Act of 1933 and the Securities Exchange Act of 1934.  Forward-looking statements by their nature involve risk and uncertainty.

The Company cautions that a variety of factors, including but not limited to the following, could cause business conditions and results to differ from those expected by the Company: changes in the rate of economic growth in the United States and in other major international economies; significant changes in trade, monetary and fiscal policies worldwide; tax legislation; currency fluctuations among the U.S. dollar and other currencies; demand for Company products and services; distributor inventory levels; failure to achieve the Company's productivity targets; and competitor actions including unanticipated pricing actions or new product introductions.

Item 3 - Quantitative and Qualitative Disclosures about 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 changes.  From time to time the Company enters into agreements to reduce its raw material, foreign currency and interest rate risks.  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 a sensitivity analysis when measuring its exposure to currency fluctuations.  The sensitivity analysis is a measurement of the potential loss in fair value based on a percentage increase or decrease in exchange rates against the U.S. dollar.

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 operations 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 

Reorganization as a Bermuda Company and Related Risk Factors

On December 31, 2001, IR-New Jersey was effectively reorganized as IR-Limited, a Bermuda company (the Reorganization).  The Company believes that the Reorganization has enabled it to begin to realize a variety of potential, financial and strategic benefits, including to:

-       help enhance business growth;

-       create a more favorable corporate structure for expansion of the Company's current business;

-      improve expected cash flow for use in investing in the development of higher-growth product lines and
       higher-growth businesses;

-       improve expected cash flow for use in reducing the amount of the Company's debt;

-       reduce the Company's worldwide effective tax rate;

-       enable the Company to implement its business strategy more effectively; and

-       expand the Company's investor base as its shares may become more attractive to non-U.S. investors.

To consummate the Reorganization, IR Merger Corporation, a New Jersey corporation, merged into IR-New Jersey, with IR-New Jersey as the surviving company.  Upon the merger, IR-New Jersey became a wholly-owned, indirect subsidiary of the Company, and the outstanding shares of IR-New Jersey common stock were automatically cancelled in exchange for the issue of the Company's Class A common shares.  In addition, as part of the Reorganization, IR-New Jersey and certain of its subsidiaries transferred shares of certain existing subsidiaries and issued certain debt to the Company in exchange for 135,250,003 shares of the Company's Class B common shares, such amount of shares being subject to adjustment based on the results of final valuation of the transferred subsidiaries.  The number of Class B common shares issued had an aggregate value equal to the fair market value of the shares of the subsidiaries transferred (the transferred shares) and the amount of debt issued to the Company based on the market value of IR-New Jersey common stock at the effective time of the merger.  Prior to the Reorganization, neither the Company nor IR-Merger Corporation had any significant assets or capitalization or engaged in any business or other activities other than in connection with formation and the merger and related reorganization transactions.

The Reorganization will expose the Company to the risks described below.  In addition, the Company cannot be assured that the anticipated benefits of the Reorganization will be realized.

            The Reorganization and related transfers of assets could result in a taxable gain.

There is a possibility of U.S. withholding tax if the Internal Revenue Service successfully disputes the value of the transferred shares.  Therefore, while the Company believes that neither IR-New Jersey nor
the Company will incur significant U.S. federal income or withholding taxes as a result of the transfer of the transferred shares, its projections are not binding on the Internal Revenue Service.  The Company cannot be assured that its anticipated tax costs with respect to the transferred shares will be borne out, that the Internal Revenue Service will not contest its determination, or that the Internal Revenue Service will not succeed in any such contest.

            Certain of the Company's shareholders may be subject to additional tax if the Company or
            any of its non-U.S. subsidiaries are considered a "controlled foreign corporation" or
           "CFC" under current U.S. tax laws.

A non-U.S. corporation (a foreign corporation), such as the Company, will constitute a "controlled foreign corporation" or "CFC" for U.S. federal income tax purposes if U.S. shareholders owning (directly, indirectly, or constructively) 10% or more of the foreign corporation's total combined voting power collectively own (directly, indirectly, or constructively) more than 50% of the total combined voting power or total value of the foreign corporation's shares.  Following the merger and as of December 31, 2001, IR-New Jersey, through its ownership of the non-voting Class B common shares, owned approximately 45% of the total value of the Company's shares.  As a consequence, any Class A common shareholder who is considered to own 10% of the voting power in the Company could cause the Company's non-U.S. subsidiaries or (if the Internal Revenue Service successfully takes the position that the Class B common shares held by IR-New Jersey in the Company are voting shares) the Company itself to be treated as a CFC.  

If the Company or any of its foreign subsidiaries are treated as a CFC, this status should have no adverse effect on any of the Company's shareholders who do not own (directly, indirectly, or constructively) 10% or more of the total combined voting power of all classes of the Company's shares or the shares of any of its foreign subsidiaries.  If, however, the Company or any of its foreign subsidiaries are treated as a CFC for an uninterrupted period of 30 days or more during any taxable year, any U.S. shareholder who owns (directly, indirectly, or constructively) 10% or more of the total combined voting power of all classes of stock of the Company or the subsidiary on any day during the taxable year and who directly or indirectly owns any stock in the corporation the last day of such year in which it is a CFC will have to include in its gross income for U.S. federal income tax purposes its pro rata share of the corporation's "subpart F income" relating to the period during which the corporation is a CFC. 

In addition, the gain on the sale of the Company's shares, if treated as a CFC, realized by such a shareholder would be treated as ordinary income to the extent of the shareholder's proportionate share of the Company's and its CFC subsidiaries' undistributed earnings and profits accumulated during the shareholder's holding period of the shares while the Company is a CFC.

If the U.S. shareholder is a corporation, however, it may be eligible to credit against its U.S. tax liability with respect to these potential inclusions foreign taxes paid on the earnings and profits associated with the included income.  A disposition of shares by a U.S. shareholder may result in termination of the Company's CFC status or the CFC status of its foreign subsidiaries.

            The Internal Revenue Service and non-U.S. taxing authorities may not agree with the
          Company's tax treatment of various items relating to the Reorganization.

The Company believes that the Reorganization will help enhance its business growth and cash flow and reduce its worldwide effective tax rate. However, the Company cannot give any assurance as to the amount of taxes it will pay as a result of or after the Reorganization. The amount of taxes it will pay will depend in part on the treatment given the Company by the taxing authorities in the jurisdictions in which it operates.

            The Company may become subject to U.S. corporate income tax, which would reduce its net
            income.

Prior to the Reorganization, IR-New Jersey was subject to U.S. corporate income tax on its worldwide income.  After the Reorganization, the earnings of IR-New Jersey and its U.S. subsidiaries continue to be subject to U.S. corporate income tax.  The Company believes that as a result of the Reorganization its non-U.S. operations will generally not be subject to U.S. tax other than withholding taxes.  However, if the Internal Revenue Service successfully contends that the Company or any of its non-U.S. affiliates are engaged in a trade or business in the U.S., the Company or that non-U.S. affiliate would, subject to possible income tax treaty exemptions, be required to pay U.S. corporate income tax and/or branch profits tax on income that is effectively connected with such trade or business.

            Changes in laws or regulations could adversely affect the Company and its subsidiaries.

Changes in tax laws, treaties or regulations or the interpretation or enforcement thereof could adversely affect the tax consequences of the Reorganization to the Company and its subsidiaries.  In this connection, bills have been introduced in the United States Congress which, if enacted, could substantially reduce or eliminate the tax benefits resulting from the Reorganization.

There are also proposed legislative and regulatory actions which could reduce or eliminate the ability of the Company or its subsidiaries to enter into contracts with governmental authorities.

            The enforcement of judgments in shareholder suits against the Company may be more
           difficult than it would have been to enforce shareholder suits against IR-New Jersey.

The Company has been advised that a judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in Bermuda.  It has also been advised that with respect to a final and conclusive judgment obtained in a court of competent jurisdiction in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty), a Bermuda court would be expected to enforce a judgment based thereon, provided that (a) such courts had proper jurisdiction over the parties subject to such judgment, (b) such courts did not contravene the rules of natural justice of Bermuda, (c) such judgment was not obtained by fraud, (d) the enforcement of the judgment would not be contrary to the public policy of Bermuda, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of Bermuda and (f) there is due compliance with the correct procedures under the laws of Bermuda.

As a result, it may be difficult for a holder of the Company's securities to effect service of process within the United States or to enforce judgments obtained against the Company in U.S. courts.  The Company has irrevocably agreed that it may be served with process with respect to actions based on offers and sales of securities made in the United States by having Ingersoll-Rand Company, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, be its U.S. agent appointed for that purpose.

A Bermuda court may impose civil liability on the Company or its directors or officers in a suit brought in the Supreme Court of Bermuda against the Company or such persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding such violation would constitute or give rise to a cause of action under Bermuda law.

Item 4 - Controls and Procedures

The Company's management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of the six months ended June 30, 2004, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Quarterly Report on Form 10-Q has been made known to them in a timely fashion.  There have been no significant changes in internal controls, or in factors that could significantly affect internal controls during the quarter.

PART II OTHER INFORMATION

Item 1 - Legal Proceedings
In the normal course of business, the Company is involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities and intellectual property disputes.  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 Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, Environmental and Asbestos Matters, and also Part I, Item 1, Note 8 to the Condensed Consolidated Financial Statements.

Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On May 7, 1997, the Board of Directors of the Company authorized the repurchase of up to 10 million shares, adjusted to 15 million shares for the August 1997 three-for-two stock split of the Company's common stock.  As of June 30, 2004, the Company has purchased the entire 15 million shares allowable under the program. 

Total share repurchases for the six months ended June 30, 2004 are as follows:

			Total number	Maximum number
			of shares	of shares still
	Total number	Average	purchased as part	available to be
	of shares	price paid	of a publicly	purchased under
Period	purchased	per share	announced program	the program
1/01/2004 - 1/31/2004	-	-	-	3,292,689
2/01/2004 - 2/29/2004	1,215,600	$65.87	1,215,600	2,077,089
3/01/2004 - 3/31/2004	1,912,000	$65.84	1,912,000	165,089
4/01/2004 - 4/30/2004	-	-	-	165,089
5/01/2004 - 5/31/2004	165,089	$62.17	165,089	-
6/01/2004 - 6/30/2004	-	-	-	-
Total	3,292,689		3,292,689

Item 4 - Submission of Matters to a Vote of Security Holders

The Annual General Meeting of Shareholders of the Company was held on June 2, 2004.  The items voted upon by the company's shareholders included nominations to elect three members of IR's board of directors, the appointment of independent auditors, and amendments to the company's incentive stock plan and bye-laws.  The company's shareholders also voted upon proposals sponsored by shareholders regarding the company's incorporation in Bermuda, the declassification of the company's board of directors, and the separation of the positions of chairman of the board and chief executive officer.  The shareholders voted as follows on the following matters:

Election of directors of the Second Class to hold office for three years.  The voting results for each nominee is follows:

Name	Votes For	Votes Withheld
P.C. Godsoe	133,867,175	7,506,691
C.J. Horner	135,340,176	6,033,690
O.R. Smith	135,396,451	5,977,415

The reappointment of the Company's independent accountants, PricewaterhouseCoopers, was approved by a vote of 138,543,040 shares voting for, 1,822,734 shares voting against, and 1,008,092 shares abstaining.

A proposal to adopt the Amended and Restated Incentive Stock Plan of 1998 was approved by a vote of 99,580,736 shares voting for, 22,098,629 voting against, 1,180,044 shares abstaining, and 18,514,457 shares not voting.

A proposal to adopt the Amended and Restated Bye-Laws of the Company was approved by a vote of 120,316,780 shares voting for, 1,295,971 shares voting against, 1,246,658 shares abstaining, and 18,514,457 shares not voting.

A non-binding shareholder proposal that the Company reincorporate to a U.S. state was defeated by a vote of 13,361,726 shares voting for, 107,576,603 shares voting against, 1,921,080 shares abstaining, and 18,514,457 shares not voting.

A non-binding shareholder proposal to declassify the Company's board of directors was approved by a vote of 98,040,535 shares voting for, 23,297,794 shares voting against, 1,521,080 shares abstaining, and 18,514,457 shares not voting.

