-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PW0EVAKBd45h/1GvV+QcirlTuJE+3G+sf7j3rI858K/ljgAuDtpx2Ef8LYfXigxW 0ZSVd4ZUFkf93XJkzXgBjg== 0000050485-99-000002.txt : 19990331 0000050485-99-000002.hdr.sgml : 19990331 ACCESSION NUMBER: 0000050485-99-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INGERSOLL RAND CO CENTRAL INDEX KEY: 0000050485 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 135156640 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00985 FILM NUMBER: 99578560 BUSINESS ADDRESS: STREET 1: 200 CHESTNUT RIDGE RD STREET 2: PO BOX 8738 CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 BUSINESS PHONE: 2015730123 MAIL ADDRESS: STREET 1: 200 CHESTNUT RIDGE ROAD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-985 INGERSOLL-RAND COMPANY (Exact name of registrant as specified in its charter) New Jersey 13-5156640 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Woodcliff Lake, New Jersey 07675 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(201)573-0123 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Series A Preference Stock Purchase Rights New York, London and Amsterdam Common Stock, $2 par value New York, London and Amsterdam Income PRIDES New York Growth PRIDES New York Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] The aggregate market value of common stock held by nonaffiliates on February 27, 1999 was $7,838,722,194 based on the closing price of such stock on the New York Stock Exchange. This includes the shares owned by the Registrant's Leveraged Employee Stock Ownership Plan. The number of shares of common stock outstanding as of February 27,1999 was 164,889,619. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for fiscal year ended December 31, 1998. With the exception of those portions which are incorporated by reference into Parts I, II and IV of this Form 10-K Annual Report, the 1998 Annual Report to Shareholders is not to be deemed filed as part of this report. Proxy Statement for Annual Meeting of Shareholders to be held on May 5, 1999. See Part III of this Form 10-K Annual Report for portions incorporated by reference. (A definitive proxy statement has been filed with the Commission since the close of the fiscal year). PART I Item 1. BUSINESS Ingersoll-Rand Company (the company) was organized in 1905 under the laws of the State of New Jersey as a consolidation of Ingersoll-Sergeant Drill Company and the Rand Drill Company, whose businesses were established in the early 1870's. Over the years, the company has supplemented its original business, which consisted primarily of the manufacture and sale of rock drilling equipment, with additional products which have been developed internally or obtained through acquisition. The following acquisitions have been accounted for as purchases and, accordingly, each purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values. The results of operations since the dates of acquisition are included in the consolidated financial statements. o In the first quarter of 1998, the company acquired for approximately $15.4 million in cash, substantially all the assets of Johnstone Pump Company (Johnstone). Johnstone manufactures industrial piston pumps, automated dispensing systems and related products for use primarily in the automotive industry. The company also acquired for approximately $18 million in cash, the door hardware technology and intellectual property relating to residential door locksets from the Master Lock unit of Fortune Brands, Inc. The Master Lock transaction covers patents and certain manufacturing assets used to produce residential locks, excluding padlocks. In the third quarter of 1998, the company acquired full ownership of GHH-RAND Schraubenkompressoren GmbH & Co. KG (GHH- RAND), a manufacturer of air ends for air compressors. The company previously owned 50 percent of GHH-RAND. o On October 31, 1997, the company acquired Thermo King Corporation (Thermo King) from Westinghouse Electric Corporation, for an aggregate purchase price of approximately $2.56 billion in cash. Thermo King designs, manufactures and distributes transport temperature control systems and service parts for a variety of mobile applications, including trailers, truck bodies, seagoing containers, buses and light-rail cars. o In April 1997, the company completed the acquisition of Newman Tonks Group PLC (Newman Tonks), a United Kingdom-based producer of architectural hardware products headquartered in Birmingham, England. Newman Tonks is a leading manufacturer, specifier and supplier of branded architectural hardware products. o On August 27, 1996, the company acquired for $34.3 million in cash and the assumption of certain liabilities, substantially all of the assets of Zimmerman International Corp. (Zimmerman). Zimmerman manufactures equipment and systems that assist in handling or lifting tools, components and materials for a variety of industrial operations. o On January 31, 1996, the company acquired for $95.4 million in cash and the assumption of certain liabilities, the Steelcraft Division of MascoTech, Inc. Steelcraft manufactures a wide range of cold-rolled and galvanized steel doors for use primarily in nonresidential construction. Dispositions that the company has made in recent years are as follows: o In the first quarter of 1998, the company completed the sale of Ing. G. Klemm Bohrtechnik GmbH. Also in 1998, the company sold certain assets of Ingersoll-Rand Architectural Hardware Group Limited (formerly Newman Tonks Group Limited). Sales proceeds approximated the book value of these assets. In the third quarter of 1998 the company sold the Spra-Coupe product line which was reported as part of the Specialty Vehicle Segment. The sale price of approximately $35 million resulted in a $9 million gain. o On February 14, 1997, the company sold Clark-Hurth Components Group (Clark-Hurth) to Dana Corporation for approximately $241.5 million of net cash. This group's 1997 results, inclusive of the sale transaction, produced operating income for the first quarter of approximately $2.7 million, but on an after-tax basis, reduced net earnings by approximately $3.6 million. o During 1996, the company sold the Process Systems Group in two separate transactions at a price of approximately $180.3 million. The company recorded a pretax gain of $55 million. Products The company manufactures and sells primarily nonelectrical machinery and equipment. Principal products include the following: Air balancers Air compressors & accessories Air dryers Air logic controls Air motors Air and electric tools Architectural hardware trim Asphalt compactors Asphalt pavers Automated dispensing systems Automated production systems Automotive components Ball bearings Blasthole drills Blowers Centrifugal pumps Compact hydraulic excavators Construction equipment Diaphragm pumps Door closers Door control hardware Door locks, latches & locksets Doors and door frames (steel) Drilling equipment and accessories Electrical security systems Engineered pumps Engine-starting systems Exit devices Extrusion pump systems Fastener-tightening systems Fluid-handling equipment Foundation drills Golf cars Hoists Hydraulic breakers Lubrication equipment Material handling equipment Mining equipment Multistage pumps Needle roller bearings Parts-washing systems Paving equipment Piston pumps Pneumatic breakers Pneumatic cylinders Pneumatic valves Portable compressors Portable generators Portable light towers Reciprocating pumps Road-building machinery Rock drills Rock stabilizers Roller bearings Rotary drills Rotary pumps Rough-terrain forklifts Skid-steer loaders Soil compactors Spray-coating systems Submersible pumps Transport temperature control systems Utility vehicles Vacuum pumps Vertical turbine pumps Waterjet-cutting systems Water-well drills Winches These products are sold primarily under the company's name and also under other names including ABG, Blaw-Knox, Bobcat, Charles Maire, Club Car, Dixie-Pacific, Dor-O-Matic, Ecoair, Fafnir, Falcon, Glynn-Johnson, Ingersoll-Dresser Pumps, Johnstone, LCN, Legge, Monarch, Montabert, Normbau, Schlage, Steelcraft, Thermo King, Torrington, Von Duprin and Zimmerman. During the past three years, the division of the company's sales between capital goods and expendables has been in the approximate ratio of 63 percent and 37 percent, respectively. The company generally defines as expendables those products which are not capitalized by the ultimate user. Examples of such products are parts sold for replacement purposes, power tools and needle bearings. Additional information on the company's business and financial information about industry segments is presented in Note 17 to the Consolidated Financial Statements included in the company's Annual Report to Shareholders for 1998, incorporated by reference in this Form 10-K Annual Report. Distribution The company's products are distributed by a number of methods which the company believes are appropriate to the type of product. Sales are made domestically through branch sales offices and through distributorships and dealers across the United States. International sales are made through approximately 75 subsidiary sales and service companies with a supporting chain of distributors in over 100 countries. Working Capital The working capital requirements of the company vary with respect to the many products and industries in which it is involved. In general, the requirements of its Engineered Products Segment, which manufactures machinery for specialized customer needs, involve a relatively long lead time and, at times, more significant company investment with respect to the particular product or order. Historically, these orders are generally covered by progress payments, which reduce the company's investment in the amount of inventory maintained by this segment. The products manufactured by the company's Specialty Vehicles, Air & Temperature Control and Hardware and Tools segments are more in the nature of standard equipment. Consequently, a wider variety of such products must usually be more readily available to meet rapid delivery requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the company's major competitors. Customers No material part of the company's business is dependent upon a single customer or very few customers, the loss of any one of which would have a material adverse effect on the company's operations. Competitive Conditions The company's products are sold in highly competitive markets throughout the world against products produced by both foreign and domestic corporations. The principal methods of competition in these markets relate to price, quality and service. The company believes that it is one of the leading manufacturers in the world of a broad line of air compression systems, anti- friction bearings, construction equipment, transport temperature control products, air tools, pumps, golf cars and utility vehicles. In addition, the company believes it is a leading supplier in domestic markets for locks, other door hardware products, skid-steer loaders and asphalt paving equipment. International Operations Sales to customers outside the United States accounted for approximately 38 percent of the consolidated net sales in 1998. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not have a significant effect on the company's international operations. Raw Materials The company manufactures many of the components included in its products. The principal raw materials required for the manufacture of the company's products are purchased from numerous suppliers, and the company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future. Backlog The company's approximate backlog of orders at December 31, 1998, believed by it to be firm, was $248 million for the Specialty Vehicles Segment, $304 million for the Air & Temperature Control Segment, $189 million for the Hardware & Tools Segment and $743 million for the Engineered Products Segment as compared to $247 million, $323 million, $192 million and $783 million, respectively, at December 31, 1997. These backlog figures are based on orders received. While the major portion of the company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead time and are often subject to revision, deferral, cancellation or termination. The company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months. Research, Engineering and Development The company maintains extensive research, engineering and development facilities for experimenting, testing and developing high quality products. The company employs approximately 1,821 professional employees for its research, engineering and development activities. The company spent $259 million in 1998, $216 million in 1997 and $209 million in 1996 on research, engineering and development. Patents and Licenses The company owns numerous patents and patent applications and is licensed under others. While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them. In the company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses. Environmental Matters The company has been and continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities. During 1998, the company spent approximately $8 million on capital projects for pollution abatement and control and an additional $6 million for environmental remediation expenditures at sites presently or formerly owned or leased by the company. It should be noted that these amounts are difficult to estimate because environmental improvement costs are generally a part of the overall improvement costs at a particular plant, and the accurate estimate of which portion of an improvement or a capital expenditure relates to an environmental improvement is difficult to ascertain. The company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain. The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off- site waste disposal at approximately 32 federal Superfund and state remediations sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has 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 contribution on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future. Although uncertainties regarding environmental technology, state and federal laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies and the company does not discount its liability or assume any insurance recoveries. Employees There are approximately 46,500 employees of the company throughout the world, of whom approximately 29,000 work in the United States and 17,500 in foreign countries. Approximately 38% percent of the company's United States production and maintenance employees, who work in 14 plants, are represented by 8 unions. The company believes relations with its employees are good. Item 2. PROPERTIES The company's executive offices are located at Woodcliff Lake, New Jersey. Manufacturing and assembly operations are conducted in 60 plants in the United States; 5 plants in Canada; 39 plants in Europe; 11 plants in Asia, and 7 plants in Latin America. The company also maintains various warehouses, offices and repair centers in the United States, Canada and abroad. Substantially all plant facilities are owned by the company and the remainder are under long-term lease. The company believes that its plants and equipment have been well-maintained and are generally in good condition. The company has several closed facilities that it is actively marketing with the intent of selling them at their net realizable value. The reportable segments for which the facilities are primarily used are as described below. Facilities under long-term lease are included below and are not significant to each operating segment's total number of plants or square footage. Specialty Vehicles The Specialty Vehicle Segment designs, manufactures and markets powered vehicles that play a niche role in such fields as infrastructure development, commercial construction and material movement. This segment's products include machinery regularly used in general manufacturing and in industries such as mining and construction. This segment's branded products include Bobcat skid-steer loaders and compact hydraulic excavators; Club Car golf cars; Blaw-Knox pavers; and Ingersoll-Rand compactors, drilling equipment and rough-terrain material handlers. The segment's manufacturing locations are as follows: Approximate Number of Plants Square Footage Domestic 7 2,299,000 International 3 547,000 Total 10 2,846,000 Air & Temperature Control The Air and Temperature Control Segment focuses on markets requiring air and refrigerant gas compression technology and services. This segment's branded products include Thermo King Transport Temperature-Control equipment, and Ingersoll-Rand air compressors. The segment's manufacturing facilities are as follows: Approximate Number of Plants Square Footage Domestic 10 2,479,000 International 16 2,256,000 Total 26 4,735,000 Hardware and Tools The Hardware and Tool Segment concentrates on manufacturing, marketing, and managing the distribution channels required to reach end user customers seeking products that enhance productivity and security in the industrial, construction, and do- it-yourself markets. This segment includes architectural hardware products, such as Schlage locks, Von Duprin exit devices, door-control hardware, steel doors, power operated doors and architectural columns, and tools and related industrial- production equipment. The segment's manufacturing facilities are as follows: Approximate Number of Plants Square Footage Domestic 20 3,495,000 International 20 1,542,000 Total 40 5,037,000 Engineered Products The Engineered Products Segment is comprised of highly engineered application products that are sold on a specific contract design basis. This segment's products include Torrington and Fafnir bearings and components, and pumps used in industrial, commercial and municipal applications. The segment's manufacturing facilities are as follows: Approximate Number of Plants Square Footage Domestic 23 5,251,000 International 23 3,456,000 Total 46 8,707,000 Item 3. LEGAL PROCEEDINGS In the normal course of business, the company is involved in a variety of lawsuits, claims and legal proceedings, including proceedings for off-site waste disposal cleanup of approximately 32 sites under federal Superfund and similar state laws. In the opinion of the company, pending legal matters, including the one discussed below, are not expected to have a material adverse effect on the results of operations, financial condition, liquidity or cash flows. By letter dated February 4, 1999, the Michigan Department of Environmental Quality ("DEQ") assessed a civil penalty in the amount of $113,750 on the Company for an alleged violation of a DEQ Administrative Order on Consent ("AOC"). The AOC governs the Company's environmental investigation and cleanup obligations related to the McCoy Creek Industrial Park, Buchanan, Michigan. The Company contests the penalty and has invoked the dispute resolution provisions of the AOC to resolve the matter. See also the discussion under Item 1 - Environmental Matters. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the company's security holders during the last quarter of its fiscal year ended December 31, 1998. The following information is included in accordance with the provision of Part III, Item 10. Date of Service as Principal Occupation and an Executive Other Information Name and Age Officer for Past Five Years James E. Perrella(63) 5/4/77 Chairman of the Board, President and Chief Executive Officer, Director Brian D. Jellison(53) 2/7/96 Executive Vice President, (Vice President and President of the Architectural Hardware Group, 1995 - 1998; President of the Door Hardware Group, 1994 - 1995) Steven T. Martin(58) 5/2/96 Executive Vice President (Vice President and President of Production Equipment Group,1996 - 1998; President of Production Equipment Group 1995 - 1996, Vice President and General Manager Fafnir Bearings Division of Torrington, 1986-1995) David W. Devonshire(53) 1/12/98 Senior Vice President and Chief Financial Officer, (Senior Vice President and Chief Financial Officer, Owens Corning 1993 - 1997) Patricia Nachtigal(52) 11/2/88 Vice President and General Counsel Nicholas J. Pishotti(58) 4/10/95 Vice President - Strategic Technologies (General Manager, Aircraft Engine Sourcing Department, General Electric Company, 1988 - 1995) Steven R. Shawley(46) 6/1/98 Controller (Thermo King Business Unit Controller 1994-1998; Controller - Power Generation Projects Division of Westinghouse Electric Corporation 1993 -1994) No family relationship exists between any of the above-listed executive officers of the company. All officers are elected to hold office for one year or until their successors are elected and qualify. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the principal market for the company's common stock and related stockholder matters are as follows: Quarterly share prices and dividends for the common stock are shown in the following tabulation. The common shares are listed on the New York Stock Exchange and also on the London and Amsterdam exchanges. Common Stock High Low Dividend 1998 First quarter 49 1/4 36 1/2 $0.150 Second quarter 54 41 0.150 Third quarter 47 5/8 34 7/8 0.150 Fourth quarter 52 1/8 34 0.150 1997 First quarter $32 7/8 $28 9/16 $0.137 Second quarter 41 3/4 27 13/16 0.137 Third quarter 45 9/16 37 1/2 0.150 Fourth quarter 46 1/4 34 11/16 0.150 The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800)524-4458) is the transfer agent, registrar and dividend reinvestment agent. There are no significant restrictions on the payment of dividends. The approximate number of record holders of common stock as of February 27, 1999 was 11,190. Item 6. SELECTED FINANCIAL DATA Selected financial data for the five years ended December 31, 1998, is as follows (in millions except per share amounts): December 31 1998 1997 1996 1995 1994 Net sales $8,291.5 $7,103.3 $6,702.9 $5,729.0 $4,507.5 Net earnings 509.1 380.5 358.0 270.3 211.1 Total assets 8,309.3 8,415.6 5,621.6 5,563.3 3,596.9 Long-term debt 2,166.0 2,528.0 1,163.8 1,304.4 315.9 Shareholders' equity 2,707.5 2,341.4 2,090.8 1,795.5 1,531.3 Basic earnings per common share $3.11 $2.33 $2.22 $1.70 $1.33 Diluted earning per common share 3.08 2.31 2.21 1.69 1.33 Dividends per common share 0.60 0.57 0.52 0.49 0.48 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1998 Compared to 1997 The company reported a fifth consecutive year of record sales and earnings for 1998. These financial achievements were the result of a strong domestic economy, moderate economic growth in selected international markets, and continued success of the company's asset-management, strategic-sourcing and productivity- improvement programs, despite depressed results in the company's Asian markets. Sales for 1998 totalled $8.3 billion, which generated $1,044.4 million of operating income and $509.1 million of net earnings ($3.08 diluted earnings per share). The company's results for 1998 included a full year's benefit from the October 31, 1997, acquisition of Thermo King Corporation (Thermo King). Thermo King reported 1998 sales of $1.2 billion with an operating income contribution of $159.3 million and net earnings of $24.0 million or 15 cents diluted earnings per share after the allocation of acquisition interest expense and the related tax benefit. The company's reported results for 1997 were sales of $7.1 billion, which generated $760.3 million of operating income and produced net earnings for the year of $380.5 million ($2.31 diluted earnings per share). The 1997 noncomparable items include the following: o Thermo King's activity for the last two months of the year generated $176.9 million of sales and produced an operating loss of $0.2 million, after goodwill amortization and the effect of estimated purchase accounting adjustments. Thermo King's net loss for the two months ended December 31, 1997, was $11.3 million (seven cents diluted earnings per share) after the allocation of acquisition interest expense of $27.3 million. o The equity in earnings of partially-owned affiliates in 1997 included a restructuring charge recorded by one of the company's partially-owned affiliates. This charge reduced the company's pretax earnings by $13.9 million and its after-tax results by $11.6 million (seven cents diluted earnings per share). o During the fourth quarter of 1997, a consolidated (51-percent owned) joint venture of the company recorded a $24 million charge to operating income for costs to close and consolidate underperforming operations. The effect of the restructure charge, after taxes and minority interest, was $8.1 million (five cents diluted earnings per share). After considering the items listed above, adjusted 1997 net sales, operating income and net earnings were approximately $6.9 billion, $784 million and $412 million ($2.50 diluted earnings per share), respectively. On an adjusted basis, 1998 sales increased modestly, with a 12.8- percent increase in operating income resulting in a significant increase of 18 percent in net earnings for 1998 over the adjusted 1997 results. A comparison of key financial data between 1998 and 1997 follows: o Net sales in 1998 established a record at $8.3 billion, reflecting a 16.7-percent improvement over the 1997 total of $7.1 billion. Excluding noncomparable units from both years, adjusted sales for 1998 increased by 2.3 percent over the 1997 adjusted total. o Cost of goods sold in 1998 was 72.9 percent of sales, compared to 74.1 percent in 1997. There were no partial liquidations of LIFO (last-in, first-out) inventory during 1998, but such liquidations lowered 1997 costs by $4.1 million. Excluding the effects of the LIFO liquidations, the 1997 cost of goods sold relationship to sales would have been 74.2 percent versus 72.9 percent for 1998. Excluding noncomparable items from both years, the adjusted ratio of cost of goods sold to sales reflected a marked improvement in 1998, compared to 1997. o Administrative, selling and service engineering expenses were 14.5 percent of sales in 1998, compared to 15.2 percent for 1997. This decrease is primarily attributable to the inclusion of Thermo King, which traditionally had a ratio of selling and administrative expenses to sales lower than the company's historical lines of business. o Operating income for the year totalled $1,044.4 million, a 37.4-percent increase over 1997 operating income of $760.3 million. The ratio of operating income to sales in 1998 was 12.6 percent, compared to 10.7 percent for the prior year. After excluding the noncomparable items (previously discussed) from both years, adjusted 1998 operating income still reflects a double-digit improvement over the adjusted 1997 results. This improvement was the combined effect of the company's aggressive productivity-improvement and procurement programs, and the continued stability of domestic markets. o Interest expense for the year totalled $225.8 million versus $136.6 million for 1997. Interest expense associated with the debt incurred for the Thermo King acquisition totalled approximately $129.3 million in 1998 (excluding costs related to the company's equity-linked securities) and $27.3 million for the last two months of 1997. o Other income (expense), net, is the sum of foreign exchange activities and other miscellaneous income and expense items. In 1998, these activities resulted in a net expense of $22.0 million, an unfavorable change of $0.5 million compared to the 1997 net other expense of $21.5 million. This change was caused by higher foreign exchange losses of $10.2 million in 1998, offset by lower net miscellaneous income and expense items. o The company's equity in earnings of partially-owned affiliates includes its interest in several affiliates that operate in similar lines of business and includes the company's 49-percent interest in Dresser-Rand Company (Dresser-Rand). The combined equity earnings for 1998 totalled $46.8 million compared to $28.8 million for 1997. The year-over-year increase of $18.0 million reflects a $23.6 million improvement in the results from Dresser-Rand. The Dresser-Rand improvement resulted from a combination of stronger operating results in 1998 and a nonrecurring charge of $11.6 million in 1997, which was partially offset by lower earnings from the company's partially- owned affiliates operating in Asian markets. o The company's charges for minority interests are composed of two items: (1) interests of minority owners (less than 50 percent) in a consolidated unit of the company which totalled $34.5 million in 1998 and $17.3 million in 1997, and (2) $19.7 million of charges associated with the company's equity-linked securities issued during the first quarter of 1998 as a financing component of the Thermo King acquisition. The largest minority interest relates to Ingersoll-Dresser Pump Company (IDP), which represented $30.7 million of the 1998 balance, compared to $13.7 million in 1997. IDP's change is due to stronger operating results in 1998 and the 1997 pretax restructuring charge of $24 million (discussed previously). The remaining charges for minority interests during the two periods were comparable. o The company's effective tax rate for 1998 was 35.5 percent, which improved from the 38.0 percent reported for the prior year due to a full-year favorable tax benefit associated with the Thermo King acquisition. The variance from the 35.0 percent statutory rate primarily was due to the higher tax rates associated with foreign earnings, the effect of state and local taxes, the nondeductibility of a portion of the goodwill associated with acquisitions and favorable tax benefits associated with the Thermo King acquisition. At December 31, 1998, employment totalled 46,525. This represents a slight decrease from last year's level of 46,567. Outlook The company's outlook for 1999 is for steady improvement in operating results based on continued stability and growth in domestic markets, with no further deterioration in Asian markets and some strengthening in European markets. These expectations will be supported by aggressive asset-management, strategic-sourcing and productivity-improvement programs. Review of Business Segments Specialty Vehicles Specialty Vehicles Segment sales were $2.2 billion, an increase of 8.4 percent over the $2.0 billion reported for 1997. Operating income for 1998 totalled $333.3 million, representing an increase of 47.0 percent over last year's total of $226.7 million. All major product lines reported improvements in sales, operating income and operating margins for the year. Air and Temperature Control The Air and Temperature Control Segment reported sales and operating income of $2.2 billion and $262.5 million, respectively, compared with $1.3 billion and $133.7 million, respectively, in 1997. The results for 1997 include only two months of Thermo King, while the full year of 1998 produced sales of $1.2 billion and operating income of $159.3 million. Air compressor sales decreased by 4.3 percent, while operating income decreased by 22.9 percent. This decline was caused by continued weakness in the company's Asian markets. Hardware and Tools The Hardware and Tools Segment sales increased by 4.4 percent to $1.7 billion. Operating income increased $33.5 million from $254.8 million in 1997. Architectural hardware products reported increases of 13.9 percent in sales and 26.9 percent in operating income. Modest decreases in sales and operating income for industrial-production equipment were attributable to continued weakness in the automated production systems business. Engineered Products In 1998, the Engineered Products Segment reported a 1.5 percent decrease in sales and a 9.4 percent increase in operating income compared to 1997. The lower sales reflect weakness in the Fafnir industrial bearings business. IDP's sales were up 4.9 percent from 1997, and operating income increased $37.2 million, largely due to the $24 million restructuring charge recorded in 1997. Liquidity and Capital Resources During 1998, the company made significant progress in improving its liquidity and capital resources by (1) completing the financing of the Thermo King acquisition with the issuance of $402.5 million of equity-linked securities during the first quarter of the year, and (2) reducing the company's debt by an additional $570.9 million, which was generated from the company's strong cash flow during the year. The proceeds from the equity- linked securities were used to reduce the company's short-term borrowings, which were originally issued to satisfy a portion of the cash requirements for the acquisition of Thermo King on October 31, 1997. These actions primarily contributed to the company's reduction in its debt-to-total capital ratio from 58 percent at the end of last year to 43 percent at December 31, 1998. The following table contains several key measures which the company's management uses to gauge the company's financial performance: 1998 1997 1996 Working capital (in millions) $579 $217 $1,245 Current ratio 1.3 1.1 2.0 Debt-to-total capital ratio 43% 58% 37% Average working capital to net sales 4.8% 10.3% 16.9% Average days outstanding in receivables 50.9 54.5 56.1 Average months' supply of inventory 2.4 2.5 3.0 The company maintains significant operations in foreign countries; 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 foreign subsidiaries is their local currency, the currency in which they transact their business. The company manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through the use of forward exchange contracts. The company attempts, through its hedging activities, to mitigate the impact on income of changes in foreign exchange rates. Additionally, the company maintains operations in countries where the company transacts business in U.S. dollars. The functional currency of these operations is the U.S. dollar. (Additional information on the company's use of financial instruments can be found in Note 7 to the Consolidated Financial Statements.) The following points highlight the financial results and financial condition of the company's operations, with the impact of foreign currency translation where appropriate: o Cash and cash equivalents totalled $71.9 million at December 31, 1998, a $33.0 million reduction from the prior year-end balance of $104.9 million. In evaluating the net change in cash and cash equivalents, cash flows from operating, investing and financing activities, and the effect of exchange rate changes should be considered. Cash flows from operating activities provided $899.0 million, investing activities used $183.4 million and financing activities used $752.4 million. Exchange rate changes during 1998 increased cash and cash equivalents by $3.8 million. o Marketable securities totalled $5.7 million at the end of 1998, $1.2 million below the balance at December 31, 1997. The net reduction was due to maturities and exchange rate changes. o Receivables totalled $1,177.1 million at December 31, 1998, compared to $1,281.5 million at the prior year end, a net decrease of $104.4 million. The decrease is attributable to improved cash collections and reductions from dispositions. The company focuses on decreasing its receivables base through its asset-management program, which produced a reduction in the average days outstanding in receivables to 50.9 days from the 1997 level of 54.5 days. o Inventories amounted to $940.8 million at December 31, 1998, an increase of $86.0 million from last year's level of $854.8 million. Inventory increases at year end in anticipation of early 1999 shipments, were the primary reason for the increase. The company's emphasis on inventory control was demonstrated by the reduction of the average months' supply of inventory to 2.4 months at December 31, 1998, compared to 2.5 months at the prior year end. o Prepaid expenses totalled $88.7 million at the end of the year, $47.3 million lower than the balance at December 31, 1997. Dispositions associated with assets held for sale are the primary reason for the reduction in the account balance. o Deferred income taxes (current) of $143.4 million at December 31, 1998, represented the deferred tax benefit of the difference between the book and tax values of various current assets and liabilities. The components of the balance are included in Note 14 to the Consolidated Financial Statements. o Investments in and advances with partially-owned equity affiliates at December 31, 1998, totalled $344.7 million, $16.7 million above the 1997 balance of $328.0 million. This category includes the company's 49-percent investment in Dresser-Rand Company, as well as its investments in other partially-owned equity affiliates. The investment in Dresser-Rand increased by approximately $33 million during the year, reflecting the company's portion of Dresser-Rand's 1998 results. The effects of translation offset the reduction in the advance account between the company and Dresser-Rand. Income and dividends from the investments in all of the other partially-owned equity affiliates were $13.8 million and $6.7 million, respectively. Amounts due from these units decreased $13.6 million from December 31, 1997. Currency movements and capital infusions were the primary cause of the remaining change in the account balance. o Net property, plant and equipment increased by $64.4 million in 1998 to a year-end balance of $1,347.6 million. Capital expenditures in 1998 totalled $221.0 million, and acquisitions (net of dispositions) added $13.0 million. Foreign exchange fluctuations increased net fixed assets by approximately $4.6 million. The remaining net decrease was the result of depreciation, and sales and retirements. o Intangible assets, net, totalled $3,774.3 million at December 31, 1998, as compared to $3,833.0 million at December 31, 1997, for a net decrease of $58.7 million. The amortization expense for the current year was $110.5 million. Acquisition activity and the effects of foreign currency translation accounted for the balance of the change. o Deferred income taxes (noncurrent) totalled $235.9 million at December 31, 1998, which was $21.0 million higher than the 1997 balance. The components comprising the balance at December 31, 1998, can be found in Note 14 to the Consolidated Financial Statements. o Other assets totalled $179.4 million at year end, a decrease of $32.2 million from the December 31, 1997, balance of $211.6 million. Other assets decreased by approximately $25 million due to a decrease in prepaid pensions and a general reduction in other noncurrent assets accounted for the balance of the reductions. Foreign exchange activity in 1998 had a minimal effect on the account balance during the year. o Accounts payable and accruals totalled $1,488.6 million at December 31, 1998, an increase of $118.1 million from last year's balance of $1,370.5 million. Increased inventory levels at year end and acquisitions, net of dispositions, along with the timing of payrolls and benefits account for the increase in 1998. o Loans payable were $318.7 million at the end of 1998, which reflects a $606.4 million reduction from the $925.1 million level at December 31, 1997. Proceeds of $389.6 million from the issuance of the company's equity-linked securities, were used to reduce short-term debt during the year. In addition, as a result of the company's aggressive asset management policies, the company also repaid an additional $468.4 million of short- term debt during 1998. Current maturities of long-term debt increased the account balance by an additional $251.8 million. The effect of translation accounted for the remaining change in the account balance from the previous year end. o Long-term debt, excluding current maturities, totalled $2,166.0 million, a reduction of approximately $362.0 million from the prior year's balance of $2,528.0 million. Reductions to long- term debt of $251.8 million represent the reclassification of the current maturities of long-term debt to loans payable. In addition, the company also repaid $110.0 million of long-term debt with accelerated payments during the year. Foreign exchange activity had a minimal effect on the account balance during the year. o Postemployment liabilities at December 31, 1998, totalled $897.1 million, a decrease of $40.0 million from the December 31, 1997, balance. Postemployment liabilities include medical and life insurance postretirement benefits, long-term pension and other noncurrent postemployment accruals. (See Notes 15 and 16 to the Consolidated Financial Statements for additional information.) o Minority interest liabilities at December 31, 1998, totalled $133.6 million, which represents a net increase of $5.7 million over the balance at the end of the prior year. This liability represents the ownership interests of other entities in selected consolidated subsidiaries of the company, the largest being the 49-percent interest in IDP. IDP's minority interest at December 31, 1997, was $104.3 million. This balance increased by $30.7 million, based on IDP's 1998 earnings and was reduced by $35.0 million, which represented increases in advances to the minority partner and the effect of translation. The liability for all other minority interests totalled $23.6 million at December 31, 1997, and increased to $33.6 million during 1998 due to earnings, advances and changes in ownership participation. o Other liabilities (noncurrent) at December 31, 1998, totalled $154.0 million, which approximated the balance at December 31, 1997. These obligations are not expected to be paid in the next year. Generally, these accruals cover environmental, insurance, legal and other contractual obligations. Other information concerning the company's financial resources, commitments and plans is as follows: The average amount of short-term borrowings outstanding, excluding current maturities of long-term debt, was $315.8 million in 1998, compared to $380.0 million in 1997. The weighted average interest rate during 1998 was 6.3%, compared to 6.2% during the previous year. The maximum amounts outstanding during 1998 and 1997, were $796.2 million and $2,434.1 million, respectively. The company had $1.0 billion in domestic short-term credit lines at December 31, 1998, and $454.2 million of foreign credit lines available for working capital purposes, $1.4 billion of which was unused at the end of the year. These facilities exceed projected requirements for 1999 and provide direct support for commercial paper and indirect support for other financial instruments, such as letters of credit and comfort letters. In 1998, foreign currency translation adjustments increased shareholders' equity by $3.3 million. This change was due to the minor weakening of the U.S. dollar against other currencies in countries where the company has significant operations and the local currencies are the functional currencies. Currency changes in France, Germany, and Japan accounted for nearly all of the change. During 1997, the company established two wholly-owned special purpose subsidiaries to purchase accounts and notes receivable at a discount from the company on a continuous basis. These special purpose subsidiaries simultaneously sell an undivided interest in these accounts and notes receivable to a financial institution up to a maximum of $170 million. The agreements between the special purpose corporations and the financial institution will expire in one-year periods. The company intends to renew these agreements at their expiration dates with either the current or another financial institution. The company is retained as the servicer of the pooled receivables. Prior to 1997, the company had sold an undivided interest in the accounts and notes receivable directly to financial institutions. At December 31, 1998 and 1997, $170 million and $150 million, respectively, of such receivables remained uncollected. Capital expenditures were $221.0 million and $186.0 million in 1998 and 1997, respectively. The company continues investing to improve manufacturing productivity, reduce costs and provide environmental enhancements, and advanced technologies for existing facilities. The capital expenditure program for 1999 is estimated at approximately $220 million, including amounts approved in prior periods. There are no planned projects, either individually or in the aggregate, that represent a material commitment for the company. Many of these projects are subject to review and cancellation at the option of the company without incurring substantial charges. Equity-linked Securities In March 1998, the company, together with a statutory business trust of the company (Finance Trust) issued an aggregate of (a) 16,100,000 equity-linked securities, and (b) 1,610,000 Finance Trust 6.22% capital securities, each with a stated liquidation amount. The equity-linked securities consisted of (a) 14,490,000 income equity-linked securities, and (b) 1,610,000 growth equity- linked securities. Additional details about these equity-linked securities are included in Note 10 to the Consolidated Financial Statements. Financial Market Risk 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 for the purchase or sale of a currency in accordance with authorized levels pursuant to the company's policies and procedures. The company applies sensitivity analysis and value at risk (VAR) techniques when measuring the company's exposure to currency fluctuations. VAR is a measurement of the estimated loss in fair value until currency positions can be neutralized, recessed or liquidated and assumes a 95-percent confidence level with normal market conditions. The potential one day loss, as of December 31, 1998, was $2.8 million and it is considered insignificant in relation to the company's results of operations and shareholders' equity. With regard to interest rate risk, the effect of a hypothetical one-percentage point increase in interest rates, across all maturities, would increase the estimated fair value of the company's long-term debt at December 31, 1998 from its carrying value of $2,166.0 million to $2,188.8 million. Year 2000 The company has in place a year 2000 compliance program to address the issues raised by computer date programs using the last two digits of a year. Pursuant to its year 2000 program, the company reviewed its computer information systems, computer hardware and embedded technology used in the company's products and processes. This review was designed to identify which computer systems and embedded technology might fail to correctly process the year 2000. Based upon this review, which is now complete, the company is replacing, modifying and/or upgrading certain computer systems and embedded technology with the objective being that no significant systems or devices will malfunction as the result of failing to correctly process the year 2000. The company, through the use of both internal resources and outside consultants, has actively engaged in this replacement, modification and upgrading and had substantially completed its remediation program and testing by the end of 1998. The review of company products revealed that all products currently being produced are year 2000 compliant. The total estimated cost of the year 2000 compliance program is approximately $60 million. Management estimates that as of December 31, 1998, total costs incurred to date have been approximately $55 million. Approximately 45 percent of these expenses were internal costs of the company. Although the company has incurred expenses prior to 1997, these costs were not separately identified. The company will continue to fund the cost of the year 2000 compliance program through operating cash flow. In addition to its internal review process, the company has contacted suppliers and distributors on the year 2000 issue to minimize problems in its supply and distribution chains. Most major suppliers have given assurances that their ability to supply the company will not be affected by the year 2000 issue; however, the company cannot assure timely compliance of third parties and may be adversely affected by failure of a significant third party to become year 2000 compliant. The company believes that the costs to address the issues raised by the year 2000 problem will not have a material impact on the company's financial condition, results of operations, liquidity or cash flows for any year. The schedule for successful completion of the year 2000 program and the estimated costs are based upon certain assumptions by management on future events, including the continued availability of qualified resources to implement the program and current costs for such resources. If the company fails to successfully complete a significant portion of its year 2000 compliance program, such failure may have a material adverse impact on the company's financial condition. Currently management does not consider the possibility of such a failure to be reasonably likely; however, in the event management's assessment changes an appropriate contingency plan will be developed. Euro Conversion On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing sovereign currencies and the euro. The participating countries agreed to adopt the euro as their common legal currency on that date. The company continues to identify and address all euro conversion compliance issues. At this time, the company has not experienced significant difficulties, but cannot predict the impact of the euro conversion because of the numerous uncertainties associated with noncompliance by third parties and the effect in the market place on pricing due to currency transparency. Environmental Matters The company has been and continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities. During 1998, the company spent approximately $8 million on capital projects for pollution abatement and control, and an additional $6 million for environmental remediation expenditures at sites presently or formerly owned or leased by the company. It should be noted that these amounts are difficult to estimate because environmental improvement costs are generally a part of the overall improvement costs at a particular plant. Therefore, the accurate estimate of which portion of an improvement or a capital expenditure relates to an environmental improvement is difficult to ascertain. The company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain. The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off- site waste disposal at approximately 32 federal Superfund and state remediation sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has not assumed it will bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties' financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future. Although uncertainties regarding environmental technology, state and federal laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies, and the company does not discount its liability or assume any insurance recoveries. Forward-looking Statements Information provided by the company in this 1998 Annual Report on Form 10-K, in periodic reports on Form 10-Q, in press releases and in statements made by employees in oral discussions may constitute or contain "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. Forward-looking statements represent the company's expectations concerning future events and, by their nature, involve risk and uncertainty. The company cautions investors that forward-looking statements are not guarantees of future performance. A variety of factors could cause business conditions and actual results to differ materially from expected results contained in forward-looking statements. The company includes among those factors the following: changes in the rate of economic growth in the United States and in other major international economies; impacts of unusual items resulting from ongoing evaluations of organizational structures, business strategies and acquisitions and dispositions; significant changes in trade, monetary and fiscal policies worldwide; currency fluctuations among the U.S. dollar and other currencies; demand for company products; distributor inventory levels; performance issues with key suppliers and subcontractors; impact of the year 2000; failure to achieve the company's productivity targets; costs and effects of unanticipated legal and administrative proceedings; and, competitor actions, such as unanticipated pricing actions or cost reduction strategies and entry into direct product line competition. 