A non-binding shareholder proposal to separate the positions of chairman of the board and chief executive officer was defeated by a vote of 17,706,946 shares voting for, 103,521,496 voting against, 1,630,967 shares abstaining, and 18,514,457 shares not voting.

Item 6 - Exhibits and Reports on Form 8-K

(a)                Exhibits
Exhibit No.	Description
3 (ii) 10	Amended and Restated Bye-Laws, dated June30, 2004.  Filed herewith. Amended and Restated Incentive Stock Plan of 1998, dated June 30, 2004.  Filed herewith.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b)               Reports on Form 8-K	A Current Report on Form 8-K (Item 9) dated July 22, 2004, reporting the filing of exhibit 99.1- Press Release of Ingersoll-Rand Company Limited.
	A Current Report on Form 8-K (Item 9) dated June 3, 2004, reporting the filing of exhibit 99 - Press Release of Ingersoll-Rand Company Limited reiterating its Earnings Guidance for the 2004 Second Quarter and Full Year.

INGERSOLL-RAND COMPANY LIMITED
SIGNATURES

Pursuant to the requirements 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)

Date: August 3, 2004                                                   /s/ Timothy R. McLevish                              
                                                                                    Timothy R. McLevish, Senior Vice President
                                                                                    and Chief Financial Officer

                                                                                    Principal Financial Officer

Date: August 3, 2004                                                    /s/ Richard W. Randall
                                                                                    Richard W. Randall, Vice President and
                                                                                    Controller

                                                                                    Principal Accounting Officer

EX-10

Exhibit 10

Appendix F

INGERSOLL-RAND COMPANY LIMITED

Amended and Restated
Incentive Stock Plan of 1998

Section 1. Purposes: The purposes of the Plan are (a) to provide additional incentives for Key Employees, by authorizing the payment of bonus or incentive compensation in shares of Common Stock and by encouraging Key Employees to invest in shares of Common Stock, thereby furthering their identity of interest with the interests of the Company’s members, increasing their stake in the future growth and prosperity of the Company and stimulating and sustaining constructive and imaginative thinking, and (b) to enable the Company, by offering incentives comparable to other organizations with which it competes in connection with the employment of senior level individuals, to induce the employment of the most highly-qualified individuals and the continued employment of Key Employees.

Section 2. Definitions: Unless otherwise required by the context, the following terms, when used in the Plan, shall have the meanings set forth in this Section 2:

        Act: The Securities Exchange Act of 1934, as amended.

        Affiliate: Used to indicate a relationship with a specified person, a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such a specified person.

        Associate: Used to indicate a relationship with a specified person, (a) any corporation or organization (other than the Company or a majority-owned Subsidiary of the Company) of which such specified person is an officer or partner, or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar capacity, (c) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person, or who is a director or officer of the Company or any of its parents or subsidiaries, and (d) any person who is a director, officer or partner of such specified person or of any corporation (other than the Company or any wholly-owned Subsidiary), partnership or other entity which is an Affiliate of such specified person.

        Beneficial Owner: As such term is defined by Rule 13d-3 under the Act (or any successor provision at the time in effect); provided, however, that any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any of the Company’s outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such securities.

        Board of Directors or Board: The Board of Directors of the Company.

        Change in Control of the Company: The occurrence of either of the following:

        (a)     any individual, corporation, partnership, group, association or other person or entity, together with
                 its Affiliates and Associates (other than a trustee or other fiduciary holding securities under an
                 employee benefit plan of the Company or any of its Subsidiaries), is or becomes the Beneficial
                 Owner of securities of the Company representing 20% or more of the combined voting power of
                 the Company’s then outstanding securities entitled to vote generally in the election of directors,
                 unless a majority of the Continuing Directors determines in their sole discretion that, for purposes of
                 the Plan, a Change in Control of the Company has not occurred; or

        (b)     the Continuing Directors shall at any time fail to constitute a majority of the members of the Board
                 of Directors.

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.

        Code: The Internal Revenue Code of 1986, as amended from time to time.

        Committee: Such committee or committees as shall be appointed by the Board of Directors to administer the Plan pursuant to the provisions of Section 12.

        Common Stock: The 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.

        Common Stock Equivalents: Such of the rights and benefits of the actual owner of shares of Common Stock as the Committee may determine, including the right to receive dividends and the right to receive the amount of appreciation in value, if any, on such shares of Common Stock from the date the grant of such Common Stock Equivalents becomes effective until they become payable to the holder.

        Company: Ingersoll-Rand Company Limited, a Bermuda company.

        Continuing Director: A director who either was a member of the Board on January 1, 2002, or who became a member of the Board subsequent to such date and whose election, or nomination for election by the Company’s shareholders, was Duly Approved by the Continuing Directors at the time of such nomination or election, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Board in which such person is named as a nominee for director, provided, however, that no individual shall be considered a Continuing Director if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Act) or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Board (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest.

        Disability: Such term as defmed under the pension, retirement or appropriate benefit plan or plans of the Company or a Subsidiary applicable to the Key Employee.

        Dividend Equivalents: A right to receive immediately or on a deferred basis, whether or not subject to forfeiture, an amount equivalent to all or part of dividends paid or payable on a share of Common Stock subject to a Stock Incentive.

        Duly Approved by the Continuing Directors: An action approved by the vote of at least a majority of the Continuing Directors then on the Board, except, if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the Board if a vote by all of its members were to have been taken, then such term shall mean an action approved by the unanimous vote of the Continuing Directors then on the Board so long as there are at least three Continuing Directors on the Board at the time of such unanimous vote.

        Effective Time: The Effective Time as such term is defined in the Merger Agreement.

        Fair Market Value: As applied to any date, the mean between the high and low sales prices of a share of Common Stock on such date in New York Stock Exchange Composite Transactions, as reported in The Wall Street Journal or another newspaper of general circulation, or, if no such sales were made on such date, on the next preceding date on which there were such sales so reported. If the Common Stock is not listed or admitted to trading on The New York Stock Exchange, the Fair Market Value of the Common Stock shall be the closing sales price of one share of Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sales price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market of the Common Stock, as reported by the National Association of Securities Dealers Inc. Automated Quotations system or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices of the Common Stock as furnished by a professional market maker making a market in the Common Stock selected by the Board. If on any such date no market maker is making a market in the Common Stock, the Fair Market Value shall be determined in good faith by the Continuing Directors.

        Incentive Compensation: Bonuses, extra and other compensation payable in addition to a salary or other base amount, whether contingent or not, whether discretionary or required to be paid pursuant to an agreement, resolution, arrangement, plan or practice and whether payable currently or on a deferred basis, in cash, Common Stock or other property, awarded by the Company or a Subsidiary.

        Key Employee: An employee of the Company or a Subsidiary, including an officer or director who is an employee, who in the opinion of the Committee can contribute significantly to the growth and successful operations of the Company or such Subsidiary. The granting of a Stock Incentive to an employee pursuant to the Plan shall be deemed a determination that such employee is a Key Employee.

        Outside Director: A member of the Board who is not an officer or employee of the Company, a Subsidiary or an Affiliate.

        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 became an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited.

        Option: An option to purchase a share of Common Stock.

        Plan: The Incentive Stock Plan of 1998 herein set forth as the same may from time to time be amended.

        Retirement: The termination of employment with the Company and its subsidiaries at or after the individual in question has attained age 55 and served as such an employee for at least five years.

        Stock Appreciation Right: A right to receive a number of shares of Common Stock, or, with the approval of the Committee, cash, in either event based on the increase in the Fair Market Value of the number of shares of Common Stock subject to such right, as set forth in Section 7.

        Stock Award: An issuance or transfer of shares of Common Stock at the time a Stock Incentive is granted or as soon thereafter as practicable, or an undertaking to issue or transfer such shares in the future. As provided in Section 5, Stock Awards may be designated as Employment Stock Awards or Performance Stock Awards.

        Stock Incentive: A Stock Incentive granted under the Plan in one of the forms provided for in Section 3.

        Subsidiary: A corporation or other form of business association of which shares (or other ownership interests) having 50% or more of the voting power are owned or controlled, directly or indirectly, by the Company.

Section 3. Grants of Stock Incentives:

        (a) Subject to the provisions of the Plan, the Committee may at any time, and from time to time, grant Stock Incentives to, and only to, Key Employees.

        (b) Stock Incentives may be granted in the following forms:

                (i) a Stock Award, in accordance with Section 5, or

                (ii) an Option, in accordance with Section 6, or

                (iii) a Stock Appreciation Right, in accordance with Section 7, or

                (iv) any combination of the foregoing.

Section 4. Stock Subject to the Plan:

        (a) Subject to the provisions of paragraph (b) of this Section 4 and of paragraph (a) of Section 10, the aggregate number of shares of Common Stock which may be issued or transferred pursuant to Stock Incentives granted under the Plan shall not exceed 30,000,000 shares of Common Stock. Of the total available Stock Incentives not more than 20% shall be in the form of Stock Awards. No Key Employee shall be granted in the aggregate Stock Incentives (excluding Stock Awards) relating to more than 15% of the aggregate number of shares of Common Stock issuable or transferable under the Plan.

        (b) If any shares of Common Stock subject to a Stock Incentive shall not be issued or transferred and shall cease to be issuable or transferable because of the termination, in whole or in part, of such Stock Incentive, or, subject to the provisions of paragraph (j) of Section 6 and paragraph (d) of Section 7, for any other reason, or if any such shares shall, after issuance or transfer, be reacquired by the Company or a Subsidiary because of an employee’s failure to comply with the terms and conditions of a Stock Incentive, the shares not so issued or transferred, or the shares so reacquired by the Company or a Subsidiary, shall no longer be charged against the limitation provided for in paragraph (a) of this Section 4 and may again be made subject to Stock Incentives.

Section 5. Stock Awards: Stock Incentives in the form of Stock Awards shall be subject to the following provisions:

        (a) A Stock Award shall be granted only (i) in payment of Incentive Compensation that has been earned or (ii) as Incentive Compensation to be earned.

        (b) Shares of Common Stock subject to a Stock Award may be issued or transferred to a Key Employee at the time the Stock Award is granted, or at any time subsequent thereto, or in installments from time to time, as the Committee shall determine. In the event that any such issuance or transfer shall not be made to the Key Employee at the time the Stock Award is granted, the Committee may provide for the payment or crediting to such Key Employee of Dividend Equivalents. Any amount payable in shares of Common Stock under the terms of a Stock Award may, in the discretion of the Committee, be paid in cash on each date on which delivery of shares would otherwise have been made, in an amount equal to the Fair Market Value on such date of the shares which would otherwise have been delivered.

        (c) A Stock Award shall contain such terms and conditions as the Committee shall determine with respect to payment or forfeiture of all or any part of the Stock Award upon termination of employment or the occurrence of other circumstances.

        (d) A Stock Award shall be subject to such other terms and conditions, including, without limitation, restriction on sale or other disposition of the Stock Award or of the shares issued or transferred pursuant to such Stock Award, as the Committee shall determine; provided, however, that upon the issuance or transfer of shares pursuant to a Stock Award, the recipient shall, with respect to such shares, be and become a shareholder of the Company fully entitled to receive dividends, to vote and to exercise all other rights of a shareholder except to the extent otherwise provided in the Stock Award. Each Stock Award shall be evidenced by a written instrument in such form as the Committee shall determine, provided the Stock Award is consistent with the Plan and incorporates it by reference.

        (e) All or part of a Stock Award may be designated as an Employment Stock Award, as to which the shares so designated shall only be issued if the Key Employee to whom such Stock Award has been granted meets the employment terms and conditions specified by the Committee at the time such Stock Award is granted.

        (f) All or part of a Stock Award may be designated as a Performance Stock Award, as to which the shares so designated shall only be issued if certain pre-established performance goals are met during the term of the grant. The Committee may establish such performance goals in writing at the time the Performance Stock Award is granted or it may establish such goals early in each year during the term of the grant, provided it indicates, at the time of grant, what portion of the Performance Stock Award will be available to be earned each year during the term of the award based on each year’s performance goals. The performance goals established by the Committee may be based, among other factors, upon the attainment of specified earnings per share, return on asset or asset management goals or upon the Company’s total return to shareholder ranking relative to a pre-established comparator group of companies. Shares subject to a Performance Stock Award granted to any individual whose compensation from the Company is covered by Section 162(m) of the Code shall be issued only after the Committee certifies in writing that the performance goals have been met.

Section 6. Options: Stock Incentives in the form of Options shall be subject to the following provisions:

        (a) The price per share at which a share subject to an Option may be purchased shall be determined by the Committee, but in no instance shall such price be less than the Fair Market Value of a share of Common Stock on the date such Option is granted.

        (b) Each Option shall expire at such time as the Committee may determine on the date such Option is granted, but no later than ten years from the date such Option is granted. The Committee may, at any time prior to the expiration of the Option, extend its term for a period ending not later than ten years from the date such Option is granted and any such extension shall not be deemed the grant of a new or additional Option for any purpose under the Plan.

        (c) The Option may be exercised solely by the person to whom it is granted, except as hereinafter provided in the case of such person’s death or Disability. During the lifetime of the optionee, the Option and any rights and privileges pertaining thereto shall not be transferred, assigned, pledged or hypothecated in any way, whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.

        (d) Each optionee must complete twelve months of continuous employment with the Company or Subsidiary, or both, before any part of the Option may be exercised by such optionee (subject to the provisions of paragraph (f) below).

        (e) After the completion of the required period of employment, the Option may be exercised, in whole or in part, and from time to time, during the balance of the term of the Option, subject to the terms and conditions specified in the Option or by the Committee.

        (f) Unless otherwise determined by the Committee each Option (to the extent then exercisable) shall terminate 90 days after the optionee shall terminate employment with the Company and its Subsidiaries, except that if the optionee shall die or become subject to a Disability while in the employ of the Company or of a Subsidiary, then the Option shall be exercisable within such period as shall be set forth in the Option, by the optionee or by such person or persons as shall have acquired the optionee’s rights under the Option by will or by the laws of descent and distribution, or by the optionee’s guardian, conservator or similar legal representative, but not later than three years after the date of death or Disability. In the event of the Retirement of the optionee, if the optionee shall have completed at least twelve months of continuous employment (or such shorter period as the Committee may determine) then the Option shall be exercisable within such period as shall be set forth in the Option but not later than three years after the date of Retirement (or such longer period as the Committee may determine).

        (g) Shares purchased under the Option shall be paid for in full at the time of the exercise of the Option as to such shares upon such terms as the Committee may approve, including cash, secured or unsecured indebtedness, by exchange for other property (including shares of Common Stock), by delivery of irrevocable instructions to a financial institution to deliver promptly to the Company the portion of sale or loan proceeds sufficient to pay the Option exercise price, or otherwise.

        (h) The Committee may at any time and from time to time provide for the payment to an optionee of Dividend Equivalents.

        (i) Except as otherwise provided in Section 10, in no event will the Committee decrease the price per share at which a share subject to an Option may be purchased after the date of grant or cancel outstanding Options and grant replacement Stock Options or Stock Appreciation Rights with a lower purchase price than that of the replaced Stock Options without first obtaining the approval of the shareholders of the Company.

        (j) The Option agreements or Option grants authorized by the Plan may contain such other provisions as the Committee shall deem advisable. Without limiting the foregoing, if so authorized by the Committee and subject to such terms and conditions as are specified in the Option or by the Committee, the Company may, with the consent of the holder of the Option, and at any time or from time to time, cancel all or a portion of the Option then subject to exercise and discharge its obligation in respect of the Option either by payment to the holder of an amount of money equal to the excess, if any, of the Fair Market Value, at such time or times, of the shares subject to the portion of the Option so cancelled over the aggregate purchase price of such shares, or by the issuance or transfer to the holder of shares of Common Stock with the Fair Market Value at such time or times equal to any such excess, or by a combination of cash and shares. The number of shares of Common Stock subject to the Option, or portion thereof, so cancelled shall, in the event that a payment of money or transfer of shares is made by the Company in respect of such cancellation, be charged against the maximum limitation set forth in paragraph (a) of Section 4 of the Plan.

        (k) Options may be granted under the Plan from time to time in substitution for stock options held by employees of other corporations who are about to become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of the assets of the employing corporation, or the acquisition by the Company or a Subsidiary of stock of the employing corporation as the result of which it becomes a Subsidiary. The terms and conditions of the substitute options so granted may vary from the terms and conditions set forth in this Section 6 to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the options in substitution for which they are granted.

Section 7. Stock Appreciation Rights:

        (a) Stock Appreciation Rights may be granted in connection with any Option granted under the Plan, either at the time of the grant of such Option or at any time thereafter during the term of the Option, or may be granted independently of the grant of an Option.

        (b) If granted in connection with an Option, Stock Appreciation Rights shall entitle the holder of the related Option, upon surrender of the Option, or any portion thereof, to exercise the Stock Appreciation Rights, to the extent unexercised, and to receive a number of shares of Common Stock, or cash, determined pursuant to paragraph (c) (iii) of this Section 7. Such Option shall, to the extent so surrendered, thereupon cease to be exercisable. If granted independently of an Option, Stock Appreciation Rights shall entitle the holder of the Stock Appreciation Rights to receive a number of shares of Common Stock, or cash, determined pursuant to paragraph (c) (iii) of this Section 7.

        (c) Stock Appreciation Rights shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent with the Plan as shall from time to time be approved by the Committee:

                (i) If granted in connection with an Option, Stock Appreciation Rights shall be exercisable at such time or times and to the extent, but only to the extent, that the Option to which they relate shall be exercisable, except that, at the time of granting such Stock Appreciation Rights, the Committee may provide that the period during which such Stock Appreciation Rights may be exercised shall expire prior to the expiration of the period during which the related Option may be exercised. If granted independently of an Option, Stock Appreciation Rights shall be exercisable at such time or times as shall be determined by the Committee at the time of the grant of the Stock Appreciation Rights but, unless otherwise determined by the Committee, in no event later than the date the employment of the holder of the Stock Appreciation Rights shall have terminated other than by reason of death, Disability or Retirement. In the event of termination of employment by reason of death or Disability, Stock Appreciation Rights shall be exercisable for such period as the Committee may specify at the time of granting of the Stock Appreciation Rights, but in no event later than three years after such termination of employment by the holder of the Stock Appreciation Rights or by the beneficiary designated pursuant to paragraph (1) of Section 13, and in the case of Retirement, no later than three years after the date of such Retirement. Unless otherwise determined by the Committee, each Stock Appreciation Right shall terminate if and when the holder thereof shall terminate employment with the Company and its Subsidiaries for reasons other than the death, Disability or Retirement of such holder.

                (ii) Stock Appreciation Rights shall in no event be exercisable unless and until the holder of the Stock Appreciation Rights shall have completed at least twelve months of continuous service with the Company or a Subsidiary, or both, immediately following the date upon which the Stock Appreciation Rights shall have been granted.

                (iii) Upon exercise of Stock Appreciation Rights, the holder thereof shall be entitled to receive a number of shares equal in Fair Market Value on the date of exercise to the amount by which the Fair Market Value of one share of Common Stock on the date of such exercise shall exceed the Fair Market Value of a share of Common Stock on the date of grant of such Stock Appreciation Rights multiplied by the number of shares in respect of which the Stock Appreciation Rights shall have been exercised. The Company may determine, by action of the Committee, to settle all or any part of its obligation arising out of an exercise of Stock Appreciation Rights by the payment of cash equal to the aggregate value of shares of Common Stock (or a fraction of a share) that it would otherwise be obligated to deliver under the preceding sentence of this paragraph (c) (iii) of Section 7.

        (d) To the extent that Stock Appreciation Rights shall be exercised, an Option in connection with which such Stock Appreciation Rights shall have been granted shall be deemed to have been exercised for the purpose of the maximum limitation set forth in the Plan under which such Option shall have been granted. In the case of Stock Appreciation Rights granted independently of an Option, the number of shares of Common Stock in respect of which such Stock Appreciation Rights shall be exercised shall be charged against the maximum limitation set forth in paragraph (a) of Section 4.

        (e) If so directed by the Committee at any time and from time to time, the grant of Stock Appreciation Rights may provide for payment of Dividend Equivalents to the holder of the Stock Appreciation Rights.

        (f) Stock Appreciation Rights may provide that, upon exercise of such Stock Appreciation Rights, the shares or cash, as the case may be, which the holder of such Stock Appreciation Rights shall be entitled to receive, shall be distributed or paid in such installments and over such number of years as the Committee may direct, with distribution or payment of each such installment contingent upon continued services of the employee to the Company or a Subsidiary, or both (except for death, Disability, Retirement or termination of employment by the Company or with its consent), to the time for distribution or payment of such installment.

        (g) Except as otherwise provided in Section 10, in no event will the Committee, for purposes of a Stock Appreciation Right, decrease the Fair Market Value of a share of Common Stock on the date of grant of a Stock Appreciation Right after the date of grant or cancel outstanding Stock Appreciation Rights and grant replacement Options or Stock Appreciation Rights with a lower Fair Market Value of a share of Common Stock on the date of grant.

Section 8. Dividend Equivalents:

        A grant of Dividend Equivalents shall be made subject to such terms and conditions as the Committee may determine, and may be awarded only in connection with a Stock Incentive granted under Section 5, 6 or 7. Dividend Equivalents may be awarded either at the time of grant of a Stock Incentive or at any time thereafter during the term of the Stock Incentive. Dividend Equivalents may be payable or credited either in cash, shares of Common Stock, or in Common Stock Equivalents. If credited in Common Stock or in Common Stock Equivalents, they shall be credited at the Fair Market Value of a share of Common Stock on the day of such crediting. The Committee may provide that any amounts representing dividends earned by Common Stock Equivalents may either be paid currently or credited in cash or in Common Stock or that they may be represented by further Common Stock Equivalents, or any combination thereof. The Committee may provide that when Common Stock Equivalents shall become payable to the holder, they may be paid in cash or in shares of Common Stock, or a combination of both. To the extent that any payment to the holder with respect to Dividend Equivalents is made in shares of Common Stock, the number of shares of Common Stock used for such payment shall be charged against the maximum limitation set forth in paragraph (a) of Section 4.

Section 9. Outside Directors’ Options:

        (a) On the date of the first Board of Directors meeting after each annual general meeting of the shareholders through 2003, each Outside Director shall automatically be granted Options to purchase 2,250 shares of Common Stock. In the event an adjustment is made under the provisions of Section 10 in the outstanding unexercised Options granted to Outside Directors hereunder, a similar adjustment shall be made in the number of Options to be granted to Outside Directors subsequent to the effectiveness of such adjustment. Notwithstanding the foregoing, Options shall not be granted under the Plan to an Outside Director who on the date referred to above in this paragraph (a) of Section 9 is awarded Options under another Incentive Stock Plan of the Company.

        (b) The price at which each share of Common Stock covered by Options granted to Outside Directors may be purchased shall be the Fair Market Value of the Common Stock on the date the Options are granted.

        (c) Options granted to Outside Directors hereunder shall be fully vested on the date of grant and shall become exercisable on the first anniversary of such date of grant. Such Options may be exercised by the Outside Director during the period that the Outside Director remains a member of the Board and for a period of five years following retirement or resignation, provided that in no event shall any such Option be exercisable more than ten years after the date of grant.

        (d) In the event of the death of an Outside Director, the Options shall be exercisable only within the three years next succeeding the date of death, and then only by the executor or administrator of the Outside Director’s estate or by the person or persons to whom the Outside Director’s rights under the Options shall pass by the Outside Director’s will or the laws of descent and distribution, provided that in no event shall the Option be exercisable more than ten years after the date of grant.

        (e) Except as expressly provided in this Section 9, Options granted to Outside Directors shall be subject to the terms and conditions of Section 6 regarding the terms of Options and to the other relevant provisions of the Plan.