1997 Compared to 1996 Sales for 1997 totalled $7.1 billion, which generated $760.3 million of operating income and $380.5 million of net earnings ($2.33 basic earnings per share). The company's results for 1997 reflect a more impressive increase over 1996, considering the following noncomparable items: o On October 31, 1997, the company completed its acquisition of Thermo King Corporation (Thermo King) from Westinghouse Electric Corporation. For the last two months of 1997, Thermo King generated $176.9 million of sales and produced an operating loss of approximately $0.2 million, after goodwill amortization and the effect of estimated purchase accounting adjustments. Thermo King's net loss for the two months ended December 31, 1997, was approximately $11.3 million (seven cents per share) after the allocation of acquisition interest expense of approximately $27.3 million. o At the beginning of April 1997, the company completed its acquisition of Newman Tonks Group PLC (Newman Tonks). Since its acquisition, Newman Tonks has generated approximately $230 million of sales, and produced approximately $15 million of operating income, after the effect of goodwill amortization, estimated purchase accounting adjustments and synergistic benefits from group operations. Newman Tonks essentially operated at the break-even level for 1997 after considering the allocation of approximately $17.0 million of acquisition interest expense and its related tax benefit. o Dresser-Rand Company (Dresser-Rand) is a partnership that manufactures reciprocating compressor and turbomachinery products, in which the company owns a 49-percent interest. The company accounts for its interest in Dresser-Rand under the equity accounting method in which the company only records its related ownership interest in the results of Dresser-Rand. During the fourth quarter of 1997, Dresser-Rand recorded a $36 million restructuring charge to reduce its headcount and to close underperforming operations. This charge reduced the company's pretax earnings by $13.9 million and its after tax results by $11.6 million (seven cents per share). Prior to the restructuring charge, Dresser-Rand generated approximately $47.5 million of net earnings (after tax costs for international subsidiaries) for 1997. o Ingersoll-Dresser Pump Company (IDP) is a joint venture, in which the company owns a 51-percent interest and, therefore, it is consolidated into the company's financial statements. During the fourth quarter of 1997, IDP recorded a $24 million charge to operating income for costs to close and consolidate underperforming operations. The effect of the restructure charge, after taxes and minority interest, was $8.1 million. After considering the items listed above, adjusted 1997 net sales, operating income and net earnings were approximately $6.7 billion, $770 million and $412 million ($2.52 basic earnings per share), respectively. The company reported sales of $6.7 billion in 1996, which generated $683.5 million of operating income and $358.0 million of net earnings ($2.22 basic earnings per share). The company's 1996 results also included the following noncomparable items: o During 1996, the company sold the Process Systems Group in two transactions, which generated a combined pretax gain of $55.0 million and benefitted net earnings by $34.7 million (21 cents per share). o Other noncomparable items in 1996, which caused a net reduction to the company's operating income, were a $37 million restructure charge (principally for European operations) and a $5.4 million charge for the closure of a foundry at IDP. These charges were reduced by a gain on the sale of an investment during the 1996 first quarter of $4.8 million, which was recorded as other income. The after-tax effect of these items reduced net earnings by $22.5 million (14 cents per share). After considering the effect of these items, adjusted 1996 net sales, operating income and net earnings were $6.7 billion, $670.9 million and $345.8 million ($2.15 basic earnings per share), respectively. A comparison of key financial data between 1997 and 1996 follows: o Net sales in 1997 established a record at $7.1 billion, reflecting a six-percent improvement over the 1996 total of $6.7 billion. Excluding noncomparable units from both years, adjusted sales for 1997 increased by a comparable percent over the 1996 adjusted total. o Cost of goods sold in 1997 was 74.1 percent of sales, compared to 75.0 percent in 1996. Partial liquidations of LIFO (last- in, first-out) inventory lowered 1997 costs by $4.1 million as compared to a $4.8 million liquidation in 1996. Excluding the effects of the LIFO liquidations, the 1997 cost of goods sold relationship to sales would have been 74.2 percent versus 75.1 percent for 1996. Excluding noncomparable items from both years, the adjusted ratio of cost of goods sold to sales reflected a marked improvement in 1997, compared to 1996. o Administrative, selling and service engineering expenses were 15.2 percent of sales in 1997, compared to 14.8 percent for 1996. This increase is primarily attributable to the inclusion of Newman Tonks, which traditionally had a ratio of selling and administrative expenses to sales higher than the company's historical lines and the divestment of Clark-Hurth, which had a lower ratio than that of the overall company. o Operating income for the year totalled $760.3 million, an 11.2-percent increase over 1996 operating income of $683.5 million. The ratio of operating income to sales in 1997 was 10.7 percent, as compared to 10.2 percent for the prior year. After excluding the noncomparable items (previously discussed) from both years, adjusted 1997 operating income reflects a significant improvement over the adjusted 1996 results. This improvement was the combined effect of the company's aggressive productivity-improvement and procurement programs and the continued stability of domestic markets. o Interest expense for 1997 totalled $136.6 million versus $119.9 million for 1996. Interest expense associated with the debt incurred for the Thermo King acquisition totalled approximately $27.3 million. o Other income (expense), net, is the sum of foreign exchange activities, and other miscellaneous income and expense items. In 1997, these activities resulted in a net expense of $21.5 million, an unfavorable change of $2.7 million compared to the 1996 net other expense of $18.8 million. This change was caused by lower foreign exchange losses of approximately $4.6 million in 1997, the absence of the 1996 gain of $4.8 million from the sale of an investment and higher net miscellaneous expense items of approximately $2.5 million. o The company's equity in earnings of partially-owned affiliates, including Dresser-Rand results, for 1997 was $28.8 million as compared to $42.4 million in 1996. This decrease is mainly due to the Dresser-Rand restructuring charges, previously discussed. o The company's charges for minority interests totalled $17.3 million in 1997 versus $18.9 million in 1996. These charges represent the interests of minority owners (less than 50 percent) in a consolidated unit of the company. The largest minority interest relates to IDP, which represents $13.7 million of the 1997 balance, compared to $17.3 million in 1996. IDP's change is due to the 1997 pretax restructuring charge of $24 million (discussed previously). The remaining charges represent minority interests in the company's operations principally located in India and China. o The company's effective tax rate for 1997 was 38.0 percent, which represented a slight increase over the 37.0 percent reported for the prior year. The variance from the 35.0 percent statutory rate primarily was due to the higher tax rates associated with foreign earnings, the effect of state and local taxes, the nondeductibility of a portion of the goodwill associated with acquisitions and favorable tax benefits associated with the Thermo King acquisition. At December 31, 1997, employment totalled 46,567. This represents a net increase of 4,693 employees over the 1996 level of 41,874. This increase principally results from 1997 acquisition activity, partially offset by a reduction resulting from the Clark-Hurth disposition. The most significant event affecting the company's liquidity during 1997 was the acquisition of Thermo King on October 31,1997. The total purchase price paid for Thermo King was approximately $2.56 billion in cash, which was financed mainly by the issuance of both long-term and short-term debt. The effects of this transaction are discussed throughout this report, including in Note 2 to the Consolidated Financial Statements. The following points highlight the financial results and financial condition of the company's operations, with the impact of currency variations where appropriate: o Cash and cash equivalents totalled $104.9 million at December 31, 1997, a $79.2 million reduction from the prior year-end balance of $184.1 million. These funds were used to reduce a portion of the company's outstanding short-term debt incurred in connection with the Thermo King acquisition. In evaluating the net change in cash and cash equivalents, cash flows from operating, investing and financing activities, and the effect of exchange rate changes should be considered. Cash flows from operating activities provided $703.5 million, investing activities used $2.7 billion and financing activities provided approximately $2.0 billion. Exchange rate changes during 1997 increased cash and cash equivalents by $1.6 million. o Marketable securities totalled $6.9 million at the end of 1997, $1.1 million below the balance at December 31, 1996. The net reduction was due mainly to exchange rate changes. o Receivables totalled $1,281.5 million at December 31, 1997, compared to $1,066.2 million at the prior year end, a net increase of $215.3 million. The increase is attributable to the acquisitions of Thermo King and Newman Tonks, which added approximately $228.2 million. This increase was partially offset by currency translation, dispositions and reclassifications to assets held for sale, which caused net reductions of $34.5 million. The timing of the company's strong fourth quarter sales also increased the year-end receivables balance. The company focuses on decreasing its receivables base through its asset-management program, which produced a reduction in the average days outstanding in receivables to 54.5 days from the 1996 level of 56.1 days. o Inventories amounted to $854.8 million at December 31, 1997, an increase of $79.7 million from the prior year's level of $775.1 million. The acquisitions of Thermo King and Newman Tonks accounted for increases of approximately $185.6 million, while dispositions, reclassifications to assets held for sale and the effects of currency fluctuations reduced inventories by $57.2 million. The company's emphasis on inventory control was demonstrated by the reduction of the average months' supply of inventory to 2.5 months at December 31, 1997, compared to 3.0 months at the prior year end. o Prepaid expenses, including assets held for sale, totalled $136.0 million at the end of the year, $203.8 million lower than the balance at December 31, 1996. Assets held for sale totalled $46.5 million at December 31, 1997, and principally represented the net book value of selected operations from the Newman Tonks acquisition that did not meet the company's long- term objectives and certain European assets of the Specialty Vehicles Segment. Assets held for sale at December 31, 1996, comprised the net assets of Clark-Hurth, which were sold on February 14, 1997. Foreign exchange activity had a minimal effect on the remaining prepaid expenses, while acquisitions accounted for $14.2 million of the increase. o Deferred income taxes (current) of $160.8 million at December 31, 1997, represented the deferred tax benefit of the difference between the book and tax values of various current assets and liabilities. The components of the balance are included in Note 14 to the Consolidated Financial Statements. o Investments in partially-owned equity affiliates at December 31, 1997, totalled $328.0 million, $48.2 million below the 1996 balance of $376.2 million. Included in this account is the investment in Dresser-Rand, which totalled $115.0 million at December 31, 1997. Dresser-Rand's investment decreased $37.6 million from the 1996 balance of $152.6 million. The components of the Dresser-Rand change for 1997 consisted of income for the year of $9.4 million, a $42.9 million change in the company's advance account and a $4.1 million reduction due to foreign currency movements. Income and dividends from other investments in partially-owned equity affiliates were $19.2 million and $8.7 million, respectively. Amounts due from partially-owned affiliates excluding Dresser-Rand decreased from $18.3 million to $13.5 million at December 31, 1997. Currency movements were the primary cause of the remaining $16.3 million reduction. o Net property, plant and equipment increased by $137.8 million in 1997 to a December 31, 1997, balance of $1,283.2 million. Fixed assets from acquisitions added $186.6 million. Capital expenditures in 1997 totalled $186.0 million. Business dispositions and reclassifications to assets held for sale reduced the balance by $20.9 million. In addition, foreign exchange fluctuations decreased net fixed assets by approximately $24.5 million. The remaining net decrease was the result of depreciation and sales and retirements. o Intangible assets, net, totalled $3,833.0 million at December 31, 1997, as compared to $1,178.0 million at December 31, 1996, for a net increase of approximately $2.7 billion. Goodwill from the Thermo King and Newman Tonks acquisitions, net of amortization expense of $54.7 million during 1997 accounted for the change. o Deferred income taxes (noncurrent) totalled $214.9 million at December 31, 1997, which was $52.3 million higher than the 1996 balance. The components comprising the balance at December 31, 1997, can be found in Note 14 to the Consolidated Financial Statements. o Other assets totalled $211.6 million at December 31, 1997, a decrease of $12.2 million from the December 31, 1996, balance of $223.8 million. Other assets decreased by approximately $20 million due to prepaid pensions, an amount that was partially offset by increases due to acquisitions. Foreign exchange activity in 1997 had a minimal effect on the account balance during the year. o Accounts payable and accruals totalled $1,370.5 million at December 31, 1997, an increase of $275.1 million from the 1996 balance of $1,095.4 million. Acquisition activity during 1997 accounted for $259.4 million of the increase, while dispositions and currency fluctuations decreased accounts payable and accruals by $36.3 million. Additionally, accruals increased by $17 million due to IDP's restructure charge. o Loans payable were $925.1 million at the end of 1997, which reflects a $762.8 million increase over the $162.3 million at December 31, 1996. Short-term debt assumed from companies acquired during 1997 added $69.4 million and current maturities of long-term debt increased the balance by an additional $145.4 million. The effects of translation, dispositions and reclassifications to assets held for sale caused a $4.4 million reduction. The remaining increase is primarily due to higher short-term borrowings to finance Thermo King and other acquisitions. o Long-term debt, excluding current maturities, totalled $2,528.0 million, an increase of approximately $1.4 billion over the prior year's balance of $1,163.8 million. Proceeds from the issuance of long-term debt of $1,508.6 million were primarily used for the Thermo King acquisition. Reductions to long-term debt of $145.4 million represent the reclassification of the current maturities of long-term debt to loans payable. Foreign exchange activity had a minimal effect on the account balance during the year. o Postemployment liabilities at December 31, 1997, totalled $937.1 million, an increase of $122.4 million from the December 31, 1996, balance. Postemployment liabilities include medical and life insurance postretirement benefits, long-term pension and other noncurrent postemployment accruals. The increase in the liability during 1997 is almost exclusively related to the acquisitions of Thermo King and Newman Tonks. (See Notes 15 and 16 to the Consolidated Financial Statements for additional information.) o Minority interest liabilities at December 31, 1997, totalled $127.9 million, which also represented the balance at the end of the prior year. This liability represents the ownership interests of other entities in selected consolidated subsidiaries of the company, the largest being Dresser Industries' 49-percent interest in IDP. The other minority interests relate primarily to joint ventures in India and China. IDP's minority interest at December 31, 1996, was $113.4 million. It increased by $13.7 million, based on IDP's 1997 earnings and was reduced by $22.7 million, which represented increases in advances to Dresser Industries and the effect of translation. The liability for all other minority interests totalled $14.5 million at December 31, 1996, and increased to $23.5 million during 1997 due to earnings, acquisitions and advances. o Other liabilities (noncurrent) at December 31, 1997, totalled $153.4 million, which were $19.2 million higher than the balance at December 31, 1996. The net increase is primarily related to the Thermo King acquisition. These obligations are not expected to be paid in the next year. Generally, these accruals cover environmental, insurance, legal and other contractual obligations. Other information concerning the company's financial resources, commitments and plans is as follows: The average amount of short-term borrowings outstanding, excluding current maturities of long-term debt, was $380 million in 1997, compared to $58.0 million in 1996. The weighted average interest rate during 1997 was 6.2%, compared to 7.8% during 1996. The maximum amounts outstanding during 1997 and 1996, were $2.4 billion and $181.7 million, respectively. The company had $1.5 billion in domestic short-term credit lines at December 31, 1997, and $509.4 million of foreign credit lines available for working capital purposes, $2.0 billion of which was unused at the end of the year. These facilities provide direct support for commercial paper and indirect support for other financial instruments, such as letters of credit and comfort letters. At December 31, 1997, the debt-to-total capital ratio was 58 percent, as compared to 37 percent at the prior year end. This substantial increase resulted from debt issued in connection with the Thermo King acquisition. In 1997, foreign currency translation adjustments decreased shareholders' equity by $80.6 million. This change was due to the strengthening of the U.S. dollar against other currencies in countries where the company has significant operations and the local currencies are the functional currencies. Currency changes in Australia, Canada, Belgium, France, Germany, India, Italy, Japan, the Netherlands, Singapore and Spain accounted for nearly all of the change. Stock Split In August 1997, the board of directors declared a three-for-two stock split on the company's common stock. The stock split was made in the form of a stock dividend, and was paid on September 2, 1997, to shareholders of record on August 19, 1997. All prior year per share amounts have been restated to reflect the stock split. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The information required by Item 7A is provided under the caption "Financial Market Risk" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and supplementary financial information included in the accompanying Annual Report to Shareholders for 1998 are incorporated by reference in this Form 10-K Annual Report: (a) The consolidated financial statements and the report thereon of PricewaterhouseCoopers LLP dated February 2, 1999, are included as Exhibit 13 - the Annual Report to Shareholders for 1998. (b) The unaudited quarterly financial data for the two-year period ended December 31, 1998, is as follows (in millions except per share amounts): Net Cost of Operating Net 1998 sales goods sold income earnings First quarter $2,002.9 $1,484.1 $ 213.6 $ 99.1 Second quarter 2,186.2 1,596.7 286.3 140.9 Third quarter 2,020.0 1,484.1 250.2 119.4 Fourth quarter 2,082.4 1,481.7 294.3 149.7 Year 1998 $8,291.5 $6,046.6 $1,044.4 $509.1 Net Cost of Operating Net 1997 sales goods sold income earnings First quarter $1,639.4 $1,228.4 $166.6 $ 77.8 Second quarter 1,837.4 1,355.5 209.6 111.6 Third quarter 1,694.0 1,250.8 179.7 97.1 Fourth quarter 1,932.5 1,429.0 204.4 94.0 Year 1997 $7,103.3 $5,263.7 $760.3 $380.5 1998 1997 Basic Diluted Basic Diluted earnings earnings earnings earnings per per per per common common common common share share share share First quarter $0.60 $0.60 $0.48 $0.48 Second quarter 0.86 0.85 0.68 0.68 Third quarter 0.73 0.72 0.60 0.58 Fourth quarter 0.92 0.91 0.57 0.57 Year $3.11 $3.08 $2.33 $2.31 Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is (i) incorporated by reference in this Form 10-K Annual Report from pages 1 through 5, 17 and 18 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 5, 1999, and (ii) included after Item 4 in Part I of this Form 10-K Annual Report. Item 11. EXECUTIVE COMPENSATION Information on executive compensation is incorporated by reference in this Form 10-K Annual Report from pages 7 through 17 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 5, 1999. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information on security ownership of directors and nominees, directors and officers as a group and certain beneficial owners is incorporated by reference in this Form 10-K Annual Report on pages 4 and 5 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 5, 1999. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated by reference in this Form 10-K Annual Report from page 17 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 5, 1999. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. and 2. Financial statements and financial statement schedules The financial statements, together with the report thereon of PricewaterhouseCoopers LLP dated February 2, 1999, included as Exhibit 13 and the unaudited quarterly financial data included in Part II Item 8(b) are incorporated by reference in this Form 10-K Annual Report. The financial statement schedule listed in the accompanying index should be read in conjunction with the financial statements in such Annual Report to Shareholders for 1998. Separate financial statements for all 50 percent or less owned companies, accounted for by the equity method have been omitted because no individual entity constitutes a significant subsidiary. 3. Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this Form 10-K Annual Report. (b) Reports on Form 8-K A Current Report on Form 8-K (Item 5) dated November 4, 1998 reporting on the adoption of a Shareholder Rights Plane effective December 22, 1998. A Current Report on Form 8-K/A (Item 5) dated November 4, 1998 amending the reporting on the Shareholer Rights Plan. INGERSOLL-RAND COMPANY INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a) 1 and 2) Form 10-K Consolidated Financial Statements: Report of independent accountants * Consolidated balance sheet at December 31, 1998 and 1997 * For the years ended December 31, 1998, 1997 and 1996: Consolidated statement of income * Consolidated statement of shareholders' equity * Consolidated statement of cash flows * Notes to consolidated financial statements * Selected unaudited quarterly financial data ** Financial Statement Schedule: Report of independent accountants on financial statement schedule See below Consolidated schedule for the years ended December 31, 1998, 1997 and 1996: Schedule II -- Valuation and Qualifying Accounts See below * See Exhibit 13 - Ingersoll-Rand Company Annual Report to Shareholders for 1998. ** See Item 8 Financial Statements and Supplementary Data. Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Financial statements of the company's 50 percent or less owned companies, are omitted because individually they do not meet the significant subsidiary test of Rule 3-09 of Regulation S-X. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Ingersoll-Rand Company: Our audits of the consolidated financial statements referred to in our report dated February 2, 1999, which is included as part of Exhibit 13 - the Annual Report to Shareholders for 1998 of Ingersoll-Rand Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /S/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey February 2, 1999 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (No. 333-38367, No. 333-37019, and No. 333-34029) and to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-42133, No. 333-19445, No. 333-67257, No. 333- 00829, No. 33-35229, and No. 2-98258) of Ingersoll-Rand Company of our report dated February 2, 1999, which is included as part of Exhibit 13 - the Annual Report to Shareholders for 1998, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on this page. /S/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey March 26, 1999 SCHEDULE II INGERSOLL-RAND COMPANY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (Amounts in millions) Additions charged to Balance at costs and Balance beginning expenses Deductions at end Description of year (*) (**) of year 1998 Doubtful accounts $33.9 $13.3 $ 5.2 $42.0 1997 Doubtful accounts $34.3 $11.7 $12.1 $33.9 1996 Doubtful accounts $38.3 $ 8.6 $12.6 $34.3 (*) "Additions" include foreign currency translation. (**) "Deductions" include accounts and advances written off, less recoveries. INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 14(a)) Description 3 (i) Restated Certificate of Incorporation of Ingersoll-Rand Company, as amended through May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 3 (ii) Amendment to Restated Certificate of Incorporation of Ingersoll-Rand Company filed May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 3 (iii) Amendment to Restated Certificate of Incorporation of Ingersoll-Rand Company filed August 20, 1997. Incorporated by reference to Form S-3 filed October 2, 1997. 3 (iv) By-Laws of Ingersoll-Rand Company, as amended through January 5, 1999. Filed herewith. 4 (i) Rights Agreement, dated as of November 9, 1998. Incorporated by reference from Form 8-A/A of Ingersoll- Rand Company filed on November 13, 1998. 4 (ii) Indenture, dated as of August 1, 1986 between Ingersoll- Rand Company and The Bank of New York, as Trustee, as supplemented. Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 of the company's Form S-3 Registration Statement No. 33-39474. 4(iii) Purchase Contract Agreement dated as of March 23, 1998 between Ingersoll-Rand Company and The Bank of New York, as Purchase Contract Agent. Filed herewith. 4(iv) Pledge Agreement dated as of March 23, 1998 between Ingersoll-Rand Company and The Chase Manhattan Bank, as Collateral Agent, Custodial Agent and Securities Intermediary. Filed herewith. 4(v) Indenture dated as of March 23, 1998 between Ingersoll-Rand Company and The Bank of New York, as trustee. Filed herewith. 4(vi) First Supplemental Indenture dated as of March 23, 1998 between Ingersoll-Rand Company and The Bank of New York, as trustee. Filed herewith. 4(vii) Amended and Restated Declaration of Trust for Ingersoll- Rand Financing I, a Delaware statutory business trust, dated March 23, 1998. Filed herewith. 4(viii) Guarantee Agreement dated as of March 23, 1998, between Ingersoll-Rand Company and The First National Bank of Chicago, as trustee. Filed herewith. 4 (ix) (a) Ingersoll-Rand Company is a party to several long-term debt instruments under which in each case the total amount of securities authorized does not exceed 10% of the total assets of Ingersoll-Rand Company and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Ingersoll-Rand Company agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. 10 (iii) The following exhibits constitute management contracts or compensatory plans or arrangements required by Item 601 of Regulation S-K. 10 (iii) (a) Management Incentive Unit Plan of Ingersoll- Rand Company. Amendment to the Management Incentive Unit Plan, effective January 1, 1982. Amendment to the Management Incentive Unit Plan, effective January 1, 1987. Amendment to the Management Incentive Unit Plan, effective June 3, 1987. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (b) Ingersoll-Rand Company Directors Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997. 10 (iii) (c) Forms of Contingent Compensation Agreements with Vice Presidents and/or Group Presidents of Ingersoll-Rand Company. Filed herewith. 10 (iii) (d) Description of Bonus Arrangements for Executive Vice President of Ingersoll-Rand Company. Filed herewith. 10 (iii) (e) Description of Bonus Arrangements for Chairman, President and Staff Officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (f) Amended and Restated Form of Change of Control Agreement as of March 1, 1999 with Chairman and Chief Executive Officer of Ingersoll-Rand Company. Filed herewith. 10 (iii) (g) Amended and Restated Form of Change of Control Agreement as of March 1, 1999, with selected executive officers other than Chairman of Ingersoll-Rand Company. Filed herewith. 10 (iii) (h) Executive Supplementary Retirement Agreement for selected executive officers. Incorporated by reference to Form 10- K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (i) Executive Supplementary Retirement Agreement for selected executive officers. Incorporated by reference to Form 10- K for the year ended December 31, 1996, filed March 26, 1997. 10 (iii) (j) Incentive Stock Plan of 1985 of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll- Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (k) Forms of insurance and related letter agreements with certain executive officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (l) Incentive Stock Plan of 1990 of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll- Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (m) Restated Supplemental Pension Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996. 10 (iii) (n) Supplemental Stock and Savings Investment Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (o) Supplemental Retirement Account Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994. 10 (iii) (p) Incentive Stock Plan of 1995 of Ingersoll-Rand Company. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix A of the Proxy Statement dated March 15, 1995. 10 (iii) (q) Senior Executive Performance Plan. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix B of the Proxy Statement dated March 15, 1995. 10 (iii) (r) Amended and Restated Elected Officers Supplemental Plan. Filed herewith. 10 (iii) (s) Selected Executive Officer Employment Agreement. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996. 10 (iii) (t) Executive Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997. 10 (iii) (u) Senior Vice President and Chief Financial Officer Employment Agreement. Incorporated by reference to Form 10-k for the year ended December 31, 1997, filed March 6, 1998. 10 (iii) (v) Incentive Stock Plan of 1998 of Ingersoll-Rand Company. Incorporated by reference to Appendix A to the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement dated March 17, 1998. 11 Computation of Earnings Per Share. Filed herewith. 12 Computations of Ratios of Earnings to Fixed Charges. Filed herewith. 13 Ingersoll-Rand Company Annual Report to Shareholders for 1998. Not deemed to be filed as part of this report except to the extent incorporated by reference. Filed herewith. 21 List of Subsidiaries of Ingersoll-Rand Company. Filed herewith. 27 Financial Data Schedule. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INGERSOLL-RAND COMPANY (Registrant) By /S/ David W. Devonshire Date March 29, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date Chairman, President, Chief Executive Officer and Director (Principal /S/ James E. Perrella Executive Officer) March 29, 1999 (James E. Perrella) Senior Vice President Chief Financial Officer (Principal Financial /S/ David W. Devonshire and Accounting Officer) March 29, 1999 (David W. Devonshire) Controller (Principal /S/ Steven R. Shawley Accounting Officer) March 29, 1999 (Steven R. Shawley) /S/ Joseph P. Flannery Director March 29, 1999 (Joseph P. Flannery) /S/ Peter C. Godsoe Director March 29, 1999 (Peter C. Godsoe) /S/ Constance J. Horner Director March 29, 1999 (Constance J. Horner) /S/ H. William Lichtenberger Director March 29, 1999 (H. William Lichtenberger) /S/ Theodore E. Martin Director March 29, 1999 (Theodore E. Martin) /S/ Orin R. Smith Director March 29, 1999 (Orin R. Smith) /S/ Richard J. Swift Director March 29, 1999 (Richard J. Swift) /S/ Tony L. White Director March 29, 1999 (Tony L. White) EX-3 2 BY-LAWS of INGERSOLL-RAND COMPANY As amended through January 5, 1999 ARTICLE I. STOCKHOLDERS' MEETINGS Section 1. Annual Meeting: The annual meeting of the Stockholders of the Company shall be held on the fourth Thursday of April, in each year, or such other date as the Board of Directors may determine, at such hour and at such place within or without the State of New Jersey as may be fixed by the Board of Directors and stated in the notice of the meeting, for the election of Directors of the Company and for the transaction of such other business as may come before it in accordance with the provisions of these By-Laws. At any such annual meeting of Stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors, or (b) by any Stockholder entitled to vote at such meeting who complies with the procedures set forth in this Section 1. Any Stockholder entitled to vote at such meeting may propose business to be included in the agenda of such meeting only if written notice of such Stockholder's intent is given to the Secretary of the Company, either by personal delivery or by United States mail, postage prepaid, not later than 90 days in advance of the anniversary of the immediately preceding annual meeting or if the date of the annual meeting of Stockholders 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 Stockholders. A Stockholder's notice to the Secretary shall set forth in writing as to each matter such Stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Company's books, of the Stockholder proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the Stockholder and (d) any material interest of the Stockholder in such business. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1. The officer of the Company or other person presiding at the annual 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 Section 1, 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. Section 2. Special Meetings: Special meetings of the Stockholders may be held at the principal office of the Company in the State of New Jersey or at such other place within or without said State as may from time to time be designated by the Board of Directors and stated in the notice of the meeting, whenever called in writing by the Chairman of the Board, the Vice-Chairman or the President or by vote of a majority of the Board of Directors. At any special meeting of the Stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors and such business shall be confined to the object or objects stated in the notice thereof. Section 3. Quorum: Unless otherwise provided in the Certificate of Incorporation of this Company or by statute, the presence in person or by proxy of the holders of record of the shares entitled to cast a majority of the votes at any meeting of the Stockholders shall constitute a quorum at such meeting. 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. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend in person or by proxy at the time and place fixed by these By-Laws for an annual meeting, or as fixed by notice, as above provided for a special meeting, a majority in interest of the Stockholders 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 stock 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. Section 4. Organization: The Chairman of the Board shall call meetings of the Stockholders to order and shall act as Chairman of such meetings. In the absence of the Chairman of the Board, the Vice-Chairman or the President, or in his absence an Executive Vice President shall preside: and in the absence of any of the foregoing officers, the Stockholders present, or the Board of Directors, may appoint any Stockholder to act as Chairman of any meeting. The Secretary of the Company shall act as Secretary of all meetings of the Stockholders. In the absence of the Secretary at any meeting of the Stockholders, the presiding officer may appoint any person to act as Secretary of the Meeting. Section 5. Voting: At each meeting of the Stockholders, every Stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing subscribed by such Stockholder or by his duly authorized attorney and delivered to the inspectors at the meeting. The votes for Directors and, upon demand of any Stockholder, the votes upon any question before the meeting shall be by ballot. Section 6. Inspectors: At each annual stated meeting of the Stockholders for the election of Directors, the presiding officer of such meeting shall appoint two persons to act as inspectors, who shall be sworn to perform their duties in accordance with the laws of the State of New Jersey, and who shall return a formal certificate. Section 7. Nominations of Directors: Nominations for the election of Directors may be made by the Board of Directors or any Stockholder entitled to vote for the election of Directors. Any Stockholder 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 Stockholder's intent to make such nomination is given to the Secretary of the Company, either by personal delivery or United States mail, postage prepaid, not later than (a) with respect to an election to be held at an annual meeting of Stockholders, 90 days in advance of the anniversary of the immediately preceding annual meeting or if the date of the annual meeting of Stockholders 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 Stockholders and (b) in the case of any Stockholder who wishes to nominate a person or persons for election as a Director pursuant to consents in writing by Stockholders without a meeting (to the extent election by such consents is permitted under applicable law and the Company's Certificate of Incorporation), 60 days in advance of the date on which materials soliciting such consents are first mailed to Stockholders 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 Stockholder who intends to make the nomination and of the person or persons to be nominated for election as a Director, a representation that the Stockholder is a holder of record of stock 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 Stockholder 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 Stockholder, such other information regarding each nominee proposed by such Stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if such nominee had been nominated, or was intended to be nominated, for election as a Director by the Board of Directors, and the consent of each nominee to serve as a Director of the Company if so elected. The Board of Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. ARTICLE II. BOARD OF DIRECTORS Section 1. Number and Election: The business and property of the Company shall be managed by a Board of nine Directors. The number of Directors may be altered from time to time by the alteration of these By-Laws, provided that, as required by the Restated Certificate of Incorporation, the Board shall never consist of less than eight members. As provided in the Restated Certificate of Incorporation, the Board of Directors shall be divided into three classes, each consisting of three Directors. At each annual election, the successors to the Directors of the class whose terms shall expire 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 in each year. Each Director shall serve for the term for which such Director shall have been elected and until such Director's successor shall have been duly elected. Notwithstanding the foregoing provisions of this Section 1, if and as long as the Restated Certificate of Incorporation provides for the election of additional Directors by class or classes of stock, such additional Directors shall be elected in the manner and for the term provided in the Restated Certificate of Incorporation. Section 2. Vacancies: Subject to any requirements of the Certificate of Incorporation with respect to the filling of vacancies among additional Directors elected by a class or classes of stock, 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 meeting of the Stockholders and until his successor shall have been elected and qualified. Section 3. Place of Meetings: The Directors may hold their meetings and may have an office and keep the books of the Company (except as otherwise may be provided for by law) in such place or places in the State of New Jersey or outside of the State of New Jersey as the Board from time to time may determine. Section 4. Regular Meetings: Regular meetings of the Board of Directors shall be held at such times and intervals as the Board may from time to time determine. It shall be the duty of the Secretary to send a notice to each of the Directors at his address as it appears on the books of the Company at least two (2) days before the holding of each regular meeting, but a failure of the Secretary to send such notice shall not invalidate any proceedings of the said Board. Section 5. Special Meetings: Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or the Vice-Chairman or the President, or by one-third (1/3) of the Directors for the time being in office. The Secretary shall give notice of each special meeting by mailing the same at least two (2) days before the meeting, or by telegraphing the same at least one (1) day before the meeting to each Director, but such notice may be waived by any Director. At any meeting at which every Director shall be present, even without notice, any business may be transacted. Section 6. Quorum: Six (6) members of the Board of Directors, but not less than one-third (1/3) of the entire Board, shall constitute a quorum for the transaction of business; but if at any meeting of the Board there be less than a quorum present, those present may adjourn the meeting from time to time. At meetings of the Board of Directors, business shall be transacted in such order as from time to time the Board may determine. Section 7. Director Emeritus: The Board of Directors may appoint a person who has served with distinction and who has retired from the Board upon reaching mandatory retirement as provided herein to the position of Director Emeritus. A Director Emeritus shall be invited to attend all meetings of the Board and shall receive the same compensation as that paid to outside Directors. While serving as a Director Emeritus, he shall not be considered a retired director for pension benefit purposes; however, any pension benefits to which he may be entitled will commence upon his cessation of service as a Director Emeritus. He shall be appointed by the Board for a one-year term and may be reappointed from time to time by action of the Board. While the presence of a Director Emeritus at a Board meeting will not be considered for quorum or voting purposes, nevertheless, his advice and counsel on all matters to come before the Board is invited. ARTICLE III. COMMITTEES The Board of Directors may appoint from their number such standing committees as they deem best and to the extent permitted by statute may invest them with such of their own powers as they may deem advisable, subject to such conditions as they may prescribe. ARTICLE IV. OFFICERS Section 1. Officers: The executive officers of the Company shall include a Chairman of the Board of Directors, President, Treasurer and Secretary and may also include one or more Vice-Chairmen, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, and such other officers as the Board of Directors shall deem necessary or otherwise appropriate to elect. The Chief Executive Officer may hold the title of Chairman of the Board, or President, or both titles. The Board of Directors may appoint such other officers and advisory boards as they shall deem necessary, who shall have such authority and who shall perform such duties as from time to time may be prescribed by the Board of Directors. Any executive officer elected by the Board of Directors may be removed at any time with or without cause by the affirmative vote of two-thirds (2/3) of the entire Board of Directors. Any other appointed or elected officer, agent, employee or member of an advisory board may be removed at any time with or without cause by affirmative vote of the Directors or by the Committee or superior officer upon whom such power of removal may be conferred. Section 2. Powers and Duties: The Chairman of the Board shall preside at all meetings of the Board of Directors and Stockholders. Subject to designation by the Board of Directors he shall be the Chief Executive Officer of the Company, and he shall have responsibility for the active management of the business of the Company. He may sign and execute contracts and agreements authorized by the Board, delegate other officers to do so and may, from time to time, require from other officers and from employees of the Company opinions, reports or information upon any matter specified by him or generally upon the interests or affairs of the Company under the supervision of such officers or employees respectively. He may appoint and remove assistant officers and other employees and agents. He may exercise any other powers conferred upon him by the Board of Directors. Other officers shall have all the usual and customary powers and shall perform all the usual and customary duties incident to their respective offices and, in addition thereto and to any duties specifically prescribed by any subsequent provisions of these By-Laws, they shall respectively perform such other general or special duties as may from time to time be assigned to them by the Board of Directors or the Chief Executive Officer. The Board of Directors may appoint an officer to act as Chief Financial Officer of the Company, who shall have responsibility for the financial affairs of the Company. He will be responsible for the preparation of the financial statements of the Company, and such other duties as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. The Board of Directors may appoint an officer to act as General Counsel of the Company, who shall have responsibility for the legal affairs of the Company. The Board of Directors may appoint the Comptroller to be the principal accounting and financial control officer of the Company. Securities of other corporations or interests in other entities held by the Company may be voted by the Chairman of the Board or by any other person designated by the Board of Directors or Chief Executive Officer. Section 3. Term: The executive officers elected by the Board of Directors shall hold office for one year or until their successors are elected and qualify. The Chairman, and any Vice-Chairman, shall be elected by the Directors from among their own number. One person may hold more than one office. ARTICLE V. BILLS, NOTES, AND CHECKS All bills, notes, checks or other negotiable instruments of the Company shall be made in the name of the Company and shall be signed by two executive officers or by any two persons duly authorized by the Board of Directors. No officers or agents of the Company, either singly or together shall have power to make any bill, note or check or other negotiable instrument in the name of the Company to bind the Company thereby, except as in this Article prescribed and provided. No officer or agent of this Company shall have power to endorse in the name, for or in behalf of the Company, any note, bill of exchange, draft, check or other written instrument for the payment of money, save only for purposes of the discount or the collection of the said instrument, unless thereunto duly and specially authorized by the vote of the Directors of this Company entered on the minutes of said Board. ARTICLE VI. CAPITAL STOCK Section 1. Certificates for Shares: The certificates for shares of the capital stock of the Company shall be in such form not inconsistent with the Certificate of Incorporation as shall be prepared or be approved by the Board of Directors. The certificates shall be signed by or bear thereon the facsimile signature of the Chairman, the Vice-Chairman, President, or an Executive Vice President, or a Vice President, and also be signed by or bear thereon the facsimile signature of the Treasurer or an Assistant Treasurer. The certificates shall be consecutively numbered. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered in the Company's books. Section 2. Transfers: Shares of the capital stock of the Company shall be transferred only on the books of the Company by the holder thereof in person or by his attorney, upon surrender of the certificate or certificates properly endorsed. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Company. The Board of Directors may appoint Transfer Agents and Stock Registrars and may require all stock certificates to bear the signatures of such a Transfer Agent and of such a Registrar of Transfers, or any of them. The stock transfer books may be closed for such period next preceding any Stockholders' meeting, or the payment of dividends as the Board of Directors may from time to time determine, and during such period no stock shall be transferable. The Board of Directors may also fix in advance a date not more than 60 nor less than 10 days preceding the date of any meeting of Stockholders, nor more than 60 days preceding the date for the payment of any dividend on the Common Stock or any series of Preference Stock, or the date for allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the Stockholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of capital stock. In such cases only Stockholders of record on the date so fixed shall be entitled to such notice of and vote at such meeting, or to receive payment of such dividend, or allotment of rights, or to exercise such rights, as the case may be, and notwithstanding any transfer of any stock on the books of the Company after any such record date fixed as aforesaid. Section 3. Lost Stock Certificates: In case any stock certificate shall be lost, the Board of Directors may order a new certificate to be issued in its place upon receiving such proof of loss and such security therefor as may be satisfactory to it. ARTICLE VII. THE CORPORATE SEAL The Corporate Seal of the Company shall consist of a circle formed by the words "Ingersoll-Rand Company" and the letters "N. J." with the words "Corporate Seal" and the figures "1905" in the center. The Seal shall be attested by the signature of the Secretary or the Assistant Secretary or of the Treasurer or the Assistant Treasurer. When authorized by the Board of Directors, the Secretary shall affix the Seal, or cause it to be affixed, to all documents executed on behalf of the Company. The Board of Directors may also specifically or generally authorize other persons to affix the Seal. ARTICLE VIII. REACQUIRED SHARES When shares of the Company are reacquired by the Company by purchase, by redemption or by their conversion into other shares of the Company, such shares shall be treated by the Company as treasury shares, unless and to the extent the Board of Directors determines at any time that any such shares shall be cancelled. ARTICLE IX. INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS Section 1. Right to Indemnification: Each person who was or is made a party or is threatened to be made a party to or is involved in any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, or any appeal therein or any inquiry or investigation which could lead to such action, suit or proceeding ("proceeding"), by reason of his or her being or having been a Director or officer of the Company or of any constituent corporation absorbed by the Company in a consolidation or merger, or by reason of his or her being or having been a Director, officer, trustee, employee or agent of any other corporation (domestic or foreign) or of any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise (whether or not for profit), serving as such at the request of the Company or of any such constituent corporation, or the legal representative of any such Director, officer, trustee, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent permitted by the New Jersey Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said Act permitted prior to such amendment), from and against any and all reasonable costs, disbursements and attorneys' fees, and any and all amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties, incurred or suffered in connection with any such proceeding, and such indemnification shall continue as to a person who has ceased to be a Director, officer, trustee, employee or agent and shall inure to the benefit of his or her heirs, executors, administrators and assigns; provided, however, that there shall be no indemnification hereunder with respect to any settlement or other nonadjudicated disposition of any proceeding unless the Company has given its prior consent to such settlement or disposition. The right to indemnification conferred in this Section 1 shall be a contract right and shall include the right to be paid by the Company the expenses incurred in connection with any proceeding in advance of the final disposition of such proceeding as authorized by the Board of Directors; provided, however, that, if the New Jersey Business Corporation Act so requires, the payment of such expenses incurred by a Director or officer in his or her capacity as a Director or officer in advance of the final disposition of a proceeding shall be made only upon receipt by the Company of an undertaking, by or on behalf of such Director or officer, to repay all amounts so advanced if it shall ultimately be determined that such Director or officer is not entitled to be indemnified under this Section 1 or otherwise. The Company may, by action of its Board of Directors, provide for indemnification and advancement of expenses to employees and agents of the Company with the same scope and effect as the foregoing indemnification of Directors and officers. Section 2. Right of Claimant to Bring Suit: If a claim under Section 1 of this Article IX is not paid in full by the Company within thirty days after a written request has been received by the Company, the claimant may at any time thereafter apply to a court for an award of indemnification by the Company for the unpaid amount of the claim and, if successful on the merits or otherwise in connection with any proceeding, or in the defense of any claim, issue or matter therein, the claimant shall be entitled also to be paid by the Company any and all expenses incurred or suffered in connection with such proceeding. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of expenses incurred in connection with any proceeding where the required undertaking, if any, has been tendered to the Company) that the claimant has not met the standard of conduct which makes it permissible under the New Jersey Business Corporation Act for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such proceeding that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the New Jersey Business Corporation Act, nor an actual determination by the Company (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, nor the termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights: The right to indemnification and advancement of expenses provided by or granted pursuant to this Article IX shall not exclude or be exclusive of any other rights, including the right to be indemnified against any and all reasonable costs, disbursements and attorneys' fees, and any and all amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties incurred or suffered in proceedings by or in the right of the Company, to which any person may be entitled under a certificate of incorporation, by-law, agreement, vote of stockholders, or otherwise, provided that no indemnification shall be made to or on behalf of any person if a judgment or other final adjudication adverse to such person establishes that such person has not met the applicable standard of conduct required to be met under the New Jersey Business Corporation Act. ARTICLE X. AMENDMENTS The Board of Directors may, by a majority vote of the entire Board, make By-Laws and from time to time alter, amend or repeal any By-Law, but any By-Law made by the Board of Directors may be altered or repealed by the Stockholders at any annual or special meeting. Notice of such proposed alteration, amendment or repeal of any By-Law shall be included in the notice of the meeting of the Directors or Stockholders. ARTICLE XI. AUDITORS The Board of Directors may appoint a firm of certified public accountants to audit the books and accounts of the Company for the calendar year in which such appointment is made. EX-4 3 INGERSOLL-RAND COMPANY (a New Jersey Corporation) INGERSOLL-RAND FINANCING I (a Delaware Business Trust) 14,000,000 FELINE PRIDES and 1,400,000 Capital Securities UNDERWRITING AGREEMENT Dated: March 17, 1998 Ingersoll-Rand Company (a New Jersey Corporation) INGERSOLL-RAND FINANCING I (a Delaware Business Trust) 14,000,000 FELINE PRIDESSM (Stated Amount of $25 per FELINE PRIDES), consisting of 12,600,000 Income PRIDESsm each consisting of a Purchase Contract of Ingersoll-Rand Company Requiring the Purchase on May 16, 2001 (or earlier) of certain Shares of Common Stock of Ingersoll-Rand Company and a 6.22% Capital Security of Ingersoll-Rand Financing I and 1,400,000 Growth PRIDESSM each consisting of a Purchase Contract of Ingersoll-Rand Company Requiring the Purchase on May 16, 2001 (or earlier) of certain Shares of Common Stock of Ingersoll-Rand Company and a 1/40 Undivided Beneficial Interest in a Zero-Coupon U.S. Treasury Security Having a Principal Amount Equal to $1,000 and maturing on May 15, 2001; and 1,400,000 6.22% Capital Securities of Ingersoll-Rand Financing I (Liquidation Amount $25 per Capital Security) UNDERWRITING AGREEMENT March 17, 1998 MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters World Financial Center North Tower New York, New York 10281-12091 Ladies and Gentlemen: Ingersoll-Rand Company, a New Jersey corporation (the "Company"), and Ingersoll-Rand Financing I, a Delaware statutory business trust (the "Trust" and, together with the Company, the "Offerors"), confirm their agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Under writer"), with respect to the sale to the Underwriter of 14,000,000 FELINE PRIDES and 1,400,000 6.22% Capital Securities (the "Capital Securities" and, together with the FELINE PRIDES, the "Initial Securities") of the Trust. The FELINE PRIDES will initially consist of (A) 12,600,000 units (referred to as "Income PRIDES") with a Stated Amount, per Income PRIDES, of $25 (the "Stated Amount") and (B) at least 1,400,000 units (referred to as "Growth PRIDES") with a face amount, per Growth PRIDES, equal to the Stated Amount. Each Income PRIDES will initially consist of a unit comprised of (a) a stock purchase contract (a "Purchase Contract") under which (i) the holder will purchase from the Company on May 16, 2001 (the "Purchase Contract Settlement Date"), for an amount of cash equal to the Stated Amount, a number of newly issued shares of common stock, $2 par value per share (the "Shares"), of the Company equal to the Settlement Rate described herein, and (ii) the Company will pay the holder unsecured contract adjustment payments ("Contract Adjustment Payments") at the rate of 6.22% of the Stated Amount per annum and (b) beneficial ownership of a Capital Security. Each Growth PRIDES will initially consist of a unit comprised of (a) a Purchase Contract under which (i) the holder will purchase from the Company on the Purchase Contract Settlement Date, for an amount in cash equal to the Stated Amount, the number of Shares of Common Stock of the Company, equal to the Settlement Rate, and (ii) the Company will pay the holder Contract Adjustment Payments, at the rate of 6.22% of the Stated Amount per annum, and (b) a 1/40 undivided beneficial interest in a zero-coupon U.S. Treasury Security (CUSIP No. 912820 BAY) in an amount equal to $1,000 payable on May 15, 2001 (the "Treasury Securities"). The Company and the Trust also propose to grant to the Underwriter options to purchase up to 1,890,000 additional Income PRIDES 210,000 additional Growth PRIDES and 210,000 additional Capital Securities (the "Option Securities" and together with the Initial Securities, the "Securities") as described in Section 2(b) hereof. In accordance with the terms of the Purchase Contract Agreement (as defined below), to be dated as of March 23, 1998, between the Company and The Bank of New York, as Purchase Contract Agent (the "Purchase Contract Agent"), the Capital Securities constituting a part of the Income PRIDES, and the Treasury Securities constituting a part of the Growth PRIDES, will be pledged by the Purchase Contract Agent, on behalf of the holders of the Securities, to the Chase Manhattan Bank, as Collateral Agent, pursuant to the Pledge Agreement, to be dated as of March 23, 1998 (the "Pledge Agreement"), among the Company, the Purchase Contract Agent and the Collateral Agent, to secure the holders' obligation to purchase Common Stock under the Purchase Contracts. The rights and obligations of a holder of Securities in respect of Capital Securities, subject to the pledge thereof, and Purchase Contracts will be evidenced by Security Certificates (the "Security Certificates") to be issued pursuant to the Purchase Contract Agreement. The Capital Securities and Common Securities (as defined below) will be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise (the "Guarantee") pursuant to the Guarantee Agreement, to be dated as of March 23, 1998 (the "Guarantee Agreement"), executed and delivered by the Company and The First National Bank of Chicago, as trustee (the "Guarantee Trustee"), for the benefit of the holders from time to time of the Capital Securities and the Common Securities, and certain back-up undertakings of the Company. All of the net proceeds from the sale of the Capital Securities will be combined with the entire net proceeds from the sale by the Trust to the Company of its common securities (the "Common Securities" and, together with the Capital Securities, the "Trust Securities") will be used by the Trust to purchase the % Debentures due May 16, 2003 (the "Debentures") of the Company. The Trust Securities will be issued pursuant to the amended and restated declaration of trust of the Trust, dated as of March 23, 1998 (the "Declaration"), among the Company, as Sponsor, Ronald G. Heller, Nancy Casablanca and Patricia Nachtigal (the "Regular Trustees"), and The First National Bank of Chicago, as the institutional trustee (the "Institutional Trustee") and First Chicago Delaware, Inc., as the Delaware trustee (the "Delaware Trustee" and, together with the Institutional Trustee and the Regular Trustees, the "Trustees"), and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Debentures will be issued pursuant to the Indenture, dated as of March 17, 1998 (the "Base Indenture"), between the Company and The Bank of New York, as Trustee (the "Debt Trustee"), as supple mented by the First Supplemental Indenture, dated March 23, 1998 (the Base Indenture, as supplemented and amended, being referred to as the "Indenture"). Capitalized terms used herein without definition shall be used as defined in the Prospectus. Prior to the purchase and public offering of the Securities by the Underwriter, the Offerors and the Underwriter shall enter into an agreement substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the form of an exchange of any standard form of written communication between the Offerors and the Underwriter and shall specify such applicable information as is indicated in Exhibit A hereto. The offering of the Securities will be governed by this Agreement, as supplemented by the Pricing Agreement. From and after the date of the execution and delivery of the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement. Pursuant to a remarketing agreement (the "Remarketing Agreement") to be dated as of March 23, 1998, among the Company, the Trust, the Purchase Contract Agent and a nationally recognized investment banking firm chosen by the Company, the Capital Securities may be remarketed, subject to certain terms and conditions. The Company and the Trust have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-38367) and pre-effective amendment no. 1 thereto covering the registration of securities of the Company and the Trust, including the Securities and the Purchase Contracts and Capital Securities included in, and Shares underlying, the Securities, under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses, and the offering thereof from time to time in accordance with the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and the Company has filed such post-effective amendments thereto as may be required prior to the execution of the Pricing Agreement. Such registration statement, as so amended, has been declared effective by the Commission. Such registration statement, as so amended, including the exhibits and schedules thereto, if any, and the information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "Rule 430A Information") or Rule 434(d) of the 1933 Act Regulations (the "Rule 434 Information"), is referred to herein as the "Registration Statement"; and the final prospectus relating to the offering of the Securities, in the form first furnished to the Underwriter by the Company for use in connection with the offering of the Securities, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" and the "Prospectus" shall be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), prior to the execution of the applicable Pricing Agreement;provided, further, that if the Offerors file a registration statement with the Commission pursuant to Section 462(b) of the 1933 Act Regulations (the "Rule 462(b) Registration Statement"), then after such filing, all references to "Registration Statement" shall be deemed to include the Rule 462(b) Registration Statement; and provided, further, that if the Offerors elect to rely upon Rule 434 of the 1933 Act Regulations, then all references to "Prospectus" shall be deemed to include the final or preliminary prospectus and the applicable term sheet or abbreviated term sheet (the "Term Sheet"), as the case may be, in the form first furnished to the Underwriter by the Company in reliance upon Rule 434 of the 1933 Act Regulations, and all references in this Underwriting Agreement to the date of the Prospectus shall mean the date of the Term Sheet. A "preliminary prospectus" shall be deemed to refer to any prospectus used before the registration statement became effective and any prospectus that omitted, as applicable, the Rule 430A Information, the Rule 434 Information or other information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations, that was used after such effectiveness and prior to the execution and delivery of the applicable Pricing Agreement. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the electronically transmitted copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the 1934 Act which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be. The Offerors understand that the Underwriter proposes to make a public offering of the Securities as soon as the Under writer deems advisable after the Pricing Agreement has been executed and delivered and the Declaration, the Indenture and the Guarantee Agreement have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). SECTION 1. Representations and Warranties. (a) The Offerors represent and warrant to each Underwriter as of the date hereof, as of the date of the Pricing Agreement and as of each Date of Delivery (as defined) (such later date being hereinafter referred to as the "Representation Date") that: (i) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Offerors, threatened by the Commission. (ii) The Company and the Trust meet, and at the respective times of the commencement and consummation of the offering of the Securities will meet, the requirements for the use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at each Representation Date, the Registration Statement, any Rule 462 Registration Statement and any amendments or supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations") and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the date of the Prospectus and at the Closing Time (as defined herein), the Prospectus and any amendments and supplements thereto did not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Offerors elect to rely upon Rule 434 of the 1933 Act Regulations, the Offerors will comply with the requirements of Rule 434. Notwithstanding the foregoing, the representations and warranties in this subsection shall not apply to (A) statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Offerors in writing by the Underwriter expressly for use in the Registration Statement or the Prospectus or (B) the part of the Registration Statement which shall constitute the Statement of Eligibility (Form T-1) under the 1939 Act. Each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied as so filed in all material respects with the 1933 Act Regulations and, if applicable, each preliminary prospectus and the Prospectus delivered to the Underwriter for use in connection with the offering of the Securities will, at the time of such delivery, be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (iii) The documents incorporated or deemed to be incorporated by reference in the Registration Statement or the Prospectus, at the time they were or hereafter are filed or last amended, as the case may be, with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act, and the rules and regulations of the Commission there under (the "1934 Act Regulations"), and at the time of filing or as of the time of any subsequent amendment, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading; and any additional documents deemed to be incorporated by reference in the Registration Statement or the Prospectus will, if and when such documents are filed with the Commission, or when amended, as appropriate, comply in all material respects to the requirements of the 1934 Act and the 1934 Act Regulations and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Offerors by the Underwriter expressly for use in the Registration Statement or the Prospectus. (iv) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (v) The financial statements of the Company included or incorporated by reference in the Registration Statement and the Prospectus, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries as at the dates indicated and the results of their operations for the periods specified in all material respects. Such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included or incorporated by reference in the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein in all material respects. The ratio of earnings to fixed charges included in the Prospectus has been calculated in compliance with Item 503(d) of Regulation S-K of the Commission. The selected financial information and the summary financial data included in the Prospectus present fairly in all material respects the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement and the Prospectus. The pro forma financial statements and the related notes thereto included in the Registration Statement and the Prospectus present fairly in all material respects the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (vi) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as otherwise stated therein, (A) there has been no material adverse change and no development which could reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs of the Company and its subsidiaries, considered as one enterprise whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those arising in the ordinary course of business, which are material with respect to the Company and its subsidiaries, considered as one enterprise, (C) except for regular dividends on the Common Stock in amounts per share that are consistent with past practice or the applicable charter document or supplement thereto, respectively, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vii) The Company has been incorporated, is validly existing as a corporation and is in good standing under the laws of the State of New Jersey, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Agreement, the Pricing Agreement, the Remarketing Agreement, the Purchase Contract Agreement, the Pledge Agreement and the Guarantee Agreement. The Company is qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. (viii) Other than the Trust, each "Significant Subsidiary" (as defined in Rule 1-02 of Regulation S-X of the 1933 Act) of the Company is set forth on Schedule I hereto, has been incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus, and is qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospec- tus, all of the issued and outstanding shares of capital stock of each subsidiary of the Company have been authorized and validly issued, are fully paid and non-assessable and all such shares are owned by the Company, directly or through its subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of the subsidiaries was issued in violation of preemptive or other similar rights arising by operation of law, under the charter or by-laws of any subsidiary or under any agreement to which the Company or any subsidiary is a party, or otherwise. (ix) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus; since the date indicated in the Prospectus there has been no change in the consolidated capitalization of the Company and its subsidiaries (other than changes in outstanding Common Stock resulting from em- ployee benefit plan or dividend reinvestment and stock purchase plan transactions); and all of the issued and outstanding capital stock of the Company has been authorized and validly issued, is fully paid and non-assessable and conforms to the descriptions thereof contained in the Prospectus. (x) The Trust has been created and is validly existing in good standing as a business trust under the Delaware Business Trust Act (the "Delaware Act") with the power and authority to own property and to conduct its business as described in the Registration Statement and Prospectus and to enter into and perform its obligations under this Agreement, the Pricing Agree- ment, the Remarketing Agreement, the Capital Securities and the Declaration; the Trust is qualified to transact business as a foreign company and is in good standing in each jurisdiction in which such qualification is necessary, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect on the Trust; the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus; the Trust is and will, under current law, be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. (xi) The Purchase Contract Agreement has been autho- rized by the Company and, at the Closing Time, when validly executed and delivered by the Company and assuming due authoriza- tion, execution and delivery of the Purchase Contract Agreement by the Purchase Contract Agent, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally, or by general equitable principles (whether considered in a proceeding in equity or at law) (the "Bankruptcy Exceptions"), and will conform in all material respects to the description thereof contained in the Prospectus. (xii) The Pledge Agreement has been authorized by the Company and, at the Closing Time, when validly executed and delivered by the Company and assuming due authorization, execu- tion and delivery of the Pledge Agreement by the Collateral Agent and the Purchase Contract Agent, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and will conform in all material respects to the description thereof contained in the Prospectus. (xiii) The Common Securities have been authorized by the Declaration and, when issued and delivered by the Trust to the Company against payment therefor as described in the Regis- tration Statement and Prospectus, will be validly issued, will represent undivided beneficial interests in the assets of the Trust and will conform in all material respects to the descrip- tion thereof contained in the Prospectus; the issuance of the Common Securities is not subject to preemptive or other similar rights; and at the Closing Time all of the issued and outstanding Common Securities of the Trust will be directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right. (xiv) The Declaration has been authorized by the Company and, at the Closing Time, will have been executed and delivered by the Company and the Trustees, and assuming due authorization, execution and delivery of the Declaration by the Institutional Trustee and the Delaware Trustee, the Declaration will, at the Closing Time, be a legal, valid and binding obliga- tion of the Company and the Regular Trustees, enforceable against the Company and the Regular Trustees in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and will conform in all material respects to the description thereof contained in the Prospectus; and at the Closing Time, the Declaration will have been duly qualified under the 1939 Act. (xv) The Guarantee Agreement has been authorized by the Company and, when validly executed and delivered by the Company, and, assuming due authorization, execution and delivery by the Guarantee Trustee, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and the Guarantee and the Guarantee Agreement will conform in all material respects to the description thereof contained in the Prospectus; and at the Closing Time, the Guarantee Agreement will have been duly qualified under the 1939 Act. (xvi) The Securities have been authorized for issuance and sale to the Underwriter and, when issued and delivered against payment therefor as provided herein, will be validly issued and fully paid and non-assessable and will conform in all material respects to the description thereof contained in the Prospectus; the issuance of the Securities is not subject to preemptive or other similar rights. (xvii) The Shares, when issued and delivered in accor dance with the provisions of the Purchase Contract Agreement and the Pledge Agreement, will be authorized, validly issued and fully paid and non-assessable and will conform in all material respects to the description thereof contained in the Prospectus; and the issuance of such Shares will not be subject to preemptive or other similar rights. (xviii) The Indenture has been authorized by the Company and qualified under the 1939 Act and, at the Closing Time, will have been executed and delivered and will constitute a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions; the Indenture will conform in all material respects to the description thereof contained in the Prospectus. (xix) The Debentures have been authorized by the Company and, at the Closing Time, will have been executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment therefor as described in the Prospectus, will constitute legal, valid and binding obliga- tions of the Company, enforceable against the Company in accor dance with their terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and will be in the form contemplated by, and entitled to the benefits of, the Indenture and will conform in all material respects to the description thereof contained in the Prospectus. (xx) Each of the Regular Trustees of the Trust is an employee of the Company and has been authorized by the Company to execute and deliver the Declaration. (xxi) Neither the Company nor any of its subsidiaries is in violation of its articles of incorporation or by-laws. The Trust is not in violation of the Declaration or its certificate of trust filed with the State of Delaware on August 18, 1997 (the "Certificate of Trust"); none of the Company, any of its subsid iaries or the Trust is in default in the performance or obser- vance of any obligation, agreement, covenant or condition con- tained in any contract, indenture, mortgage, note, lease, loan or credit agreement or any other agreement or instrument to which the Company, any of its subsidiaries or the Trust is a party or by which any of them may be bound, or to which any of the proper- ty or assets of the Company, any subsidiary or the Trust is sub- ject, or in violation of any applicable law, rule or regulation or any judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdic- tion over the Company or any of its subsidiaries or any of their respective properties or assets, which violation or default would, singly or in the aggregate, have a Material Adverse Effect. (xxii) The entry into the Purchase Contracts underly- ing the Securities by the Company, the offer of the Securities as contemplated herein and in the Prospectus, the issue of the Shares and the sale of the Shares by the Company pursuant to the Purchase Contracts, the execution, delivery and performance of this Agreement, the Pricing Agreement, the Remarketing Agreement, the Purchase Contracts, the Purchase Contract Agreement, the Pledge Agreement, the Declaration, the Capital Securities, the Common Securities, the Indenture, the Debentures, the Guarantee Agreement and the Guarantees, and the consummation of the transac- tions contemplated herein, therein and the Registration Statement (including the issuance and sale of the Securities and the use of proceeds from the sale of the Securities as described in the prospectus under the caption "Use of Proceeds") and compliance by the Offerors with their obligations hereunder and thereunder have been authorized by all necessary action (corporate or otherwise) and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of any of the terms or provisions of, or constitute a default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, any subsidiary or the Trust pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument to which the Company, the Trust or any subsidiary is a party or by which any of them may be bound, or to which any of the Property of any of them is subject (the "Agreements and Instruments") (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or the Declaration or Certificate of Trust or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company, any subsidiary or the Trust or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company, any subsidiary or the Trust. (xxiii) There is no action, suit, proceeding, inquiry or investigation before or by any court or governmental agency or body, domestic or foreign, now pending or to the knowledge of the Company threatened against or affecting the Trust, the Company or any of its subsidiaries which is required to be disclosed in the Registration Statement and the Prospectus (other than as stated therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might be reasonably expected to have a Material Adverse Effect on the assets, properties or opera- tions thereof or the consummation of this Agreement, the Pricing Agreement, the Remarketing Agreement, the Purchase Contracts, the Purchase Contract Agreement, the Pledge Agreement, the Guarantee Agreement, the Indenture or the transactions contemplated herein or therein. (xxiv) The Company and its subsidiaries have good and marketable title to all material real and personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Registration Statement or the Prospectus or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any material real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; the Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents and orders of all governmental authorities or agencies which are necessary for the ownership or lease of the material properties owned or leased by each of them and for the operation of the business now operated by each of them with such exceptions which, singly or in the aggregate, are not material and do not material- ly interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise; all such licens- es, franchises, permits, certificates, orders, authorizations, approvals and consents are in full force and effect and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement or the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxv) No authorization, approval, consent, order, registration or qualification of or with any court or governmen- tal authority or agency is required for the entry into the Pur chase Contracts underlying the Securities, in connection with the issuance and sale of the Common Securities, the offering of the Securities and the issuance and sale of the Shares by the Company pursuant to such Purchase Contracts, except such as have been obtained and made under the federal securities laws and such as may be required under state or foreign securities or Blue Sky laws. (xxvi) This Agreement, the Remarketing Agreement and the Pricing Agreement have been authorized, executed and deliv- ered by each of the Offerors. (xxvii) None of the Trust nor the Company or any of its subsidiaries is, and upon the issuance and sale of the Securi- ties as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xxviii) None of the Company, its subsidiaries or any of their respective directors, officers or controlling persons, has taken, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the stabilization or manipula- tion of the price of any security of the Company to facilitate the sale or resale of the Securities or the Common Stock. (xxix) No "forward looking statement" (as defined in Rule 175 under the 1933 Act) contained in the Registration Statement, any