Section 10. Adjustment and Change in Control Provisions:

        (a) In the event that any recapitalization, reclassification, split-up or consolidation of shares of Common Stock shall be effected, or the outstanding shares of Common Stock are, in connection with a merger or consolidation of the Company or a sale by the Company of all or a part of its assets, exchanged for a different number or class of shares of stock or other securities of the Company or for shares of the stock or other securities of any other corporation, or new, different or additional shares of other securities of the Company or of another corporation are received by the holders of Common Stock or any distribution is made to the holders of Common Stock other than a cash dividend, (i) the number and class of shares or other securities that may be issued or transferred pursuant to Stock Incentives, (ii) the number and class of shares or other securities which have not been issued or transferred under outstanding Stock Incentives, (iii) the purchase price to be paid per share under outstanding Options and other Stock Incentives, (iv) the Fair Market Value of a share of Common Stock on the date of grant of outstanding Stock Appreciation Rights, (v) the dates or events upon which Options and Stock Appreciation Rights may be exercised, which may, in appropriate instances, be related to specific dates or events under any of the aforesaid actions, and (vi) the price to be paid per share by the Company or a Subsidiary for shares or other securities issued or transferred pursuant to Stock Incentives which are subject to a right of the Company or a Subsidiary to reacquire such share or other securities, shall in each case be equitably adjusted. In addition, the Committee may, in its discretion, make the adjustments described above in this paragraph (a) of Section 10 in the event the Company pays a cash dividend in respect of the Common Stock other than a regular quarterly dividend.

        (b) Notwithstanding any other provision of the Plan to the contrary (and notwithstanding any requirement that conditions the receipt of benefits of a Stock Incentive granted hereunder on the completion of a specified period of employment by the holder thereof or on the attainment of certain performance goals by the Company or any group, Subsidiary or division thereof), in the event of a Change in Control of the Company the holders of Stock Incentives outstanding as of the date of the occurrence of the Change in Control of the Company shall have the right to surrender such Stock Incentives within the 60-day period following the occurrence of the Change in Control of the Company and to receive cash as consideration for such surrender in accordance with the following:

                (i) A holder of a Stock Award being surrendered shall be entitled to the amount equal to the highest Fair Market Value of one share of Common Stock during the 60 days preceding the date on which the Change in Control of the Company occurs, multiplied by the number of shares in respect of which the Stock Award shall have been surrendered.

                (ii) A holder of Options being surrendered shall be entitled to the amount by which the highest Fair Market Value of one share of Common Stock during the 60 days preceding the date on which the Change in Control of the Company occurs exceeds the exercise price of one share of Common Stock subject to such Option, multiplied by the number of shares in respect of which the Option shall have been surrendered.

                (iii) The holder of Stock Appreciation Rights being surrendered shall be entitled to the amount by which the highest Fair Market Value of one share of Common Stock during the 60 days preceding the date on which the Change in Control occurs exceeds the Fair Market Value of one share of Common Stock on the date of grant of such Stock Appreciation Rights (as adjusted, if applicable under the terms of the Plan), multiplied by the number of shares in respect of which the Stock Appreciation Rights shall have been surrendered. Stock Appreciation Rights granted in connection with the grant of Options may be surrendered only if surrendered together with the surrender of the related Options and the holder thereof shall be entitled to the payment described in this subparagraph (iii) only.

                (iv) All payments to be made pursuant to this paragraph (b) of Section 10 shall be made within ten days of the delivery of written notice of such surrender by the holder to the Company.

Section 11. Term: The Plan shall be deemed adopted and shall become effective on the date it is approved by the shareholders of the Company. No Stock Incentives shall be granted under the Plan after May 31, 2007.

Section 12. Administration:

        (a) The Plan shall be administered by the Committee which shall consist of not less than three directors of the Company designated by the Board; provided, however, that no director shall be designated as or continue to be a member of the Committee, unless such director shall be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Act (or any successor rule or regulation), (ii) an “outside director” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder (or any successor provisions, rules or regulations) and (iii) an independent director under the rules of The New York Stock Exchange.

        (b) The Committee shall have full authority to act for the Company under the Plan, except the authority to amend or discontinue the Plan, which power shall be solely that of the Board.

        (c) The Committee may establish such rules and regulations not inconsistent with the provisions of the Plan as it deems necessary to determine eligibility to participate in the Plan and for the proper administration of the Plan, and may amend or revoke any rule or regulation so established. The Committee may make such determinations and interpretations under or in connection with the Plan as it deems necessary or advisable. All such rules, regulations, determinations and interpretations shall be binding and conclusive upon the Company, its Subsidiaries, its shareholders and all employees, and upon their respective legal representatives, beneficiaries, successors and assigns and upon all other persons claiming under or through any of them.

        (d) Any action required or permitted to be taken by the Committee under the Plan shall require the affirmative vote of a majority of all the members of the Committee. The Committee may act by written determination instead of by affirmative vote at a meeting, provided that any written determination shall be signed by all of the members of the Committee, and any such written determination shall be as fully effective as a unanimous vote at a meeting.

        (e) Members of the Committee acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross negligence or willful misconduct in the performance of their duties.

Section 13. General Provisions:

        (a) With respect to any shares of Common Stock issued or transferred under any provision of the Plan, such shares may be issued or transferred subject to such conditions, in addition to those specifically provided in the Plan, as the Committee may direct and, without limiting the generality of the foregoing, provision may be made in the grant of Stock Incentives that shares issued or transferred upon their grant or exercise shall be subject to forfeiture upon failure to comply with conditions and restrictions imposed in the grant of such Stock Incentives.

        (b) The Committee may fix a uniform date, within any specified period, either before or after the date so fixed, as of which any exercise of an Option or Stock Appreciation Rights shall be deemed to be effective.

        (c) The Committee may, in its discretion, in the event of termination of employment with the consent of the Company or the death, Retirement or Disability of the holder of a Stock Incentive, reduce the period of employment required before such Stock Incentive may be exercised.

        (d) In the event of the termination of employment with the consent of the Company of an optionee or a Key Employee who is a holder of Stock Appreciation Rights, other than by death, Retirement or Disability, the Committee may extend the period during which such Options or Stock Appreciation Rights may be exercised after the date of termination of employment but not beyond the expiration date of the term of the Options or Stock Appreciation Rights.

        (e) Whether an authorized leave of absence or an absence for military or government service shall constitute termination of employment or interruption of required additional continuous employment for the purpose of the Plan shall be determined by the Committee.

        (f) Nothing in the Plan nor in any instrument executed pursuant thereto shall confer upon any employee any right to continue in the employ of the Company or any Subsidiary or shall affect the right of the Company or of a Subsidiary to terminate the employment of any employee with or without cause.

        (g) No shares of Common Stock shall be issued or transferred pursuant to a Stock Incentive unless and until all legal requirements applicable to the issuance or transfer of such shares have, in the opinion of counsel to the Company, been complied with. In connection with any such issuance or transfer, the person acquiring the shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company that the shares are being acquired for investment and not with a view to resale or distribution thereof and assurances in respect of such other matters as the Company or a Subsidiary may deem desirable to assure compliance with applicable legal requirements.

        (h) No holder of a Stock Incentive (individually or as a member of a group), and no beneficiary or other person claiming under or through such holder, shall have any right, title or interest in or to any shares of Common Stock allocated or reserved for the purposes of the Plan or subject to any Stock Incentive except as to such shares of Common Stock, if any, as shall have been issued or transferred to such individual.

        (i) The Company or a Subsidiary may, with the approval of the Committee, enter into an agreement or other commitment to grant a Stock Incentive in the future to a person who is or will be a Key Employee at the time of grant, and, notwithstanding any other provision of the Plan, any such agreement or commitment shall not be deemed the grant of a Stock Incentive until the date on which the Committee takes action to implement such agreement or commitment.

        (j) In the case of a grant of a Stock Incentive to any employee of a Subsidiary, such grant may, if the Committee so directs, be implemented by the Company issuing or transferring the shares, if any, covered by the Stock Incentive to the Subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Subsidiary will transfer the shares to the employee in accordance with the terms of the Stock Incentive specified by the Committee pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Stock Incentive may be issued by and in the name of the Subsidiary and shall be deemed granted on the date it is approved by the Committee, on the date it is delivered by the Subsidiary, or on such other date between such two dates, as the Committee shall specify.

        (k) The Company or a Subsidiary may make such provisions as it may deem appropriate for the withholding of any taxes which the Company or Subsidiary determines it is required to withhold in connection with any Stock Incentive.

        (1) No Stock Incentive and no rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature except that, under such rules and regulations as the Committee may establish, a beneficiary may be designated in respect of a Stock Incentive in the event of the death of the holder of such Stock Incentive and except that if such beneficiary shall be the executor or administrator of the estate of the holder of such Stock Incentive, any rights in respect of such Stock Incentive may be transferred to the person or persons or entity (including a trust) entitled thereto under the will of the holder of such Stock Incentive or, in the case of intestacy, under the laws relating to intestacy. A Stock Incentive shall be exercisable during the lifetime of the holder thereof only by the holder or by the holder’s guardian, conservator or similar legal representative.

        (m) Nothing in the Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Company or any Subsidiary now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock purchase, incentive compensation or bonus plan.

        (n) The place of administration of the Plan shall conclusively be deemed to be within the State of New Jersey and the validity, construction, interpretation and administration of the Plan and of any rules and regulations or determinations or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be governed by, and determined exclusively and solely in accordance with, the laws of the State of New Jersey. Without limiting the generality of the foregoing, the period within which any action must be commenced arising under or in connection with the Plan, or any payment or award made or purportedly made under or in connection therewith, shall be governed by the laws of the State of New Jersey, irrespective of the place where the act or omission complained of took place and of the residence of any party to such action and irrespective of the place where the action may be brought.

Section 14. Amendment or Discontinuance of Plan:

        (a) The Plan may be amended by the Board at any time; provided, however, that, without the approval of the shareholders of the Company, no amendment shall be made which (i) increases the aggregate number of shares of Common Stock that may be issued or transferred pursuant to Stock Incentives as provided in paragraph (a) of Section 4, (ii) amends the provisions of paragraph (a) of Section 12 with respect to the eligibility of the members of the Committee, (iii) permits any person to be granted a Stock Incentive who is not at the time of such grant a Key Employee or an Outside Director, (iv) amends Section 11 to extend the term of the Plan, or (v) amends this Section 14.

        (b) The Board may by resolution adopted by a majority of the entire Board discontinue the Plan.

        (c) No amendment or discontinuance of the Plan shall adversely affect any Stock Incentive theretofore granted without the consent of the holder thereof.

EX-3

Exhibit 3 (ii)

A M E N D E D   A N D   R E S T A T E D

 

B Y E - L A W S

 

O F

 

I N G E R S O L L - R A N D   C O M P A N Y   L I M I T E D



 

Adopted June 2 , 2004

TABLE OF CONTENTS

		Page
INTERPRETATION		1
1.	Interpretation	2
BOARD OF DIRECTORS		2
2.	Board of Directors	3
3.	Management of the Company	3
4.	Power to Authorise Specific Actions	3
5.	Power to Appoint Attorney	3
6.	Power to Delegate to a Committee	3
7.	Power to Appoint and Dismiss Employees	3
8.	Power to Borrow and Charge Property	4
9.	Exercise of Power to Purchase Shares of or Discontinue the Company	4
10.	Election of Directors	4
11.	Defects in Appointment of Directors	5
12.	Removal of Directors	5
13.	Vacancies on the Board	5
14.	Notice of Meetings of the Board	6
15.	Quorum at Meetings of the Board	6
16.	Meetings of the Board	6
17.	Unanimous Written Resolutions of Directors	6
18.	Contracts and Disclosure of Directors' Interests	6
19.	Remuneration of Directors	7
OFFICERS		7
20.	Officers of the Company	7
21.	Appointment and Authority of Officers	7
22.	Duties of Officers	7
23.	Chairman of Meetings	7
24.	Register of Directors and Officers	8
MINUTES		8
25.	Obligations of Board to Keep Minutes	8
INDEMNITY		8
26.	Indemnification of Directors and Officers of the Company	8
MEETINGS		9
27.	Annual General Meeting	9
28.	Special General Meetings	10
29.	Accidental Omission of Notice of General Meeting	10
30.	Meeting Called on Requisition of Members	10
31.	Short Notice	10
32.	Postponement of Meetings	10
33.	Quorum for General Meeting	10
34.	Adjournment of Meetings	10
35.	Attendance at Meetings	11
36.	Unanimous Written Resolutions of Members	11
37.	Attendance of Directors	11
38.	Presiding Officer at Meetings	11
39.	Voting at Meetings	11
40.	Seniority of Joint Holders Voting	12
41.	Instrument of Proxy	12
42.	Representation of Corporations at Meetings	12
SHARE CAPITAL AND SHARES		12
43.	Authorised Share Capital	12
44.	Power to Issue Shares	14
45.	Variation of Rights, Alteration of Share Capital and Purchase of Shares of the Company	14
46.	Registered Holder of Shares	15
47.	Death of a Joint Holder	15
48.	Certificated or Uncertificated Shares	15
REGISTER OF MEMBERS		15
49.	Contents of Register of Members	15
50.	Inspection of Register of Members	16
51.	Transactions with Interested Members	16
52.	Record Dates	16
53.	Scrutineers	16
TRANSFER OF SHARES		17
54.	Instrument of Transfer	17
55.	Restriction on Transfer	17
56.	Transfers by Joint Holders	17
TRANSMISSION OF SHARES		17
57.	Representative of Deceased Member	17
58.	Registration on Death or Bankruptcy	17
59.	Dividend Entitlement of Transferee	17
DIVIDENDS AND OTHER DISTRIBUTIONS		18
60.	Declaration of Dividends by the Board	18
CAPITALISATION		18
61.	Issue of Bonus Shares	18
ACCOUNTS AND FINANCIAL STATEMENTS		18
62.	Records of Account	18
63.	Fiscal Year	18
64.	Financial Statements	18
AUDIT		18
65.	Appointment of Auditor	18
66.	Remuneration of Auditor	19
67.	Vacation of Office of Auditor	19
68.	Access to Books of the Company	19
69.	Report of the Auditor	19
NOTICES		19
70.	Notices to Members of the Company	19
SEAL OF THE COMPANY		19
71.	The Seal	19
72.	Manner in Which Seal is to be Affixed	19
WINDING-UP		20
73.	Winding-up/Distribution by Liquidator	20
ALTERATION OF BYE-LAWS		20
74.	Alteration of Bye-laws	20