preliminary prospectus or the Prospectus was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. (b) Any certificate signed by any officer of the Company or a Trustee of the Trust and delivered to the Underwrit- er or to counsel for the Underwriter shall be deemed a repre- sentation and warranty by the Company or the Trust, as the case may be, to the Underwriter as to the matters covered thereby. SECTION 2. Sale and Delivery to Underwriter; Closing. (a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Offerors agree to sell to the Underwriter, and the Underwriter agrees to purchase from the Offerors, at the price per security set forth in the Pricing Agreement, 14,000,000 Initial Securities. (1) If the Offerors have elected not to rely upon Rule 430A of the 1933 Act Regulations, the initial public offering price per Security and the purchase price per Security to be paid by the Underwriter for the Securities have each been determined and set forth in the Pricing Agreement, dated the date hereof, and any necessary amendments to the Registration Statement and the Prospectus will be filed before the Registration Statement becomes effective. (2) If the Offerors have elected to rely upon Rule 430A of the 1933 Act Regulations, the purchase price per Security to be paid by the Underwriter shall be an amount equal to the initial public offering price per Security, less an amount per Security to be determined by agreement between the Underwriter and the Offerors. The initial public offering price per Security shall be a fixed price to be determined by agreement between the Underwriter and the Offerors. The initial public offering price and the purchase price, when so determined, shall be set forth in the Pricing Agreement. In the event that such prices have not been agreed upon and the Pricing Agreement has not been executed and delivered by all parties thereto by the close of business on the fourth business day following the date of this Agreement, this Agreement shall terminate forthwith, without liability of any party to any other party, unless otherwise agreed to by the Offerors and the Underwriter. (b) In addition, on the basis of the representations and warranties herein contained and subject to the terms and condi- tions herein set forth, the Offerors hereby grant to the Under writer the right to purchase at its election up to 1,890,000 Income PRIDES, 210,000 Growth PRIDES and 210,000 Capital Securi- ties at the price per share set forth in the Pricing Agreement; provided, that, pursuant to such options, the Underwriter shall purchase, proportionately, at least as many Capital Securities as Growth PRIDES and shall purchase proportionately, at least as many Growth PRIDES as Income PRIDES. The option hereby granted will expire automatically at the close of business on the 30th calendar day after (i) the later of the date the Registration Statement and any Rule 462(b) Registration Statement becomes effective, if the Offerors have elected not to rely upon Rule 430A under the 1933 Act Regulations, or (ii) the Representa- tion Date, if the Offerors have elected to rely upon Rule 430A under the 1933 Act Regulations, and may be exercised in whole or in part from time to time only for the purpose of covering over- allotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by the Under writer to the Offerors setting forth the aggregate number of additional Optional Securities to be purchased and the time and date of delivery for the related Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be deter mined by the Underwriter but shall not be later than seven full business days after the exercise of such option, nor in any event before the Closing Time, unless otherwise agreed upon by the Underwriter and the Offerors. (c) The Capital Securities and Treasury Securities underly- ing the Securities will be pledged with the Collateral Agent to secure the holders' obligations to purchase Common Stock under the Purchase Contracts. Such pledge shall be effected by the transfer to the Collateral Agent of the Capital Securities and Treasury Securities to be pledged at the Closing Time and appro- priate Date of Delivery, if any, in accordance with the Pledge Agreement. (d) Delivery of certificates for the Initial Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the first business day prior to the Closing Time) shall be made at the offices of the Underwriter in New York, against the delivery to the Collat- eral Agent of the Capital Securities and Treasury Securities relating to such Securities by such Underwriter or on its behalf, and payment of the purchase price for such Securities shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022 or at such other place as shall be agreed upon by the Underwriter and the Offerors, at 9:00 a.m. (New York time) on the third business day after the date the Registration Statement becomes effective (or, if the Offerors have elected to rely upon Rule 430A, the third full business day after execution of the Pricing Agreement (or, if pricing of the Securities occurs after 4:30 p.m., Eastern time, on the fourth full business day thereafter)), or such other time not later than ten business days after such date as shall be agreed upon by the Underwriter and the Offerors (such time and date of payment and delivery being referred to herein as the "Closing Time"). Payment for the Securities purchased by the Underwriter shall be made by wire transfer of immediately avail- able funds, payable to the Company, against delivery to the account of the Underwriter of the Securities to be purchased by it. Delivery of, and payment for, the Securities shall be made through the facilities of The Depository Trust Company. In addition, if the Underwriter purchase any or all of the Option Securities, payment of the purchase price and delivery of certif- icates for such Option Securities shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP set forth above, or at such other place as shall be agreed upon by the Underwriter and the Offerors, on each Date of Delivery as specified in the relevant notice from the Underwriter to the Offerors. Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and registered in such names as the Underwriter may request in writing at least two full business days before the Closing Time or any Date of Delivery, as the case may be. The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination by the Underwriter no later than 10:00 a.m. (New York City time) on the last business day prior to the Closing Time or the Date of Delivery, as the case may be. (e) If settlement for the Option Securities occurs after the Closing Time, the Offerors will deliver to the Underwriter on the relevant Date of Delivery, and the obligations of the Under writer to purchase the Option Securities shall be conditioned upon the receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered at the Closing Time pursuant to Section 5(k) hereof. SECTION 3. Covenants of the Offerors. The Offerors agree with the Underwriter as follows: (a) Promptly following the execution of this Agreement, the Offerors will cause the Prospectus to be filed with the Commis- sion pursuant to Rule 424 of the 1933 Act Regulations and the Offerors will promptly advise the Underwriter when such filing has been made. Prior to the filing, the Offerors will cooperate with the Underwriter in the preparation of such Prospectus to assure that the Underwriter has no reasonable objection to the form or content thereof when filed or mailed. (b) The Offerors will comply with the requirements of Rule 430A of the 1933 Act Regulations and/or Rule 434 of the 1933 Act Regulations if and as applicable, and will notify the Underwriter immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment to the Registration Statement or the filing of any supplement or amendment to the Prospectus, (ii) the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose and (v) of the issuance by any state securities commission or other regulatory authority of any order suspending the qualification or the exemption from qualification of the Securities or the Shares under state securities or Blue Sky laws or the initiation or threatening of any proceeding for such purpose. The Offerors will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (c) The Offerors will give the Underwriter notice of their intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment and any filing under Rule 462(b) of the 1933 Act Regulations), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise; will furnish the Underwriter with copies of any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision a reasonable amount of time prior to such proposed filing or use, as the case may be; and will not file any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision to which the Underwriter or counsel for the Underwriter shall object. (d) The Company will deliver to the Underwriter and counsel for the Underwriter, without charge, signed copies of the Regis- tration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriter, without charge, a conformed copy of the Registra- tion Statement as originally filed and of each amendment thereto (without exhibits). If applicable, the copies of the Registra- tion Statement and each amendment thereto furnished to the Underwriter will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) The Company has delivered to the Underwriter, without charge, as many copies of each preliminary prospectus as the Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to the Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as the Underwriter may reasonably request. If applicable, the Prospectus and any amendments or supplements thereto furnished to the Underwriter will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (f) The Offerors will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration State- ment and the Prospectus. If at any time when the Prospectus is required by the 1933 Act or the 1934 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriter or for the Offerors, to amend the Registration Statement in order that the Registra- tion Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not mislead- ing or to amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circum- stances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supple- ment the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Offerors will promptly prepare and file with the Commission, subject to Section 3(c), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Offerors will furnish to the Underwriter, without charge, such number of copies of such amendment or supplement as the Underwriter may reasonably request. (g) The Offerors will use their best efforts, in coopera- tion with the Underwriter, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Underwriter may designate; provided, however, that the Company shall not be obligated to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securi ties have been so qualified, the Offerors will file such state- ments and reports as may be required by the laws of such juris- diction to continue such qualification in effect for so long as may be required in connection with distribution of the Securities and the Shares. (h) The Company will make generally available to its securityholders as soon as practicable, but not later than 45 days (or 90 days, in the case of a period that is also the Company's fiscal year) after the close of the period covered thereby, an earnings statement of the Company and its subsidiar- ies (in form complying with the provisions of Rule 158 of the 1933 Act Regulations). (i) The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under "Use of Proceeds". (j) If, at the time that the Registration Statement became (or in the case of a post-effective amendment becomes) effective, any information shall have been omitted therefrom in reliance upon Rule 430A or Rule 434 of the 1933 Act Regulations, then immediately following the execution of the Pricing Agreement, the Offerors will prepare, and file or transmit for filing with the Commission in accordance with such Rule 430A or Rule 434 and Rule 424(b) of the 1933 Act Regulations, copies of an amended Prospec tus, or Term Sheet, or, if required by such Rule 430A, a post-effective amendment to the Registration Statement (including an amended Prospectus), containing all information so omitted. (k) If the Offerors elect to rely upon Rule 462(b), the Offerors shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the 1933 Act Regulations by the earlier of (i) 10:00 p.m. Eastern time on the date of the Pricing Agreement and (ii) the time confirmations are sent or given, as specified by Rule 462(b)(2). (l) The Offerors, during the period when the Prospectus is required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (m) The Offerors will use their best efforts to effect the listing of the Income PRIDES and the Growth PRIDES on the New York Stock Exchange and to cause the Securities to be registered under the 1934 Act. (n) During a period of 90 days from the date of the Pricing Agreement, neither the Trust nor the Company will, without the prior written consent of the Underwriter, directly or indirectly, sell, offer to sell, grant any option for the sale of, or other- wise dispose of, or enter into any agreement to sell, any Income PRIDES, Growth PRIDES, Purchase Contracts, Capital Securities or Common Stock, as the case may be, or any securities of the Company similar to the Income PRIDES, Growth PRIDES, Purchase Contracts, Capital Securities or Common Stock or any security convertible into or exchangeable or exercisable for Income PRIDES, Growth PRIDES, Purchase Contracts, Capital Securities or Common Stock other than shares of Common Stock or options for shares of Common Stock issued pursuant to or sold in connection with any employee benefit, dividend reinvestment and stock option and stock purchase plans of the Company and its subsidiaries and other than the Growth PRIDES or Income PRIDES to be created or recreated upon substitution of Pledged Securities, or shares of Common Stock issuable upon early settlement of the Income PRIDES or Growth PRIDES or upon exercise of stock options, or (B) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Securities, any security convertible into or exchangeable into or exercisable for the Securities substantially similar to equity securities substantial- ly similar to the Securities, whether any such swap or transaction is to be settled by delivery of Securities, or other securities, in cash or otherwise. (o) For a period of three years from the Closing Time, the Company will furnish to the Underwriter copies of all annual reports, quarterly reports and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to its stockholders or securityholders generally, provided, however, that the Company shall not be required to provide the Underwriter with any such reports or similar forms that have been filed with the Commission by electronic transmission pursuant to EDGAR. (p) The Company will reserve and keep available at all times, free of preemptive or other similar rights and liens and adverse claims, sufficient shares of Common Stock to satisfy any obligations to issue Shares upon settlement of the Purchase Contracts and shall take all actions necessary to keep effective the Registration Statement with respect to the Shares. (q) None of the Company, its subsidiaries or any of their respective directors, officers or controlling persons, will take, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or the Common Stock. SECTION 4. Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, the Pricing Agreement, the Purchase Contracts, the Purchase Contract Agreement and the Pledge Agreement, includ- ing, without limitation, expenses related to the following, if incurred: (i) the preparation, delivery, printing and filing of the Registration Statement and Prospectus as originally filed (including financial statements and exhibits) and of each amend- ment thereto; (ii) the preparation, issuance and delivery of the certificates for the Securities and the Shares; (iii) the fees and disbursements of the Company's counsel, accountants and other advisors or agents (including the transfer agents and regis trars), as well as fees and disbursements of the Trustees, the Purchase Contract Agent, the Collateral Agent and any Depositary, and their respective counsel (except as provided for in the Prospectus); (iv) the qualification of the Securities and the Shares under securities laws in accordance with the provisions of Section 3(g), including filing fees and the fees and disburse ments of counsel for the Underwriter in connection therewith and in connection with the preparation of the Blue Sky Survey; (v) the printing and delivery to the Underwriter of copies of the Registration Statement as originally filed and of each amendment thereto, of each preliminary prospectus, any Term Sheet and of the Prospectus and any amendments or supplements thereto; (vi) any fees payable in connection with the rating of the Securities by nationally recognized statistical rating organiza- tions; and (vii) any fees payable or expenses incurred pursuant to any Uniform Commercial Code related filings; and (viii) the fees and expenses incurred in connection with the listing of the Income PRIDES, the Growth PRIDES and the Shares on the New York Stock Exchange. If this Agreement is terminated by the Underwriter in accordance with the provisions of Section 5 or Section 9(a)(i) hereof with respect to the Initial Securities or the Option Securities, as the case may be, the Company shall reimburse the Underwriter for all of its reasonable out-of-pocket expenses incurred in connection with the Initial Securities or Option Securities, as the case may be, including the fees and disburse- ments of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriter. SECTION 5. Conditions of Underwriter's Obligations. The obligations of the Underwriter to purchase and pay for the Securities pursuant to this Agreement are subject to the accuracy of the representations and warranties of the Offerors herein contained or in certificates of any officer of the Company or any subsidiary or the trustees of the Trust delivered pursuant to the provisions hereof, to the performance by the Offerors of their obligations hereunder, and to the following further conditions: (a) The Registration Statement, including any Rule 462(b) Registration Statement, shall have become effective under the 1933 Act not later than 5:30 p.m., New York City time, on the date hereof, and on the date hereof and at the Closing Time and any Date of Delivery, no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the satisfaction of counsel to the Underwriter. A prospectus containing information relating to the description of the Securities, the specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any required post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A), or, if the Company has elected to rely upon Rule 434 of the 1933 Act Regulations, a Term Sheet in- cluding the Rule 434 Information shall have been filed with the Commission in accordance with Rule 424(b)(7). (b) At the Closing Time the Underwriter shall have re ceived: (1) The favorable opinion, dated as of the Closing Time, of Patricia Nachtigal, Esq., Vice President and General Counsel of the Company, in form and substance reasonably satisfac- tory to counsel for the Underwriter, to the effect that: (i) The Company has been incorporated, is valid- ly existing as a corporation and is in good standing under the laws of the State of New Jersey. (ii) The Company has corporate power and author ity to own, lease and operate its properties and to conduct its business as described in the Prospectus. (iii) The Company is qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where such failure to qualify or be in good standing would not have a Material Adverse Effect. (iv) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospec- tus (except for subsequent issuances, if any, pursuant to incentive compensation plan, employee benefit plan or divi- dend reinvestment and stock purchase plan transactions), and the shares of issued and outstanding capital stock of the Company have been authorized and validly issued and are fully paid and non-assessable. (v) Except for the Trust, each Significant Subsidiary of the Company has been incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation; to such counsel's knowledge, each subsidiary of the Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently con ducted and as described in the Prospectus, and is qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the fail- ure to so qualify or be in good standing would not have a Material Adverse Effect; and to such Counsel's knowledge all of the issued and outstanding capital stock of each subsid- iary of the Company has been authorized and validly issued, is fully paid and non-assessable and all shares owned by the Company, directly or through its subsidiaries, are owned free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (vi) The Declaration has been authorized, exe cuted and delivered by the Company and the Trustees and is a legal, valid and binding obligation of the Company, enforce- able against the Company and each of the Regular Trustees in accordance with its terms, except as enforcement thereof may be limited by the Bankruptcy Exceptions; and the Declaration has been duly qualified under the 1939 Act. (vii) All legally required proceedings in connec- tion with the authorization, issuance and validity of the Securities and the sale of the Securities in accordance with this Agreement have been taken and all legally required orders, consents or other authorizations or approvals of any other public boards or bodies in connection with the autho- rization, issuance and validity of the Securities and the sale of the Securities in accordance with this Agreement (other than in connection with or in compliance with the provisions of the securities or Blue Sky laws of any juris dictions, as to which no opinion need be expressed) have been obtained and are in full force and effect. (viii) The Registration Statement is effective under the 1933 Act and, to the best knowledge of such coun- sel, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act, and no proceedings therefor have been initiated or threat ened by the Commission. (ix) Each of the documents incorporated by reference in the Registration Statement or the Prospectus at the time they were filed or last amended (other than the financial statements and the notes thereto, the financial schedules, and any other financial data included or incorpo rated by reference therein, as to which such counsel need express no belief), complied as to form in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations, as applicable; and such counsel has no reason to believe that any of such documents, when such documents became effective or were so filed, as the case may be, contained, in the case of a registration statement which became effective under the 1933 Act, an untrue statement of a material fact, or omitted to state a material fact re- quired to be stated therein or necessary to make the state- ments therein not misleading, and, in the case of other documents which were filed under the 1934 Act with the Commission, an untrue statement of a material fact or omit- ted to state a material fact necessary in order to make the statements therein not misleading. (x) The Company and the Trust meet the regis- trant requirements for use of Form S-3 under the 1933 Act Regulations. (xi) The Income PRIDES and Growth PRIDES have been duly authorized, executed and delivered by the Company, and (assuming due execution by the Purchase Contract Agent as attorney-in-fact of the holders thereof and due authenti- cation by the Purchase Contract Agent) and upon payment therefore as set forth herein, will be duly and validly issued and outstanding, and will constitute valid and bind- ing obligations of the Company entitled to the benefits of the Purchase Contract Agreement and enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. The Shares and the Securities are each regis tered under the 1934 Act, and the Income PRIDES issuable at the Closing Time and the Shares issuable by the Company pursuant to the Purchase Contracts have been authorized for listing on the New York Stock Exchange, upon official notice of issuance. (xii) The Shares subject to the Purchase Contract Agreement have been validly authorized and reserved for issuance and, when issued and delivered by the Company in accordance with the provisions of the Purchase Contract Agreement, the Purchase Contracts and the Pledge Agreement, will be fully paid and non-assessable; the issuance of such Shares will not be subject to preemptive or other similar rights arising by law or, to the best of such counsel's knowledge, otherwise. (xiii) The issuance of the Securities is not subject to preemptive or other similar rights arising by law or, to the best of such counsel's knowledge, otherwise. (xiv) All of the issued and outstanding Common Securities of the Trust are directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right. (xv) This Agreement, the Remarketing Agreement and the Pricing Agreement have been duly authorized, exe cuted and delivered by each of the Company and the Trust. (xvi) The Purchase Contract Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Purchase Contract Agent, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that enforce- ment thereof may be limited by the Bankruptcy Exceptions. (xvii) The Pledge Agreement has been duly autho- rized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Collateral Agent and the Purchase Contract Agent, constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (xviii) The Guarantee Agreement has been duly authorized, executed and delivered by the Company; the Guarantee Agreement, assuming it is duly authorized, exe- cuted, and delivered by the Guarantee Trustee, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by Bank- ruptcy Exceptions. (xix) The Indenture has been executed and deliv- ered by the Company and, assuming authorization, execution, and delivery thereof by the Debt Trustee, is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (xx) The Debentures are in the form contemplated by the Indenture, have been duly authorized, executed and delivered by the Company and, when authenticated by the Debt Trustee in the manner provided for in the Indenture and delivered against payment therefor by the Trust, will con- stitute valid and binding obligations of the Company, en- forceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (xxi) The entry into the Purchase Contracts underlying the Securities by the Company, the offer of the Securities as contemplated herein and in the Prospectus, the issuance of the Shares and the sale of the Shares by the Company pursuant to the Purchase Contracts, the execution, delivery and performance of this Agreement, the Pricing Agreement, the Remarketing Agreement, the Purchase Con- tracts, the Purchase Contract Agreement, the Pledge Agree- ment, the Declaration, the Capital Securities, the Common Securities, the Indenture, the Debentures, the Guarantee Agreement and the Guarantees, and the consummation of the transactions contemplated herein, therein and the Registra- tion Statement (including the issuance and sale of the Securities and the use of proceeds from the sale of the Securities as described in the prospectus under the caption "Use of Proceeds") and compliance by the Offerors with their obligations hereunder and thereunder have been authorized by all necessary action (corporate or otherwise) and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of any of the terms or provisions of, or constitute a default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, any subsidiary or the Trust pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any Significant Subsidiary or the Declaration or Certificate of Trust or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any govern- ment, government instrumentality or court, domestic or foreign, having jurisdiction over the Company, any subsid- iary or the Trust or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company, any subsidiary or the Trust. (xxii) All conditions precedent provided for in the Purchase Contract Agreement relating to the authentica- tion and delivery of the Security Certificates have been complied with and the Company is duly entitled to the au- thentication and delivery of the Security Certificates in accordance with the terms of the Purchase Contract Agree- ment; the Security Certificates are in a form contemplated by the Purchase Contract Agreement and comply with all applicable statutory requirements and with the requirements of the New York Stock Exchange. (xxiii) There are no actions, suits or proceed- ings before or by any court or governmental agency or body, domestic or foreign, now pending or, to the best of such counsel's knowledge, threatened, which are required to be disclosed in the Registration Statement or the Prospectus, other than those disclosed therein. (xxiv) The information in the Prospectus under the caption "Description of the Common Stock," to the extent that it involves matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material re spects. (xxv) To the best of such counsel's knowledge and information, there are no contracts, indentures, mortgages, agreements, notes, leases or other instruments required to be described or referred to or incorporated by reference in the Registration Statement or to be filed as exhibits there to other than those described or referred to or incorporated by reference therein or filed as exhibits thereto; the descriptions thereof or references thereto are true and correct in all material respects, and no default exists in the due performance or observance of any material obliga- tion, agreement, covenant or condition contained in any contract, indenture, mortgage, agreement, note, lease or other instrument so described, referred to, filed or incor- porated by reference which would result in a Material Ad verse Effect. (xxvi) No authorization, approval, consent, order, registration or qualification of or with any court or federal or state governmental authority or agency is re- quired for the issuance and sale of the Securities by the Offerors to the Underwriter or the performance by the Trust and the Company of their respective obligations in this Agreement, the Remarketing Agreement, the Pricing Agreement, the Purchase Contract Agreement, the Purchase Contracts, the Pledge Agreement, the Indenture, the Debentures, the Guarantee Agreement, the Declaration and the Securities except such as has been obtained and made under the federal securities laws or such as may be required under state or foreign securities or Blue Sky laws. (xxvii) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authoriza- tions, approvals, consents and orders of all governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and for the operation of the business carried on by each of them as described in the Registration Statement and the Prospectus with such exceptions as are not material and do not materially interfere with the conduct of the business of the Company and its subsidiaries, considered as one enter- prise; all such licenses, franchises, permits, certificates, authorizations, approvals, consents and orders are in full force and effect and, except as otherwise set forth in the Registration Statement or the Prospectus, there are no legal or governmental proceedings pending or, to such counsel's knowledge, threatened that would result in a material modi- fication, suspension or revocation thereof. Moreover, such counsel shall confirm that nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement, including any information provided pursuant to Rule 430A or Rule 434 (except for financial statements and the notes thereto, the financial schedules and any other financial data included or incorporated by reference therein, as to which counsel need express no opinion), at the time it became effective or at the Representation Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (except for financial statements and the notes thereto, the financial schedules, and any other financial data included or incorpo rated by reference therein, as to which counsel need express no opinion), at the Representation Date (unless the term "Prospectus" refers to a prospectus which has been provided to the Underwriter by the Company for use in connection with the offering of the Securities which differs from the Pro- spectus on file at the Commission at the time the Regis- tration Statement became effective, in which case at the time it is first provided to the Underwriter for such use) or at the Closing Time, included (or includes) an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In giving such opinion, such counsel may rely, as to matters of Delaware law, upon the opinion of Richards, Layton & Finger, P.A., special Delaware counsel to the Offerors, in which case the opinion shall state that such counsel believes that you and such counsel are entitled to so rely. (2) The favorable opinion, dated as of the Closing Time, of Simpson Thacher & Bartlett, special counsel to the Offer- ors, in form and substance satisfactory to counsel for the Underwriter and subject to the qualifications and assumptions stated therein, to the effect that: (i) The Registration Statement has become effective under the 1993 Act and the Prospectus was filed on March 19, 1998 pursuant to Rule 424(b) of the 1933 Act Regulations and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued or proceeding for that purpose has been instituted or threatened by the Commission. (ii) The Registration Statement, as of its effective date, and the Prospectus, as of its issue date complied as to form in all material respects with the re quirements of the 1933 Act, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the applicable rules and regulations of the Commission thereunder, except that in each case we express no opinion with respect to the financial statements or other financial data contained or incorporated by reference in the Registration Statement or the Prospectus. (iii) The statements made in Prospectus under the captions "Description of the FELINE PRIDES," "Description of the Purchase Contracts," "Certain Provisions of the Purchase Contract Agreement and the Pledge Agreement," "Description of the Guarantee," "Description of the Debentures," and "Effect of Obligations Under the Debentures and the Guaran- tee," insofar as they purport to constitute summaries of the certain terms of the documents referred to therein, consti- tute accurate summaries of the terms of such documents in all material respects. (iv) The Purchase Contract Agreement and the Pledge Agreement have been duly authorized, executed and delivered by the Company and (assuming due execution and delivery by the Purchase Contract Agent) constitute valid and binding agreements of the Company enforceable against the Company in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a pro- ceeding in equity or at law); provided, however, that upon the occurrence of a Termination Event, Section 365(e)(1) of the Bankruptcy Code (11 U.S.C. 101-1330, as amended) should not invalidate or nulify the provisions of Sections 3.15 and 5.8 of the Purchase Contract Agreement and of Section 4.3 of the Pledge Agreement that require termination of the Purchase Contracts and release of the Collateral Agent's security interest in the Capital Securities, the Debentures, the Applicable Ownership Interest in the Trea- sury Portfolio or the Treasury Securities; provided, fur- ther, that the automatic stay under Section 362 of the Bankruptcy Code may preclude such termination for a period of time and the procedures for obtaining relief from such stay may delay exercise of such termination rights. (v) The Income PRIDES and the Growth PRIDES have each been duly authorized, executed and delivered by the Company and (assuming due execution by the Purchase Contract Agent as attorney-in-fact of the holders thereof and due authentication by the Purchase Contract Agent) and upon payment therefor as set forth in the Underwriting Agreement, will be duly and validly issued and outstanding, and will constitute valid and binding obligations of the Company entitled to the benefits of the Purchase Contract Agreement and enforceable against the Company in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganizations, moratorium and other similar laws relating to or affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (vi) The provisions of the Pledge Agreement are effective to create in favor of the Collateral Agent for the benefit of the Company, a valid and perfected security interest under the Uniform Commercial Code as in effect on the date of such opinion in the State of New York in the Pledged Capital Securities, Pledged Debentures, Applicable Ownership Interests (as specified in clause (A) of the definition thereof in the Declaration) of the Treasury Portfolio and the Pledged Treasury Securities from time to time credited to the Collateral Account. (vii) The Guarantee Agreement has been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act and (assuming due execution and delivery by the Guarantee Trustee) constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent convey- ance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, gen- eral equitable principles (whether considered in a proceed- ing in equity or at law) and an implied covenant of good faith and fair dealing. (viii) The Indenture has been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act, and (assuming due authentica- tion, execution and delivery by the Debt Trustee) consti- tutes valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (ix) The Debentures have been duly authorized, executed and delivered by the Company and (assuming due authentication by the Debt Trustee) and upon payment there for as set forth herein, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a pro- ceeding in equity or at law) and an implied covenant of good faith and fair dealing. (x) The issuance and sale of the Income PRIDES and Growth PRIDES in accordance with this Agreement do not contravene the Commodity Exchange Act or the regulations of the Commodity Futures Trading Commission. (xi) None of the Trust nor the Company is, and upon the issuance and sale of the Income PRIDES and Growth PRIDES as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined within the meaning of and subject to registration under the Investment Company Act of 1940, as amended. (xii) Based upon current law and the assumptions stated or referred to therein, under current United States Federal income tax law: (i) the Trust will be classified as a grantor trust and not as an association taxable as a corporation; (ii) the Debentures will be classified as indebtedness of the Company and (iii) the discussion in the Prospectus unde the caption "Certain Federal Income Tax Consequences" is a fair and accurate summary of the matters addressed therein. Moreover, such counsel shall confirm that based upon their examination of the Registration Statement and the Prospectus and their investigations made in connection with the preparation of the Registration Statement and the Pro- spectus (excluding any documents incorporated therein) and their participations in conferences with certain officers and employees of the Company, with representatives of Price Waterhouse LLP and counsel to the Company such counsel has no reason to believe that the Registration Statement, as of its effective date (including any documents incorporated therein on file with Commission on such effective date), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not mis leading or that the Prospectus as of its date or as of the Date of Delivery (including the documents incorporated therein by reference) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that in each case such counsel need express no belief with respect to the financial statements or other financial data contained or incorporated by reference in the Registra- tion Statement, the Prospectus or the documents incorporated therein. In giving such opinion, such counsel may rely, as to matters of New Jersey law, upon the opinion of Patricia Nachtigal, Esq. Vice President and General Counsel of the Com pany. (3) The favorable opinion, dated as of the Closing Time, of Richards, Layton & Finger, P.A., special Delaware counsel to the Offerors, in form and substance satisfactory to counsel for the Underwriter, to the effect that: (i) The Trust has been created and is validly existing in good standing as a business trust under the Delaware Act, and has the trust power and authority to conduct its business as described in the Prospectus. (ii) The Declaration constitutes a legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms, except that to the extent enforceability thereof may be limited by the (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer, and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) princi- ples of equity, including applicable law relating to fidu- ciary duties (regardless of whether considered and applied in a proceeding in equity or at law), and (iii) the effect of applicable public policy on the enforcement of provisions related to indemnification. (iii) Under the Delaware Act and the Declaration, the Trust has the trust power and authority to (i) execute and deliver, and to perform its obligations under, this Agreement and the Pricing Agreement and (ii) issue, and perform its obligations under, the Trust Securities. (iv) Under the Delaware Act and the Declaration, the execution and delivery by the Trust of this Agreement and the Pricing Agreement, and the performance by the Trust of its obligations hereunder and under the Pricing Agree- ment, have been authorized by all necessary trust action on the part of the Trust. (v) The Capital Securities have been authorized by the Declaration and, when executed by the Trust and authenticated by the Institutional Trustee in accordance with the Declaration and delivered against payment therefor in accordance with the terms of this Agreement, will be validly issued and, subject to qualifications hereinafter expressed, fully paid and nonassessable undivided beneficial interests in the assets of the Trust; the Holders of the Capital Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability ex tended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; said counsel may note that the holders of the Capital Securities may be obligated to make payments as set forth in the Declaration. (vi) The Common Securities have been authorized by the Declaration and, when issued, executed and authenti- cated in accordance with the terms of the Declaration, and delivered and paid for as set forth in the Prospectus, will be validly issued, undivided beneficial interests in the assets of the Trust. (vii) Under the Delaware Act and the Declaration, the issuance of the Trust Securities is not subject to preemptive or other similar rights. (viii) None of the execution and delivery by the Trust of, or the performance by the Trust of its obligations under, this Agreement, the issuance and sale of the Capital Securities by the Trust in accordance with the terms of this Agreement and the Pricing Agreement, or the consummation by the Trust of the other transactions contemplated thereby, will contravene any provisions of applicable Delaware law or Delaware administrative regulations or the Certificate of Trust or the Declaration. (ix) No authorization, approval, consent, order, registration or qualification of or with any Delaware state governmental authority or Delaware state agency is required for the entry into the Purchase Contracts underlying the Securities, the issuance and sale by the Trust of the Capi- tal Securities to the Underwriter, or the performance by the Company and the Trust of their respective obligations under this Agreement, the Pricing Agreement, the Purchase Con- tracts, the Purchase Contract Agreement, the Pledge Agree- ment, the Indenture, the Debentures, the Capital Securities Guarantee Agreement, the Capital Securities Guarantee, the Declaration and the Trust Securities, except such counsel need not express any opinion regarding any securities laws. (4) The favorable opinion, dated as of the Closing Pepper Hamilton LLP, counsel to First National Bank of Chicago, as Institutional Trustee under the Declaration, and Guarantee Trustee under the Guarantee Agreement, and to First Chicago Delaware Inc., as Delaware Trustee, in form and substance satisfactory to counsel for the Underwriter, to the effect that: (i) The Institutional Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing under the laws of the United States with all necessary corporate power and author- ity to execute, deliver, and to carry out and perform its obligations under the terms of, the Declaration and the Guarantee. (ii) The Delaware Trustee is a Delaware corpora- tion, duly organized, validly existing and in good standing, with full corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (iii) The execution, delivery and performance by each of the Institutional Trustee and the Delaware Trustee of the Declaration, and the execution, delivery and perfor- mance by Guarantee Trustee of the Guarantee, have been duly authorized by all necessary corporate action on the part of the Institutional Trustee and the Delaware Trustee, respec- tively, in the case of the Declaration, and by the Guarantee Trustee, in the case of the Guarantee. The Declaration and the Guarantee have been duly executed and delivered by the Institutional Trustee and the Delaware Trustee, respec- tively, in the case of the Declaration, and by the Guarantee Trustee, in the case of the Guarantee, and constitute the legal, valid and binding obligation of the Institutional Trustee and the Delaware Trustee, in the case of the Decla- ration, and of the Guarantee Trustee, in the case of the Guarantee, enforceable against the Institutional Trustee and the Delaware Trustee in the case of the Declaration, and against the Guarantee Trustee, in the case of the Guarantee, in accordance with their terms. Such opinions may be lim- ited by (i) public policy considerations; (ii) applicable bankruptcy, solvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the enforcement of credi- tors' rights generally, as well as awards by courts of relief in lieu of the remedy of specific performance of contractual provisions; and (iii) general principles of equity (regardless of whether such enforceability is consid- ered a proceeding in equity or at law) as a court having jurisdiction may impose. (iv) The execution, delivery and performance by each of the Institutional Trustee and the Delaware Trustee of the Declaration, and the execution, delivery and perfor- mance by the Guarantee Trustee of the Guarantee, do not conflict with, or constitute a breach of, the Institutional Trustee's, the Delaware Trustee's or the Guarantee Trustee's respective charter or bylaws. (5) The favorable opinion, dated as of the Closing Time, of Emmet, Marvin & Martin, counsel to The Bank of New York, as Purchase Contract Agent, in form and substance satisfactory to counsel for the Underwriter, to the effect that: (i) The Bank of New York, is duly incorporated and is validly existing as a banking corporation with trust powers under the laws of the United States with all neces- sary power and authority to execute, deliver and perform its obligations under the Purchase Contract Agreement and the Pledge Agreement. (ii) The execution, delivery and performance by the Purchase Contract Agent of the Purchase Contract Agree- ment and the Pledge Agreement, and the authentication and delivery of the Securities have been duly authorized by all necessary corporate action on the part of the Purchase Contract Agent. The Purchase Contract Agreement and the Pledge Agreement have been duly executed and delivered by the Purchase Contract Agent, and constitute the legal, valid and binding obligations of the Purchase Contract Agent, enforceable against the Purchase Contract Agent in accor dance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (iii) the execution, delivery and performance of the Purchase Contract Agreement and the Pledge Agreement by the Purchase Contract Agent does not conflict with or con- stitute a breach of the charter or by-laws of the Purchase Contract Agent. (iv) No consent, approval or authorization of, or registration with or notice to, any New York or federal gov- ernmental authority or agency is required for the execution, delivery or performance by the Purchase Contract Agent of the Purchase Contract Agreement and the Pledge Agreement. (6) The favorable opinion, dated as of the Closing Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriter, in form and substance satisfactory to the Under writer, with respect to the issuance and sale of the Securities, and other related matters as the Underwriter may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (c) Between the date of this Agreement and prior to the Closing Time, no material adverse change shall have occurred in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust or the Company and its subsidiaries, considered as one enterprise, whether or not in the ordinary course of business. (d) At the Closing Time, the Underwriter shall have re- ceived a certificate of the President or a Vice-President of the Company and of the Chief Financial Officer or Chief Accounting Officer of the Company and a certificate of a Regular Trustee of the Trust, and dated as of the Closing Time, to the effect that (i) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust or the Company and its subsidiar- ies considered as one enterprise, whether or not in the ordinary course of business, (ii) the representations and warranties in Section 1 hereof are true and correct as though expressly made at and as of the Closing Time, (iii) the Company and the Trust have complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commis- sion. (e) At the time of the execution of this Agreement, the Underwriter shall have received from Price Waterhouse LLP a letter dated such date in form and substance satisfactory to the Underwriter, to the effect set forth below and as to such other matters as the Underwriter may reasonably request, that: (i) They are independent accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. (ii) In their opinion, the consolidated financial statements audited by them and incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1934 Act and the published rules and regu- lations thereunder with respect to registration statements on Form S-3. (iii) They have not audited any financial statements of the Company as of any date or for any period subsequent to December 31, 1997. Therefore, they are unable to and do not express any opinion on the financial position, results of operations or cash flows as of any date or for any period subsequent to December 31, 1997. (iv) For purposes of such letter, they have read the minutes of the 1998 meetings of the Board of Directors and the Board Committees (Compensation and Nominating, Corporate Affairs, Audit and Finance) of the Company as set forth in the minute books at March 13, 1998, officials of the Company having advised them that the minutes of all such meetings through that date were set forth therein (except for the minutes of the February 3, 1998 Audit Committee meeting, the March 3, 1998 Finance Committee meeting and the March 3, 1998 Corporate Affairs Committee meeting which were not approved in final form, for which drafts were provided to them; and except for the February 3, 1998 Compensation and Nominating Committee meeting and the March 4, 1998 Board of Directors meeting for which no minutes were available and for which an agenda for the meeting was provided to them; the officials of the Company have represented that such drafts and agenda include all substantive actions taken at such meetings), and have carried out other procedures to March 13, 1998 (their work did not extend to the period from March 14, 1998 to March 17, 1998, inclusive), as follows: a. With respect to the period from January 1, 1998 to February 28, 1998 they have: (1) read the unaudited consolidated finan- cial data of the Company and subsidiaries for January of both 1997 and 1998 furnished them by the Company, officials of the Company having ad- vised them that no such financial data as of any date or for any period subsequent to January 31, 1998 were available; and (2) inquired of certain officials of the Company who have responsibility for financial and accounting matters as to whether the unaudited financial data referred to in 4.a.