AMENDED AND RESTATED

BYE-LAWS

OF

INGERSOLL-RAND COMPANY LIMITED

A Bermuda Limited Liability Company

INTERPRETATION

1. Interpretation

        (1) In these Bye-laws the following words and expressions shall, where not inconsistent with the context and not defined in the text, have the following meanings respectively:

                (a) "Act" means the Companies Act 1981, as amended from time to time;

                (b) "Auditor" includes any individual, general or limited partnership, corporation, firm, association or company (including a limited liability company);

                (c) A person is a "beneficial owner" of any shares of the Company:

                        (i) which it has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise; and

                        (ii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (i) above), by any other person with which it has any agreement, arrangement or understanding with respect to the acquisition, holding, voting or disposition of shares or of any material part of the assets of the Company or of it, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the United States Securities Exchange Act of 1934 (or any successor rule or regulation);

                (d) "Board" means the Board of Directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the Directors present at a meeting of Directors at which there is a quorum;

                (e) "Business Combination" means:

                        (i) any amalgamation, merger or consolidation of the Company or one of its subsidiaries with an Interested Member or with any person that is, or would be after such amalgamation, merger or consolidation, an affiliate or associate of an Interested Member;

                        (ii) any transfer or other disposition to or with an Interested Member or any affiliate or associate of an Interested Member of all or any material part of the assets of the Company or one of its subsidiaries; and

                        (iii) any issuance or transfer of shares of the Company upon conversion of or in exchange for the securities or assets of any Interested Member, or with any person that is, or would be after such amalgamation, merger or consolidation, an affiliate or associate of an Interested Member;

                (f) "Company" means the company for which these Bye-laws are approved and confirmed;

                (g) "Director" means a director of the Company;

                (h) "Interested Member" means any Member that:

                        (i) is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the voting shares of the Company then in issue; or

                        (ii) is an affiliate or associate of the Company and at any time within the five-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the shares then in issue of the Company. For the purpose of determining whether a Member is an Interested Member, the number of voting shares of the Company then in issue shall include shares deemed to be beneficially owned by such Member, but shall not include any other unissued voting shares of the Company which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise;

                        (i) "Member" means the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons as the context so requires;

                (j) "Notice" means written notice as further defined in these Bye-laws unless otherwise specifically stated;

                (k) "Officer" means any person appointed by the Board to hold an office in the Company;

                (l) "Person" means any individual, general or limited partnership, corporation, firm, association, trust, estate, company (including a limited liability company) or any other entity or organisation or bodies of persons whether corporate or otherwise, including a government, a political subdivision or agency or instrumentality thereof;

                (m) "Register of Directors and Officers" means the Register of Directors and Officers referred to in these Bye-laws;

                (n) "Register of Members" means the Register of Members referred to in these Bye-laws;

                (o) "Resident Representative" means any person appointed to act as resident representative and includes any deputy or assistant resident representative; and

                (p) "Secretary" means the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant secretary.

(2) In these Bye-laws, where not inconsistent with the context:

                (a) words denoting the plural number include the singular number and vice versa;

                (b) words denoting the masculine gender include the feminine gender;

                (c) the word:

                        (i) "may" shall be construed as permissive;

                        (ii) "shall" shall be construed as imperative; and

                (d) unless otherwise provided herein words or expressions defined in the Act shall bear the same meaning in these Bye-laws.

(3) Expressions referring to writing or written shall, unless the contrary intention appears, include cable, telex, telecopier, facsimile, printing, computer generated email, lithography, photography and other modes of representing words in legible and non-transitory form.

(4) Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof.
 

BOARD OF DIRECTORS

2. Board of Directors

The business of the Company shall be managed by the Board.

3. Management of the Company

        (1) In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by these Bye-laws, expressly required to be exercised by the Company in general meeting, subject, nevertheless, to these Bye-laws, the provisions of any statute and to such directions as may be prescribed by the Company in general meeting.

        (2) No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.

        (3) The Board may procure that the Company pay all expenses incurred in promoting and organising the Company.

4. Power to Authorise Specific Actions

        The Board may from time to time and at any time authorise any person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument on behalf of the Company.

5. Power to Appoint Attorney

        The Board, or any duly authorised committee, may from time to time and at any time by power of attorney appoint any person or body of persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney. Such attorney may, if so authorised under the seal of the Company, execute any deed or instrument under such attorney's personal seal with the same effect as the affixation of the seal of the Company.

6. Power to Delegate to a Committee

        (1) The Board may delegate any or all of its powers to a committee or committees appointed by the Board which may consist partly or entirely of non-Directors and every such committee shall conform to such directions as the Board shall impose on them; provided that a committee appointed by the Board shall not have the power to set its or its members' remuneration. The meetings and proceedings of any such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superseded by directions imposed by the Board.

        (2) The Board, by the affirmative vote of a majority of the entire Board, may appoint from their number an executive committee of which committee a majority of committee members shall constitute a quorum; and to such extent as shall be provided in these Bye-laws and as may be permitted by law, such committee shall have and may exercise any or all of the powers of the Board.

        (3) The Board, by the affirmative vote of a majority of the entire Board, may appoint any other standing committees and such standing committees shall have and may exercise such powers as may be conferred and authorised by these Bye-laws or by the Board and as may be permitted by law.

        (4) Each committee of the Board shall keep complete, accurate minutes and records of all actions taken by such committee, prepare such minutes and records in a timely fashion and promptly distribute all such minutes and records to each member of the Board at the meeting of the Board next ensuing.

7. Power to Appoint and Dismiss Employees

        The Board may appoint, suspend or remove any Officer, manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties. Nothing contained in this Bye-law shall be construed to limit the Officers or any other Company official from being able to exercise these same powers to the extent they are duly authorised to do so.

8. Power to Borrow and Charge Property

        The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking and property, or any part thereof, and may issue debentures, debenture shares and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party. Nothing contained in this Bye-law shall be construed to limit the Officers or any other Company official from being able to exercise these same powers to the extent they are duly authorised to do so.

9. Exercise of Power to Purchase Shares of or Discontinue the Company

        (1) The Board may exercise all the powers of the Company to purchase all or any part of its own shares pursuant to Section 42A of the Act.

        (2) The Board may exercise all the powers of the Company to discontinue the Company to a named country or jurisdiction outside Bermuda pursuant to Section 132G of the Act.

10. Election of Directors

        (1) The Board shall consist of not less than three and not more than twenty Directors or such number in excess thereof as the Members may from time to time determine. The initial Directors shall be elected or appointed at the statutory meeting of the Company and thereafter, except in the case of casual vacancy, Directors shall be elected or appointed at the annual general meeting or at any special general meeting called for that purpose. Directors shall hold office for such term as the Members may determine or, in the absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated. Any general meeting may authorise the Board to fill any vacancy left unfilled at a general meeting. The number of Directors to be elected at any time within the minimum and maximum limitations specified herein shall be determined from time to time by the Board pursuant to a resolution adopted by the affirmative vote of a majority of the Board then in office. Any vacancy on the Board within the minimum and maximum limitations specified in this Bye-law may be filled by a majority of the Board then in office; provided that a quorum is present. During the existence of a vacancy on the Board the remaining Directors shall have full power to act; provided that a quorum is present. The holders of Class A Common Shares (as defined hereinafter) shall be entitled at all meetings of the Members at which Directors are elected to one vote for each such share held by them as described in this Bye-Law. The holders of Class B Common Shares (as defined hereinafter) shall not be entitled to vote for the election of Directors. At all elections of Directors each holder of Class A Common Shares shall be entitled to as many votes as shall equal the number of votes which such holder would be entitled to cast at a general meeting, multiplied by the number of Directors to be elected, and such holder may cast all such votes for a single Director, or may distribute them among the number to be voted for or any two or more Directors as such holder may see fit.

        (2) The Board shall be divided as equally as may be possible into three classes, each of which shall consist of such number as these Bye-laws may from time to time provide. Initially, the Directors of the first class shall be elected for a term of one year or until the first annual general meeting, the Directors of the second class shall be elected for a term of two years or until the second annual meeting, and the Directors of the third class shall be elected for a term of three years or until the third annual meeting. At each annual election thereafter, the successors of the Directors of the class whose term expires in that year shall be elected to hold office for a term of three years, so that the term of office of one class of Directors shall expire each year.

        (3) If the number of Directors is changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. In case of any increase in the number of Directors of any class or classes within the minimum and maximum limitations specified in Bye-law 10(1) causing a casual vacancy, additional Directors may be elected by the Board to fill such casual vacancy, but any such Director so elected shall hold office only until the next succeeding annual general meeting of Members and until his or her successor shall have been elected and qualified. No decrease in the number of Directors shall shorten the term of any incumbent Director.

        (4) Directors may be removed without cause only upon the affirmative vote of the holders of at least 80% of the shares of the Company entitled to vote for the election of Directors. Directors may be removed for cause only upon the affirmative vote of the holders of at least 66 2/3% of the shares of the Company entitled to vote for the election of Directors; provided that any meeting convened and held to consider the removal of a Director shall be convened and held in accordance with Bye-law 12.

        (5) Notwithstanding subparagraph (1) of this Bye-law, any Member entitled to vote for the election of Directors at a meeting or to express a consent in writing without a meeting may nominate a person or persons for election as a Director only if written notice of such Member's intent to make such nomination is given to the Secretary of the Company, either by personal delivery, mail or facsimile not later than (a) with respect to an election to be held at an annual general meeting of Members, 90 days in advance of the anniversary of the immediately preceding annual general meeting or if the date of the annual general meeting of Members occurs more than 30 days before or 60 days after the anniversary of such immediately preceding annual general meeting, not later than the close of business on the seventh day following the date on which notice of such meeting is given to Members and (b) in the case of any Member who wishes to nominate a person or persons for election as a Director pursuant to consents in writing by Members without a meeting (to the extent election by such consents is permitted under applicable law and these Bye-laws), 60 days in advance of the date on which materials soliciting such consents are first mailed to Members or, if no such materials are required to be mailed under applicable law, 60 days in advance of the date on which the first such consent in writing is executed. Each such notice shall set forth the name and address of the Member who intends to make the nomination and of the person or persons to be nominated for election as a Director, a representation that the Member is a holder of record of shares of the Company entitled to vote at such meeting or to express such consent in writing and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or to execute such a consent in writing to elect such person or persons as a Director, a description of all arrangements or understandings between the Member and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations for election as a Director are to be made by the Member, such other information regarding each nominee proposed by such Member as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the United States Securities and Exchange Commission if such nominee had been nominated, or was intended to be nominated, for election as a Director by the Board, and the consent of each nominee to serve as a Director if so elected. The Board may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures.

11. Defects in Appointment of Directors

        All bona fide acts taken at any meeting of the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director.

12. Removal of Directors

        (1) Subject to Bye-law 10(4) and any provision to the contrary in these Bye-laws, the Members may, at any special general meeting convened and held in accordance with these Bye-laws, remove a Director; provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than fourteen days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director's removal.

        (2) A vacancy on the Board created by the removal of a Director under the provisions of subparagraph (1) of this Bye-law may be filled by the Members at the meeting at which such Director is removed and, in the absence of such election or appointment, the Board may fill the vacancy in accordance with Bye-law 13.

13. Vacancies on the Board

        (1) Subject to any requirements of these Bye-laws with respect to the filling of vacancies among additional Directors elected by a class or classes of shares, if the office of any Director becomes vacant, the remaining Directors may, by a majority vote, elect a successor who shall hold office until the next succeeding annual general meeting of the Members and until his or her successor shall have been elected and qualified.

        (2) The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board pursuant to Bye-law 15, the continuing Directors or Director may act for the purpose of (i) summoning a general meeting of the Company or (ii) preserving the assets of the Company.

        (3) The office of Director shall be vacated if the Director:

                (a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;

                (b) is or becomes bankrupt or makes any arrangement or composition with his or her creditors generally;

                (c) is or becomes of unsound mind or dies; or

                (d) resigns his or her office by notice in writing to the Company.

14. Notice of Meetings of the Board

        (1) Notice of a regular meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by mail, courier service, cable, telex, telecopier, facsimile, printing, computer generated email or other mode of representing words in a legible and non-transitory form at such Director's last known address or any other address given by such Director to the Company for this purpose at least two days before the proposed date of the meeting, but a failure of the Secretary to send such notice shall not invalidate any proceedings of the Board at such meeting.

        (2) Notice of a special meeting of the Board shall be deemed to be duly given to a Director if it is sent to such Director by mail at least two days before the proposed date of the meeting, or given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by mail, courier service, cable, telex, telecopier facsimile, printing, computer generated email or other mode of representing words in a legible and non-transitory form, at such Director's last known address or any other address given by such Director to the Company for this purpose at least one day before the proposed date of the meeting, but such notice may be waived by any Director. At any special meeting at which every Director shall be present, even without notice, any business may be transacted.

15. Quorum at Meetings of the Board

        The quorum necessary for the transaction of business at all meetings of the Board shall be a majority of the Directors then in office. If at any meeting of the Board there be less than a quorum present, a majority of those present or any Director solely present may adjourn the meeting from time to time without further notice.

16. Meetings of the Board

        (1) Regular meetings of the Board shall be held at such times and intervals as the Board may from time to time determine.

        (2) Special meetings of the Board shall be held on the requisition of the Chairman, if one is appointed, the Deputy Chairman, if one is appointed, the President, or by 33 ¹/3% of the Directors then in office.

        (3) Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.

        (4) Unless a greater number is expressly required by law or these Bye-laws, the affirmative votes of a majority of the votes cast by the Directors present at a meeting at which a quorum is in attendance shall be the act of the Board or a committee thereof, as appropriate. At any time that these Bye-laws provide that Directors elected by the holders of a class or series of shares shall have more or less than one vote per Director on any matter, every reference in these Bye-laws to a majority or other proportion of Directors shall refer to a majority or other proportion of the votes of such Directors.

17. Unanimous Written Resolutions of Directors

        A resolution in writing signed by all the Directors then in office, which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution.

18. Contracts and Disclosure of Directors' Interests

        (1) Any Director, or any firm, partner or any company with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Director's firm, partner or such company shall be entitled to remuneration for professional services as if such Director were not a Director; provided that nothing herein contained shall authorise a Director or Director's firm, partner or such company to act as Auditor of the Company.

        (2) A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act.

        (3) Following a declaration being made pursuant to this Bye-law, the Director concerned may be counted in the quorum at such meeting and, unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested.

        (4) Any contract or other transaction to which the Company or any subsidiary of the Company is a party and in which one or more Directors has a direct or indirect interest that is material to such Director or Directors shall be authorized, approved, or ratified by affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; provided that no such contract or other transaction shall be void or voidable solely by reason of such interest, or solely because such Director or Directors are present at the meeting of the Board or committee which authorizes or approves the contract or transaction, or solely because his or their votes are counted for such purpose, if any one of the following is true: (A) the contract or other transaction is fair and reasonable as to the Company or the subsidiary of the Company at the time it is authorized, approved or ratified; or (B) the fact of the interest is disclosed or known to the Board or committee and the Board or committee authorizes, approves, or ratifies the contract or transaction by unanimous written consent, provided at least one director so consenting is disinterested, or by affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (C) the fact of the interest is disclosed or known to the Members, and they authorize, approve or ratify the contract or transaction.

19. Remuneration of Directors

        The remuneration (if any) of the Directors shall be determined by the Board from time to time. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally; provided that nothing contained herein shall be construed to preclude any Director from serving the Company in any other capacity or receiving compensation therefor.
 

OFFICERS

20. Officers of the Company

        The Officers of the Company shall consist of a President and a Vice President or a Chairman and a Deputy Chairman, such additional Vice Presidents or Deputy Chairmen as the Board may from time to time determine, a Secretary and such additional Officers, including a Chief Executive Officer, as the Board may from time to time determine all of whom shall be deemed to be Officers for the purposes of these Bye-laws. A person may hold any number of offices simultaneously; provided that the same person may not hold the offices of President and Vice President, or Chairman and Deputy Chairman, simultaneously.

21. Appointment and Authority of Officers

        (1) The Board shall, as soon as possible after the statutory meeting of Members and after each annual general meeting, appoint a President and a Vice President or a Chairman and a Deputy Chairman who shall be Directors. Any vacancy arising in the position of President or Chairman shall be filled by the Board at such time and in such manner as the Board shall determine. Such Vice President or Deputy Chairman shall have such duties and responsibilities as provided in these Bye-laws or as may be determined by the Board from time to time.

        (2) The Secretary and additional Officers, if any, shall be appointed by the Board from time to time. The Chief Executive Officer shall have the authority to appoint and remove assistant officers (who shall not be deemed to be Officers for the purposes of these Bye-laws) with such authority as the Chief Executive Officer shall deem appropriate.

22. Duties of Officers

        The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.

23. Chairman of Meetings

        Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the Chairman, if one is appointed, or, in the absence of a Chairman, the Deputy Chairman, if one is appointed, or, in the absence of the Deputy Chairman, the President, shall act as chairman at any general meeting, or in the absence of any of the foregoing Officers, a chairman shall be appointed or elected by those present at the meeting and entitled to vote.

24. Register of Directors and Officers

        The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act.
 

MINUTES

25. Obligations of Board to Keep Minutes

        (1) The Board shall cause minutes to be duly entered in books provided for the purpose:

                (a) of all elections and appointments of Officers;

                (b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and

                (c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board and meetings of committees appointed by the Board.

        (2) Minutes prepared in accordance with the Act and these Bye-laws shall be kept by the Secretary at the registered office of the Company.

INDEMNITY

26. Indemnification of Directors and Officers of the Company

        (1) The Company shall indemnify any person who was, is or is threatened to be made a party to a Proceeding (as hereinafter defined) by reason of the fact that he or she (a) is or was a Director or Officer of the Company or (b) while a Director or Officer of the Company, is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, general or limited partnership, firm, association, trust, estate, company (including a limited liability company) or any other entity or organisation or employee benefit plan or other enterprise, to the fullest extent permitted under Bermuda law, as the same exists or may hereafter be amended. Such right shall be a contract right and as such shall run to the benefit of any Director or Officer who is elected and accepts the position of Director or Officer of the Company or elects to continue to serve as a Director or Officer of the Company while this Bye-law is in effect. Any repeal or amendment of this Bye-law shall be prospective only and shall not limit the rights of any such Director or Officer or the obligations of the Company with respect to any claim arising from or related to the services of such Director or Officer in any of the foregoing capacities prior to any such repeal or amendment to this Bye-law. Such right shall include the right to be paid by the Company expenses incurred in defending any such Proceeding in advance of its final disposition to the maximum extent permitted under Bermuda law, as the same exists or may hereafter be amended; provided that to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the Director or Officer is not entitled to be indemnified under this Bye-law or otherwise. If a claim for indemnification or advancement of expenses hereunder is not paid in full by the Company within 60 days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim. It shall be a defense to any such action that such indemnification or advancement of costs of defense are not permitted under Bermuda law, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including the Board or any committee thereof, independent legal counsel or Members) to have made its determination prior to the commencement of such action that indemnification of, or advancement of costs of defense to, the claimant is permissible in the circumstances nor an actual determination by the Company (including the Board or any committee thereof, independent legal counsel or Members) that such indemnification or advancement is not permissible shall be a defense to the action or create a presumption that such indemnification or advancement is not permissible. In the event of the death of any person having a right of indemnification under the foregoing provisions, such right shall inure to the benefit of his or her heirs, executors, administrators and personal representatives.

        Except as otherwise provided in this subparagraph (1), the Company shall be required to indemnify a Director or Officer in connection with a Proceeding (or part thereof) commenced by such person only if the commencement of such Proceeding (or part thereof) by the person was authorised by the Board.

        (2) The Company may additionally indemnify any employee or agent of the Company to the fullest extent permitted by law.

        (3) The rights conferred on any person indemnified by this Bye-law shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Memorandum of Association of the Company, these Bye-laws, agreement, vote of the Members or disinterested Directors or otherwise.

        (4) The Company's obligation, if any, to indemnify or to advance expenses to any person indemnified who was or is serving at its request as a Director or Officer or otherwise of another person described in subparagraph (1) shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other person.

        (5) This Bye-law shall not limit the right of the Company, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than persons authorised for indemnification under this Bye-law when and as authorised by appropriate corporate action.

        (6) The indemnity provided by this Bye-law 26 shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons.

        (7) "Proceeding," for purposes of this Bye-law 26, means any threatened, pending or completed action, suit, claim or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit, claim or proceeding, and any inquiry or investigation that could lead to such an action, suit, claim or proceeding.

        (8) Each Member agrees to exempt a Director or Officer from any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his or her duties with or for the Company; provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer.
 

MEETINGS

27. Annual General Meeting

        (1) The annual general meeting of the Company shall be held in each year other than the year of organisation at such time and place as the Board shall appoint. Notice of such meeting shall be given to each Member not less than five nor more than sixty days prior to such meeting stating the date, place and time at which the meeting is to be held, that the election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting.

        (2) At any annual general meeting only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board or (b) by any Member entitled to vote at such meeting who complies with the procedures set forth in this Bye-law. Any Member entitled to vote at such meeting may propose business to be included in the agenda of such meeting only if written notice of such Member's intent is given to the Secretary of the Company, either by personal delivery or mail or by facsimile, not later than 90 days in advance of the anniversary of the immediately preceding annual general meeting or if the date of the annual general meeting of Members occurs more than 30 days before or 60 days after the anniversary of such immediately preceding annual meeting, not later than the close of business on the seventh day following the date on which notice of such meeting is given to Members. A Member's notice to the Secretary shall set forth in writing as to each matter such Member proposes to bring before the annual general meeting (a) a brief description of the business desired to be brought before the annual general meeting and the reasons for conducting such business at the annual general meeting, (b) the name and address, as they appear on the Company's books, of the Members proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the Member and (d) any material interest of the Member in such business. Notwithstanding anything in these Bye-laws to the contrary, no business shall be conducted at an annual general meeting except in accordance with the procedures set forth in this subparagraph. The Officer of the Company or other person presiding at the annual general meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this subparagraph, and, if such Officer or other person should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

28. Special General Meetings

        The Chairman, if one is appointed, the President or the Board by vote of a majority of the Board may convene a special general meeting of the Company whenever in its judgement such a meeting is necessary.  Notice of such meeting shall be given to each Member not less than five nor more than sixty days prior to such meeting stating the date, time, place and the nature of the business to be considered at the meeting. Special general meetings may be held at such place as may from time to time be designated by the Board and stated in the notice of the meeting. In any special general meeting of the Company only such business shall be conducted as is set forth in the notice thereof.

29. Accidental Omission of Notice of General Meeting

        The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.

30. Meeting Called on Requisition of Members

        Notwithstanding anything herein, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up capital of the Company as at the date of the deposit carries the right to vote in general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of Section 74 of the Act shall apply; provided that for any question proposed for consideration at any such special general meeting to be approved shall require the affirmative vote of the holders of not less than 66 ²/3% of the shares entitled to vote thereon.

31. Short Notice

        A general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting and (ii) a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting.

32. Postponement of Meetings

        The Secretary may postpone any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under Bye-law 30 of these Bye-laws); provided that notice of postponement is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member in accordance with the provisions of these Bye-laws.

33. Quorum for General Meeting

        (1) In any general meeting of the Company, except as otherwise expressly required by the Act or by these Bye-laws, two or more persons present in person and representing in person or by proxy a majority of the shares then in issue entitled to vote at any meeting shall form a quorum for the transaction of business; provided that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business in any general meeting of the Company held during such time. If the holders of the number of shares necessary to constitute a quorum shall fail to attend in person or by proxy at the time and place fixed by these Bye-laws for an annual general meeting, a majority in interest of the Members present, in person or by proxy, may adjourn from time to time without notice other than announcement at the meeting until the holders of the amount of shares requisite to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

        (2) Whenever the holders of any class or series of shares are entitled to vote separately on a specified item of business, the presence in person or by proxy of the holders of record of the shares of such class or series entitled to cast a majority of the votes thereon shall constitute a quorum for the transaction of such specified item of business.

34. Adjournment of Meetings

        The chairman of a general meeting may, with the consent of a majority of the Members, in any general meeting at which a quorum is present (and shall if so directed), adjourn the meeting. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws.

35. Attendance at Meetings

        Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.

36. Unanimous Written Resolutions of Members

        (1) Subject to subparagraph (6), any action which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members of the Company, may, without a meeting and without any previous notice being required, be done by resolution in writing signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members who at the date of the resolution would be entitled to attend the meeting and vote on the resolution.

        (2) A resolution in writing may be signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members, or any class thereof, in as many counterparts as may be necessary.

        (3) For the purposes of this Bye-law, the date of the resolution is the date when the resolution is signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, the last Member to sign and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law, a reference to such date.

        (4) A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in a general or special meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.

        (5) A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of Sections 81 and 82 of the Act.

        (6) This Bye-law shall not apply to:

                (a) a resolution passed pursuant to Section 89(5) of the Act; or

                (b) a resolution passed for the purpose of removing a Director before the expiration of his or her term of office under these Bye-laws.

37. Attendance of Directors

        The Directors of the Company shall be entitled to receive notice of, and to attend and be heard in any general meeting.

38. Presiding Officer at Meetings

        At all meetings of Members, unless otherwise determined by the Board, the Chairman, if one is appointed, or, in the absence of a Chairman, the Deputy Chairman, if one is appointed, or, in the absence of the Deputy Chairman, the President, shall preside and the Secretary shall act as secretary of the meeting.

39. Voting at Meetings

        Except as otherwise expressly required by the Act or these Bye-laws, any question proposed for the consideration of the Members at any general meeting at which a quorum is in attendance shall be decided by the affirmative vote of a majority of the votes cast by ballot by the Members in person or by proxy appointed by instrument in writing subscribed by such Member or by his or her duly authorised attorney and delivered to the chairman of the meeting. In the case of an equality of votes the resolution shall fail. Directors shall be elected as set forth in Bye-law 10.

        Without limiting the generality of the foregoing, any amalgamation, merger or consolidation of the Company with another entity or the sale, lease or exchange of all or substantially all of the assets of the Company shall, except as otherwise expressly provided in these Bye-laws, require the approval of Members by way of an affirmative vote of a majority of the votes cast by the Members in person or by proxy appointed by instrument in writing subscribed by such Member or by his or her duly authorised attorney and delivered to the chairman of the meeting. Prior to any votes being cast in connection with such resolutions, the chairman of the meeting may demand a poll which shall be by way of ballot.

40. Seniority of Joint Holders Voting

        In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

41. Instrument of Proxy

        The instrument appointing a proxy shall be in writing in the form as may be prescribed by the Board from time to time, under the hand of the appointor or of the appointor's attorney duly authorised in writing, or if the appointor is a corporation, either under its seal, or under the hand of a duly authorised officer or attorney. The decision of the chairman of any general meeting as to the validity of any instrument of proxy shall be final.

42. Representation of Corporations at Meetings

        A corporation which is a Member may, by written instrument, authorise such person as it thinks fit to act as its representative at any meeting of the Members and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any person to attend and vote in general meetings on behalf of a corporation that is a Member.
 

SHARE CAPITAL AND SHARES

43. Authorised Share Capital

        (1) The authorised share capital of the Company is US$1,175,010,000, consisting of (1) 1,175,000,000 common shares of the par value of US$1.00 per share, which common shares consist of (a) 600,000,000 Class A common shares ("Class A Common Shares") and 575,000,000 Class B common shares ("Class B Common Shares"), and (2) 10,000,000 preference shares of the par value of US$0.001 per share ("Preference Shares"), with any series of Preference Shares being designated from time to time pursuant to subparagraph (4) of this Bye-law.

        (2) Subject to these Bye-laws, the holders of Class A Common Shares shall:

                (a) subject to Bye-law 43(3)(b), be entitled to such dividends as the Board may, in its discretion, from time to time declare and pay out of funds legally available for the payment of dividends;

                (b) in the event of a liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, after payment in full has been made to the holders of the Preference Shares of the amounts to which they are respectively entitled or sufficient sums have been set apart for the payment thereof, be entitled to receive ratably any and all surplus assets remaining to be paid or distributed;

                (c) subject to any required Preference Share class votes, be entitled to one vote per Class A Common Share held by them and shall vote together as a single class on all matters submitted to a vote of the Members with the holders of (i) Preference Shares (but only to the extent the holders of Preference Shares shall be entitled to vote with respect to the applicable series of Preference Shares or under the Act) and (ii) Class B Common Shares (but only to the extent the holders of Class B Common Shares shall be entitled to vote under the Act);

                (d) generally be entitled to enjoy all of the rights attaching to Class A Common Shares; and

                (e) not be entitled to any preemptive or preferential rights to subscribe for or purchase any shares of any class or series of shares of the Company, now or hereafter authorised, or any series convertible into, or warrants or other evidences of optional rights to purchase or subscribe for, shares of any class or series of the Company, now or hereafter authorised.

        (3) Subject to these Bye-laws, the holders of Class B Common Shares shall have all of the rights of the holders of Class A Common Shares, except that:

                (a) the holders of Class B Common Shares shall not be entitled to vote, except as to matters for which the Act specifically requires voting rights for otherwise nonvoting shares;

                (b) if a dividend or other distribution in cash, shares or other property is declared or paid on Class A Common Shares, a like dividend or other distribution in kind and amount shall also be declared and paid on Class B Common Shares;

                (c) the holders of Class B Common Shares shall have the right to convert their shares into Class A Common Shares on a one-for-one basis in the following circumstances:

                        (i) to satisfy the obligations of the Company or its subsidiaries or affiliated companies to issue Class A Common Shares with regard to the exercise of share options, grants or purchases of shares pursuant to share incentive plans, employee share purchase plans, dividend reinvestment plans or other stock-based compensation, retirement or deferred compensation plans sponsored by the Company or its subsidiaries or affiliated companies; or

                        (ii) as consideration for any acquisition of stock or assets of a third party;

                (d) in the event of the transfer of Class B Common Shares to any person other than a wholly-owned, direct or indirect, subsidiary of the Company, Class B Common Shares so transferred shall automatically be converted into Class A Common Shares on a one-for-one basis, subject to adjustment for share divisions or other recapitalization events; and

                (e) the holders of Class B Common Shares shall have the right upon written notice to require the Company, subject to Section 42A of the Act, to purchase for cash the number of Class B Common Shares stated in such notice at the fair market value per Class A Common Share on the date of such notice. Any such purchase shall be settled within 180 calendar days of the day such notice is given and shall include simple interest from the date of the notice to but not including the payment date at a rate equal to the prime rate charged by the Chase Manhattan Bank or its successor. For purposes of this paragraph, the fair market value per Class A Common Share, as of any date, means the average of the high and low sales prices of a Class A Common Share as reported on the New York Stock Exchange composite tape on the applicable date, or if no sales of Class A Common Shares were made on the New York Stock Exchange on that date, the average of the high and low prices as reported on the composite tape for the most recent preceding day on which sales of Class A Common Shares were made. No dividends shall be declared on any Class B Common Shares for which notice has been given under this paragraph.

        (4) The Board is empowered to cause the Preference Shares to be issued from time to time as shares of one or more series of Preference Shares, and in the resolution or resolutions providing for the issue of shares of each particular series, before issuance, the Board is expressly authorised to fix:

                (a) the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased (except as otherwise provided by the Board in creating such series) or decreased (but not below the number of shares thereof then in issue) from time to time by resolution of the Board;

                (b) the rate of dividends payable on shares of such series, whether or not and upon what conditions dividends on shares of such series shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate;

                (c) the terms, if any, on which shares of such series may be redeemed, including without limitation, the redemption price or prices for such series, which may consist of a redemption price or scale of redemption prices applicable only to redemption in connection with a sinking fund (which term as used herein shall include any fund or requirement for the periodic purchase or redemption of shares), and the same or a different redemption price or scale of redemption prices applicable to any other redemption;

                (d) the terms and amount of any sinking fund provided for the purchase or redemption of shares of such series;

                (e) the amount or amounts which shall be paid to the holders of shares of such series in case of liquidation, dissolution or winding up of the Company, whether voluntary or involuntary;

                (f) the terms, if any, upon which the holders of shares of such series may convert shares thereof into shares of any other class or classes or of any one or more series of the same class or of another class or classes;

                (g) the voting rights, full or limited, if any, of the shares of such series; and whether or not and under what conditions the shares of such series (alone or together with the shares of one or more other series having similar provisions) shall be entitled to vote separately as a single class, for the election of one or more additional Directors of the Company in case of dividend arrearages or other specified events, or upon other matters;

                (h) whether or not the holders of shares of such series, as such, shall have any preemptive or preferential rights to subscribe for or purchase shares of any class or series of shares of the Company, now or hereafter authorised, or any securities convertible into, or warrants or other evidences of optional rights to purchase or subscribe for, shares of any class or series of the Company, now or hereafter authorised;

                (i) whether or not the issuance of additional shares of such series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the preferences, rights and qualifications of any such other series; and

                (j) such other rights, preferences and limitations as may be permitted to be fixed by the Board of the Company under the laws of Bermuda as in effect at the time of the creation of such series.

        (5) Subject to these Bye-laws and except to the extent otherwise provided for in a series of Preference Shares in its designation, the Preference Shares shall be of equal rank and be identical in all respects. The Board is authorised to change the designations, rights, preferences and limitations of any series of Preference Shares theretofore established, no shares of which have been issued.

44. Power to Issue Shares

        (1) Subject to these Bye-laws and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, the Board shall have the power to issue any unissued shares of the Company on such terms and conditions as it may determine and any shares or class of shares may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Board may from time to time prescribe.

        (2) The Board shall, in connection with the issue of any share, have the power to pay such commission and brokerage as may be permitted by law.

        (3) Unless otherwise permitted by law, the Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of a purchase or subscription made or to be made by any person of or for any shares in the Company, but nothing in this Bye-law shall prohibit transactions mentioned in Sections 39A, 39B and 39C of the Act.

45. Variation of Rights, Alteration of Share Capital and Purchase of Shares of the Company

        (1) Subject to the provisions of Sections 42 and 43 of the Act and except as otherwise expressly set forth in these Bye-laws, any Preference Shares may be issued or converted into shares that, at a determinable date or at the option of the Company, are liable to be redeemed on such terms and in such manner as the Company before the issue or conversion may by resolution of the Members determine.

        (2) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of 75% of the shares then in issue of that class or with the sanction of a resolution passed by a majority of the votes cast in a separate general meeting of the holders of the shares of the class in accordance with Section 47(7) of the Act. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

        (3) The Company may from time to time by resolution of the Members change the currency denomination of, increase, alter or reduce its share capital in accordance with the provisions of Sections 45 and 46 of the Act. Where, on any alteration of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit including, without limiting the generality of the foregoing, the issue to Members, as appropriate, of fractions of shares and/or arranging for the sale or transfer of the fractions of shares of Members.

        (4) The Company may from time to time purchase its own shares in accordance with the provisions of Section 42A of the Act.

46. Registered Holder of Shares

        (1) The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable or other claim to, or interest in, such share on the part of any other person.

        (2) Any dividend, interest or other moneys payable in cash in respect of shares may be paid by direct deposit to the bank account designated by the Member for such purpose and cheque or draft sent through the post directed to the Member at such Member's address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.

47. Death of a Joint Holder

        Where two or more persons are registered as joint holders of a share or shares then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall, subject to Bye-law 58, recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.

48. Certificated or Uncertificated Shares

        (1) The shares of the Company may be issued in certificated or uncertificated form. The Board shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of such certificated or uncertificated shares of the Company.

        (2) Promptly after uncertificated shares have been registered as issued, the Company or its transfer agent shall send to the registered owner thereof a written statement containing a description of the issue of which such shares are a part, the number of shares registered, the date of registration and such other information as may be required or appropriate.
 

REGISTER OF MEMBERS

49. Contents of Register of Members

        (1) The Board shall cause to be kept in one or more books a Register of its Members and shall enter therein the particulars required by the Act which are as follows:

                (a) the name and address of each Member, the number and, where appropriate, the class or series of shares held by such Member and the amount paid on such shares;

                (b) the date on which each person was entered in the Register as a Member; and

                (c) the date on which any person ceased to be a Member.

        (2) Subject to the Act, the Company may keep an overseas or local or other branch register of Members resident in any place, and the Board may make and vary such regulations as it determines in respect of the keeping of any such register and maintaining a registration office in connection therewith.

50. Inspection of Register of Members

        The Register of Members and, if applicable, any branch register of Members shall be open to inspection at the registered office of the Company and, if applicable, any registration office, on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each business day be allowed for inspection. The Register of Members and, if applicable, any branch register of Members may, after notice has been given by advertisement in an appointed newspaper to that effect, be closed for any time or times not exceeding in the whole thirty days in each year.

51. Transactions with Interested Members

        (1) The Company may not engage, at any time, in any Business Combination with any Interested Member unless the Business Combination receives the affirmative vote of the holders of 80% of the shares then in issue of all classes of shares of the Company entitled to vote, considered for the purposes of this provision as one class.

        (2) Interested Member status of a Member is determined as of the date of any action taken by the Board with respect to such transaction or as of any record date for the determination of Members entitled to notice and to vote with respect thereto or immediately prior to the consummation of such transaction. Any determination made in good faith by the Board, on the basis of information at the time available to it, as to whether any person is an Interested Member, shall be conclusive and binding for all purposes of these Bye-laws.

        (3) The provisions of subparagraph (1) of this Bye-law shall not apply to (a) any Business Combination with an Interested Member that has been approved by the Board or (b) any agreement for the amalgamation, merger or consolidation of any subsidiary of the Company with the Company or with another subsidiary of the Company if (i) the provisions of this subparagraph shall not be changed or otherwise affected by or by virtue of the amalgamation, merger or consolidation and (ii) the holders of greater than 50% of the voting power of the Company or the subsidiary, as appropriate, immediately prior to the amalgamation, merger or consolidation continue to hold greater than 50% of the voting power of the amalgamated company immediately following the amalgamation, merger or consolidation.

52. Record Dates

        Notwithstanding any other provision of these Bye-laws, the Board may fix any date as the record date for:

                (a) determining the Members entitled to receive any dividend; and

                (b) determining the Members entitled to receive notice of and to vote in any general meeting of the Company; provided, that such record date shall not be more than sixty days before the date of such dividend or such general meeting, as the case may be.

53. Scrutineers

        (1) One or more scrutineers may be appointed by the Board to act at any meeting of Members, or, if the Board fails to act, the chairman of the meeting may appoint a scrutineer or scrutineers. A scrutineer may or may not be a Member, but shall not be a candidate for the office of Director.

        (2) The scrutineer or scrutineers shall determine the number of shares then in issue and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all Members.

        (3) Each scrutineer, before entering upon the discharge of the duties described in Bye-law 53(2), shall be sworn faithfully to execute the duties of a scrutineer at such meeting with strict impartiality, and according to the best of such person's ability.

TRANSFER OF SHARES

54. Instrument of Transfer

        An instrument of transfer shall be in the form as may be prescribed by the Board from time to time. The Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.

55. Restriction on Transfer

        (1) The Board shall refuse to register the transfer of a share unless such transfer is in accordance with the Bye-laws and all applicable consents, authorisations and permissions of any governmental body or agency in Bermuda have been obtained.

        (2) If the Board refuses to register a transfer of any share, the Secretary shall, within three months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.

56. Transfers by Joint Holders

        The joint holders of any share or shares may transfer such share or shares to one or more of such joint holders, and the surviving holder or holders of any share or shares previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.
 

TRANSMISSION OF SHARES

57. Representative of Deceased Member

        In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder (as set forth in Bye-law 58), shall be the only persons recognised by the Company as having any title to the deceased Member's interest in the shares. Subject to the provisions of Section 52 of the Act, for the purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the shares of a deceased Member.

58. Registration on Death or Bankruptcy

        Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Company may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in the form as may be prescribed by the Board. On the presentation thereof to the Company, accompanied by such evidence as the Company may require to prove the title of the transferor, the transferee shall be registered as a Member but the Company shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member's death or bankruptcy, as the case may be.

59. Dividend Entitlement of Transferee

        A person becoming entitled to a share by reason of the death or bankruptcy or winding-up of a Member shall be entitled to the same dividends and other advantages to which he or she would be entitled if he or she were the registered holder of the share. However, the Company may determine to withhold the payment of any dividend payable or other advantages in respect of such share until such person shall become the registered holder of the share or shall have effectually transferred such share, but, subject to the requirements of these Bye-laws being met, such a person may vote at meetings.
 

DIVIDENDS AND OTHER DISTRIBUTIONS

60. Declaration of Dividends by the Board

        The Board may, subject to these Bye-laws and in accordance with Section 54 of the Act, declare a dividend to be paid to the Members, in proportion to the number of shares held by them or the class or series of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets.
 

CAPITALISATION

61. Issue of Bonus Shares

        The Board may resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.

ACCOUNTS AND FINANCIAL STATEMENTS

62. Records of Account

        The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:

                (a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;

                (b) all sales and purchases of goods by the Company; and

                (c) the assets and liabilities of the Company.

        Such records of account shall be kept at the registered office of the Company or, subject to Section 83(2) of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours.

63. Fiscal Year

        The financial year end of the Company may be determined by resolution of the Board and failing such resolution shall be 31st December in each year.

64. Financial Statements

        Subject to any rights to waive laying of accounts pursuant to Section 88 of the Act, financial statements as required by the Act shall be laid before the Members in general meeting.
 

AUDIT

65. Appointment of Auditor

        Subject to Section 88 of the Act, in the annual general meeting or in a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company. Such Auditor may be a Member but no Director, Officer or employee of the Company shall, during his or her continuance in office, be eligible to act as an Auditor of the Company.

66. Remuneration of Auditor

        The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine.

67. Vacation of Office of Auditor

        If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor's services are required, the Board shall, as soon as practicable, convene a special general meeting to fill the vacancy thereby created.

68. Access to Books of the Company

        The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company.

69. Report of the Auditor

        (1) Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be audited at least once in every year.

        (2) The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting pursuant to Bye-law 64.

        (3) The generally accepted auditing standards referred to in subparagraph (2) of this Bye-law may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor must disclose this fact and name such country or jurisdiction.
 

NOTICES

70. Notices to Members of the Company

        A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member's address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by mail, courier service, cable, telex, telecopier, facsimile, printing, computer generated email or other mode of representing words in a legible and non-transitory form.
 

SEAL OF THE COMPANY

71. The Seal

        The seal of the Company shall be in such form as the Board may from time to time determine. The Board may adopt one or more duplicate seals for use outside Bermuda.

72. Manner in Which Seal is to be Affixed

        The seal of the Company shall not be affixed to any instrument except attested by the signature of a Director and the Secretary or any two Directors, or any person appointed by the Board for the purpose; provided that any Director, Officer or Resident Representative, may affix the seal of the Company attested by such Director, Officer or Resident Representative's signature to any authenticated copies of these Bye-laws, the organisation documents of the Company, the minutes of any meetings or any other documents required to be authenticated by such Director, Officer or Resident Representative.
 

WINDING-UP

73. Winding-up/Distribution by Liquidator

        If the Company shall be wound up, the liquidator may, with the sanction of a resolution of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.
 

ALTERATION OF BYE-LAWS

74. Alteration of Bye-laws

        No Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Board and by a resolution of the Members.

*    *    *    *    *    *

EX-31

                                                                                    Exhibit 31.1

CERTIFICATION

I, Herbert L. Henkel, certify that:

1.      I have reviewed the Form 10-Q for the quarter ended June 30, 2004 of Ingersoll-Rand Company
         Limited;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
         state a material fact necessary to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report,
         fairly present in all material respects the financial condition, results of operations and cash flows of the
         registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
         and have:

            a.       Designed such disclosure controls and procedures, or caused such disclosure controls and
                     procedures to be designed under our supervision, to ensure that material information relating to
                     the registrant, including its consolidated subsidiaries, is made known to us by others within those
                     entities, particularly during the period in which this report is being prepared;

            b.      Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
                     this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
                     the end of the period covered by this report based on such evaluation; and

            c.       Disclosed in this report any change in the registrant's internal control over financial reporting that
                     occurred during the registrant's most recent fiscal quarter that has materially affected, or is
                     reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
         internal control over financial reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent functions):

            a.       All significant deficiencies and material weaknesses in the design or operation of internal control
                     over financial reporting which are reasonably likely to adversely affect the registrant's ability to
                     record, process, summarize and report financial information; and

            b.      Any fraud, whether or not material, that involves management or other employees who have a
                     significant role in the registrant's internal control over financial reporting.

Date: August 3, 2004                                                                    /S/ Herbert L. Henkel
                                                                                                    Herbert L. Henkel
                                                                                                    Principal Executive Officer

EX-31

                                                                        Exhibit 31.2
 

CERTIFICATION

I, Timothy R. McLevish, certify that:

1.      I have reviewed the Form 10-Q for the quarter ended June 30, 2004 of Ingersoll-Rand Company
         Limited;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
         state a material fact necessary to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report,
         fairly present in all material respects the financial condition, results of operations and cash flows of the
         registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
         and have:

            a.       Designed such disclosure controls and procedures, or caused such disclosure controls and
                      procedures to be designed under our supervision, to ensure that material information relating to
                     the registrant, including its consolidated subsidiaries, is made known to us by others within those
                     entities, particularly during the period in which this report is being prepared;

            b.      Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
                     this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
                     the end of the period covered by this report based on such evaluation; and

            c.       Disclosed in this report any change in the registrant's internal control over financial reporting that
                     occurred during the registrant's most recent fiscal quarter that has materially affected, or is
                     reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
         internal control over financial reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent functions):

            a.       All significant deficiencies and material weaknesses in the design or operation of internal control
                     over financial reporting which are reasonably likely to adversely affect the registrant's ability to
                     record, process, summarize and report financial information; and

            b.      Any fraud, whether or not material, that involves management or other employees who have a
                     significant role in the registrant's internal control over financial reporting.

Date: August 3, 2004                                                                /S/ Timothy R. McLevish
                                                                                                Timothy R. McLevish
                                                                                                Principal Financial Officer

EX-32

Exhibit 32

Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Ingersoll-Rand Company Limited (the Company), does hereby certify that:

The quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (the Form 10-Q) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ Herbert L. Henkel
Herbert L. Henkel
Chief Executive Officer
August 3, 2004

/S/ Timothy R. McLevish
Timothy R. McLevish
Chief Financial Officer
August 3, 2004