(1) above are stated on a basis substantially consistent with that of the audited financial statements included in the Registration Statement. The foregoing procedures do not constitute an audit made in accordance with generally accepted auditing standards. Also, they would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, they make no representations as to the suffi- ciency of the foregoing procedures for the Underwriter's purposes. (v) Nothing came to their attention as a result of the foregoing procedures, however, that caused them to believe that: a. (i) At January 31, 1998 there was any change in the capital stock (except for any increases in the capital stock in connection with any employee benefit, dividend reinvestment or stock purchase plan of the Company), increase in long-term debt or any decreases in consolidated net current assets (working capital) or shareholders' equity of the Company and consolidated subsidiaries as compared with amounts shown in the December 31, 1997 audited consolidated balance sheet incorporated by reference in the Registration Statement or (ii) for the period from January 1, 1998 to January 31, 1998, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net sales or in the total or per share amounts of net income, except in all instances for changes, increases, or decreases that the Registration Statement discloses have occurred or may occur. (vi) As mentioned under (iv)a, Company officials have advised them that no consolidated financial data as of any date or for any period subsequent to February 28, 1998 are available; accordingly, the procedures carried out by them with respect to changes in financial statement items after February 28, 1998 have been, of necessity, even more limited than those with respect to the period referred to in (iv). They have made inquiries of certain officials of the Company who have responsibility for financial and accounting matters as to whether there was any increase in long-term debt or any decrease in shareholders' equity of the Company and consolidated subsidiaries at March 13, 1998 as compared with amounts shown on the December 31, 1997 audited consolidated balance sheet incorporated by reference in the Registration Statement. On the basis of these inquiries and their reading of the minutes as described in (iv), nothing came to their attention that caused them to believe that there was any such change, increase or decrease, except in all instances for increases or decreases which the Registration Statement discloses have occurred or may occur. (vii) For purposes of such letter, they have also read the items identified by the Underwriter on the Form 10-K forming part of the Registration Statement incorporated by reference thereto and have performed the procedures de scribed in such letter. (viii) Their audit of the consolidated financial statements for the period referred to in the introductory paragraph of such letter comprised audit tests and proce- dures deemed necessary for the purpose of expressing an opinion on such consolidated financial statements taken as a whole. For neither the periods referred to therein nor any other period did they perform audit tests for the purpose of expressing an opinion on individual balances of accounts or summaries of selected transactions such as those enumerated in such letter and, accordingly, they express no opinion thereon. (ix) They have: a. Read the unaudited pro forma condensed consol- idated statement of income for the year ended December 31, 1997, incorporated by reference in the Registration Statement. b. Inquired of certain officials of the Company who have responsibility for financial and accounting matters about: (1 The basis for their determination of the pro forma adjustments, and (2 Whether the unaudited pro forma con- densed consolidated financial statement referred to in 9.a. complies as to form in all material respects with the applicable accounting require- ments of Rule 11-02 of Regulation S-X. c. Proved the arithmetic accuracy of the applica- tion of the pro forma adjustments to the historical amounts in the unaudited pro forma condensed consoli dated financial statement. The foregoing procedures are substantially less in scope than an examination, the objective of which is the expres- sion of an opinion on management's assumptions, the pro forma adjustments, and the application of those adjustments to historical financial information. Accordingly, they do not express such an opinion. The foregoing procedures would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, they make no representation about the sufficiency of such procedures for the Underwriter's purposes. (x) Nothing came to their attention as a result of the procedures specified in paragraph (ix), however, that caused them to believe that the unaudited pro forma condensed consolidated financial statement referred to in (ix)a. incorporated by reference in the Registration Statement does not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regula- tion S-X and that the pro forma adjustments have not been properly applied to the historical amounts in the compila- tion of those statements. Had they performed additional procedures or had they made an examination of the condensed consolidated pro forma financial statement, other matters might have come to their attention that would have been reported to the Underwriter. (f at the time of the execution of this Agreement, the Underwriter shall have received from KPMG Peat Marwick LLP independent certified public accountants to Thermo King Corpora- tion ("Thermo King"), a letter dated such date in form and substance satisfactory to the Underwriter, to the effect set forth below and as to such other matters as the Underwriter may reasonably request, that: (i) They are independent certified public accountants with respect to Thermo King within the meaning of the Act and the applicable published rules and regulations thereun- der. (ii) In their opinion, the combined financial state- ments audited by them and incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the related published rules and regulations thereunder with respect to a registration statement on Form S-3. (iii) They have not audited any financial statements of Thermo King as of any date or for any period subsequent to December 31, 1996; although they have conducted an audit for the year ended December 31, 1996, the purpose (and therefore the scope) of the audit was to enable them to express their opinion on the combined financial statements as of December 31, 1996, and for the year then ended, but not on the financial statement for any interim period within that year. Therefore, they are unable to and do not express any opinion on the unaudited combined balance sheet as of September 30, 1997 and 1996, and the unaudited combined statements of income and cash flows for the nine-month periods ended September 30, 1996 and 1997, incorporated by reference in the registration statement, or on the financial position or results of operations as of any date or for any period subsequent to December 31, 1996. (iv) Thermo King was acquired by the Company effective October 31, 1997. They have performed no procedures since that date. For purposes of such letter they have read the minutes of the meetings of the Board of Directors of Thermo King as set forth in the minute books at October 31, 1997, officials of Thermo King having advised them that the min- utes of all such meetings through that date were set forth therein; they have carried out other procedures to October 31, 1997, as follows (their work did not extend to the period from November 1, 1997, to March 17, 1998, inclusive: a. With respect to the nine-month period ended September 30, 1997 they have: (1 Performed the procedures specified by the American Institute of Certified Public Accoun- tants for a review of interim financial informa- tion as described in SAS No. 71, Interim Financial Information, on the unaudited combined balance sheet as of September 30, 1997, and the unaudited combined statement of income and cash flows for the nine-month period ended September 30, 1997, incorporated by reference in the Registration Statement. (2 Inquired of certain officials of Thermo King who have responsibility for financial sand accounting matters whether the unaudited combined financials statements referred to in 4.a.(i) com- ply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations. The foregoing procedures do not constitute an audit conducted in accordance with generally accepted audit- ing standards. Also, they would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, they make no representations regarding the sufficiency of the fore going procedures of the Underwriter's purposes. (v) Nothing came to their attention as a result of the foregoing procedures, however, that caused them to believe that: a. (1) Any material modifications should be made to the unaudited combined financial statements de- scribed in 4.a.(i), incorporated by reference in the registration statement, for them to be in conformity with generally accepted accounting principles. (vi) The Company was acquired by Ingersoll-Rand Com- pany effective October 31, 1997. They have performed no procedures since that date. They have inquired of certain officials of Thermo King who have responsibility for finan- cial and accounting matters whether (a) at October 31, 1997, there was any increase in long-term debt or any decreases in combined net current assets of the combined companies as compared with amounts shown on the September 30, 1997, unaudited combined balance sheet incorporated by reference in the registration statement and (b) for the period from October 1, 1997, to October 31, 1997, there were any de- creases, as compared with the corresponding period in the preceding year, in combined net sales or in the amount of income before interest and taxes. On the basis of these inquiries and their reading of the minutes as described in 4, nothing came to their attention that caused them to believe that there was any such change, increase, or de- crease, except in all instances for increases, or decreases that the Registration Statement discloses have occurred or may occur. (g At the Closing Time, the Underwriter shall have re- ceived from Price Waterhouse, LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than five days prior to the Closing Time. (h At the Closing Time, and at each Date of Delivery, if any, counsel for the Underwriter shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions herein contained; and all proceedings taken by the Offerors in connec- tion with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Underwriter and counsel for the Underwriter. (i At the Closing Time, (i) the Securities shall be rated Investment Grade by any nationally recognized statistical rating agency, and the Offerors shall have delivered to the Underwriter a letter, from such nationally recognized statistical rating agency, or other evidence satisfactory to the Underwriter, confirming that the Securities have Investment Grade ratings; (ii) there shall not have occurred any decrease in the rating assigned to the Securities or any other securities of the Company or of the financial condition of the Company by any "nationally recognized statistical rating organization," as defined for purposes of Rule 436(g)(2) under the 1933 Act Regulations, and (iii) no such organization shall have publicly announced that it has under surveillance or review its rating of the Securities or any other securities of the Company or of the financial condition of the Company. (j At the Closing Time, the Income PRIDES, the Growth PRIDES and the Shares shall have been approved for listing on the New York Stock Exchange upon notice of issuance. (k In the event that the Underwriter exercises the options provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Offerors contained herein and the statements in any certificates furnished by the Offerors hereunder shall be true and correct as of, and as if made on, each Date of Delivery, and at the relevant Date of Delivery, the Underwriter shall have received: (1 A certificate, dated such Date of Delivery, of the President or a Vice-President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company and a certificate of a Regular Trustee of the Trust confirm- ing that the certificate delivered at the Closing Time pursu- ant to Section 5(d) hereof is true and correct as of, and as if made on, such Date of Delivery. (2 The favorable opinion of Patricia Nachtigal, Esq., Vice President and General Counsel for the Company, in form and substance satisfactory to counsel for the Underwriter, dated such Date of Delivery, relating to the Option Securi- ties and otherwise to the same effect as the opinion re- quired by Section 5(b)(1) hereof. (3 The favorable opinion of Simpson Thacher & Bart- lett, special counsel and special tax counsel for the Offer- ors, in form and substance satisfactory to counsel for the Underwriter, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Sections 5(b)(2) and 5(b)(6) hereof. (4 The favorable opinion of Richards, Layton & Fin- ger, P.A., special Delaware counsel for the Offerors, in form and substance satisfactory to counsel for the Under writer, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(3) hereof. (5 The favorable opinion of Pepper Hamilton LLP coun- sel to The First National Bank of Chicago, in form and sub- stance satisfactory to counsel for the Underwriter, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(4) hereof. (6 The favorable opinion of Emmet, Marvin and Martin, counsel to The Bank of New York, as Purchase Contract Agent, in form and substance satisfactory to counsel for the Under writer, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(5) hereof. (7 The favorable opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriter, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(7) hereof. (8 A letter from Price Waterhouse LLP in form and sub stance satisfactory to the Underwriter and dated such Date of Delivery, substantially the same in form and substance as the letter furnished to the Underwriter pursuant to Sec- tion 5(e) hereof, except that the "specified date" in the letter furnished pursuant to this Section shall be a date not more than five days prior to such Date of Delivery. (9 At such Date of Delivery, (i) the Securities shall be rated Investment Grade by any nationally recognized statistical rating agency, and the Offerors shall have delivered to the Underwriter a letter from such nationally recognized statistical rating agency, or other evidence satisfactory to the Underwriter, confirming that the Securi- ties have Investment Grade ratings; (ii) there shall not have occurred any decrease in the rating assigned to the Securities or any other securities of the Company or of the financial condition of the Company by any "nationally recog- nized statistical rating organization," as defined for purposes of Rule 436(g)(2) under the 1933 Act Regulations, and (iii) no such organization shall have publicly announced that it has under surveillance or review its rating of the Securities or any other securities of the Company or of the financial condition of the Company. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agree- ment, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the Underwriter to purchase the relevant Option Securities may be terminated by the Underwriter by notice to the Company at any time at or prior to the Closing Time, or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a The Offerors agree to jointly and severally indemnify and hold harmless the Underwriter and each person, if any, who controls the Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information deemed to be part thereof, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any gov- ernmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided, that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Offerors; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Underwriter), reasonably incurred in inves- tigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that the foregoing indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in confor- mity with written information furnished to the Offerors by the Underwriter expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information deemed to be a part thereof, if applica- ble, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (b The Underwriter agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, the Trust and each of its Trustees who- signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration State- ment (or any amendment thereto), including the Rule 430A Informa- tion and the Rule 434 Information deemed to be a part thereof, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Offerors by the Underwriter expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Underwriter, and, in the case of parties indemnified pursuant to section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may partici- pate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemni- fying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmen- tal agency or body, commenced or threatened, or any claim whatso- ever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liabili- ty arising out of such litigation investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d If at any time an indemnified party shall have request- ed an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settle- ment being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative bene- fits received by the Offerors on the one hand, and the Underwrit- er, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Offerors on the one hand, and the Underwriter, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expens- es, as well as any other relevant equitable considerations. The relative benefits received by Offerors on the one hand, and the Underwriter, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of such Securities (before deducting expenses) received by the Offerors and the total underwriting discount received by the Underwriter, in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet bear to the aggregate initial public offering price of such Securities as set forth on such cover. The relative fault of the Offerors, on the one hand, and the Underwriter, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Offerors or by the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Offerors and the Underwriter agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable consider- ations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or pro- ceeding by any governmental agency or body, commenced or threat- ened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, the Under writer shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which the Under writer has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omis- sion. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudu- lent misrepresentation. For purposes of this Section 7, each person, if any, who controls the Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Underwriter, and each director of the Company, each officer of the Company and each Trustee of the Trust who signed the Registration Statement, and each person, if- any, who controls the Company and the Trust within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Offerors. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement and the Pricing Agreement, or con- tained in certificates of officers of the Company or trustees of the Trust submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of and payment for the Securities to the Underwriter. SECTION 9. Termination of Agreement. (a The Underwriter may terminate this Agreement, by notice to the Company at any time at or prior to the Closing Time, if (i) there has been, since the date of this Agreement or since the respective dates as of which information is given in the Prospec- tus, any material adverse change or any development which could reasonably be expected to result in a prospective material adverse change, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) there has occurred any material adverse change in the financial markets in the United States or any outbreak of hostilities or escalation of hostilities or other calamity or crisis, or any change or devel- opment involving a prospective change in national or interna- tional political, financial or economic conditions the effect of which is such as to make it, in the judgment of the Underwriter impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in the Common Stock or any other security of the Company has been suspended or limited by the Commission, NASD or the New York Stock Exchange, or if trading generally on either the American Stock Exchange, the New York Stock Exchange or in the over-the-counter market has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securi- ties have been required, by either of said exchanges or by such system or by order of the Commission, NASD or any other govern- mental authority, or (iv) if a banking moratorium has been declared by either Federal, New York or New Jersey authorities. (b If this Agreement and the Pricing Agreement are termi- nated pursuant to this Section 9, such termination shall be without liability of any party to any other party except as provided in Section 4, and provided, further, that Sections 1, 6, 7 and 8 shall survive such termination and remain in full force and effect. SECTION 10. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriter shall be directed to the Underwriter c/o Merrill Lynch at Merrill Lynch World Head quarters, World Financial Center, North Tower, New York, New York 10281, Attention of Huston McCollough, Managing Director, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Atten- tion of John Osborn, Esq.; notices to the Offerors shall be directed to it at Ingersoll-Rand Company, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675, Attention of Patricia Nachtigal, Esq., Vice President and General Counsel. SECTION 11. Parties. This Agreement and the Pricing Agree- ment shall each inure to the benefit of and be binding upon the Offerors and the Underwriter and their respective successors. Nothing expressed or mentioned in this Agreement or the Pricing Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriter and the Offerors and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or the Pricing Agreement or any provision herein or therein contained. This Agreement and the Pricing Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the parties hereto and thereto and their respective successors and legal representatives, and said con- trolling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from the Under writer shall be deemed to be a successor by reason merely of such purchase. SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE PRICING AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORD ANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME UNLESS OTHERWISE INDICATED. SECTION 13. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. If the foregoing is in accordance with your under- standing of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, shall become a binding agreement among the Company, the Trust and the Underwriter in accordance with its terms. Very truly yours, INGERSOLL-RAND COMPANY By: Name: Title: INGERSOLL-RAND FINANCING I By: INGERSOLL-RAND COMPANY as Depositor By: Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: Name: Authorized Signatory: Schedule I Significant Subsidiaries Clark Equipment Company Thermo King Corporation The Torrington Company Schlage Lock Company Ingersoll-Rand Company (a New Jersey Corporation) Ingersoll-Rand Financing I (a Delaware Business Trust) 14,000,000 FELINE PRIDES_ (Stated Amount of $25 per Security) Consisting of 12,600,000 Income PRIDES_ each consisting of a Purchase Contract of Ingersoll-Rand Company Requiring the Purchase on May 16, 2001 (or earlier) of certain Shares of Common Stock of Ingersoll-Rand Company and a 6.22% Capital Security of Ingersoll-Rand Financing I and 1,400,000 Growth PRIDES_ each consisting of a Purchase Contract of Ingersoll-Rand Company Requiring the Purchase on May 16, 2001 (or earlier) of certain shares of Common Stock of Ingersoll-Rand Company and a 1/40 Undivided Beneficial Interest in a Zero-Coupon U.S. Treasury Security having a Principal Amount equal to $1,000 and maturing on May 15, 2001 and 1,400,000 6.22% Capital Securities of Ingersoll-Rand Financing I (Liquidation Amount $25 per Capital Security) PRICING AGREEMENT _____________________ "FELINE PRIDES," "Income PRIDES" and "Growth PRIDES" are service marks of Merrill Lynch & Co., Inc. March 17, 1998 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, Merrill Lynch World Headquarters World Financial Center North Tower New York, New York 10281 Ladies and Gentlemen: Reference is made to the Underwriting Agreement, dated March 17, 1998 (the "Underwriting Agreement"), relating to the purchase by the Underwriter named therein of the above Income PRIDES (the "Income PRIDES"), Growth PRIDES (The "Growth PRIDES") and Capital Securities (the "Capital Securities" and, together with the Income PRIDES and Growth PRIDES, the "Securities") of Ingersoll-Rand Company (the "Company"), and Ingersoll-Rand Financing I (the "Trust"). The Securities are being issued and sold by the Company and the Trust to the Underwritier on the terms and conditions set forth in the Underwriting Agreement. Pursuant to Section 2 of the Underwriting Agreement, the Company and the Trust agree with the Underwriter as follows: 1. The initial public offering price, and the aggre gate interest rate to be paid by the Offerors, per security for the Securities, determined as provided in said Section 2, shall be (a) in the case of each Income PRIDES, $25.00 and 6.75%, (b) in the case of each Growth PRIDES, $21.13 and .78% and (c) in the case of each separately offered Capital Security, $25.00 and 6.22%. 2. The respective purchase prices per security for the Securities to be paid by the several Underwriters shall be equal to the initial public offering prices set forth in paragraph 1. above. The Company shall pay a commission to the Underwriters equal, in the case of the Initial Securi ties, to $10,500,000 and, with respect to the Option Securi ties, $.75 per security in the case of Income PRIDES, $.575 per security in the case of Growth PRIDES and $.175 per security in the case of separately offered Capital Securi ties. If the foregoing is in accordance with your under standing of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, shall become a binding agreement among the Company, the Trust and the Underwriter in accordance with its terms. Very truly yours, INGERSOLL-RAND COMPANY By: Name: Title: INGERSOLL-RAND FINANCING I By: INGERSOLL-RAND COMPANY as Depositor By: Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: Name: Authorized Signatory: EX-4 4 INGERSOLL-RAND COMPANY, THE CHASE MANHATTAN BANK, as Collateral Agent, Custodial Agent and Securities Intermediary AND THE BANK OF NEW YORK, as Purchase Contract Agent PLEDGE AGREEMENT Dated as of March 23, 1998 TABLE OF CONTENTS Page RECITALS 1 Section 1. Definitions 3 Section 2. Pledge; Control and Perfection 8 Section 2.1. The Pledge 8 Section 2.2. Control and Perfectio 10 Section 3. Distributions on Pledged Collateral 12 Section 4. Substitution, Release, Repledge and Settlement of Capital Securities 14 Section 4.1. Substitution for Capital Securities and the Creation of Growth PRIDES 14 Section 4.2. Substitution of Treasury Securities and the Creation of Income PRIDES 15 Section 4.3. Termination Event 16 Section 4.4. Cash Settlement 17 Section 4.5. Early Settlement 19 Section 4.6. Application of Proceeds Settlement 19 Section 5. Voting Rights -- Capital Securities 22 Section 6. Rights and Remedies; Distribution of the Debentures; Tax Event Redemption 23 Section 6.1. Rights and Remedies of the Collateral Agent 23 Section 6.2. Distribution of the Debentures; Tax Event Redemption 25 Section 6.3. Substitutions 26 Section 7. Representations and Warranties; Covenants 26 Section 7.1. Representations and Warranties 26 Section 7.2. Covenants 27 Section 8. The Collateral Agent 28 Section 8.1. Appointment, Powers and Immunities 28 Section 8.2. Instructions of the Company 29 Section 8.3. Reliance by Collateral Agent 30 Section 8.4. Rights in Other Capacities 30 Section 8.5. Non-Reliance on Collateral Agent 31 Section 8.6. Compensation and Indemnity 31 Section 8.7. Failure to Act 31 Section 8.8. Resignation of Collateral Agent 32 Section 8.9. Right to Appoint Agent or Advisor 34 Section 8.10. Survival 34 Section 8.11. Exculpation 34 Section 9. Amendment 34 Section 9.1. Amendment Without Consent of Holders 34 Section 9.2. Amendment with Consent of Holders 35 Section 9.3. Execution of Amendments 36 Section 9.4. Effect of Amendments 36 Section 9.5. Reference to Amendments 36 Section 10. Miscellaneous 37 Section 10.1. No Waiver 37 Section 10.2. Governing Law 37 Section 10.3. Notices 38 Section 10.4. Successors and Assigns 38 Section 10.5. Counterparts 38 Section 10.6. Severability 38 Section 10.7. Expenses, etc. 39 Section 10.8. Security Interest Absolute 39 EXHIBIT A INSTRUCTION TO COLLATERAL AGENT EXHIBIT B INSTRUCTION TO PURCHASE CONTRACT AGENT EXHIBIT C INSTRUCTION TO CUSTODIAL AGENT REGARDING REMARKETING EXHIBIT D INSTRUCTION TO CUSTODIAL AGENT REGARDING WITHDRAWAL FROM REMARKETING PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of March 23, 1998 (this "Agreement"), among Ingersoll-Rand Company, a New Jersey corporation (the "Company"), The Chase Manhattan Bank, a New York banking corporation, not individually but solely as collateral agent (in such capacity, together with its successors in such capacity, the "Collateral Agent") as custodial agent (in such capacity, together with its successors in such capacity, the "Custodial Agent") and in its capacity as a "securities intermediary" as defined in Section 8-102(a)(14) of the Code (as defined herein) (in such capacity, together with its successors in such capacity, the "Securities Intermediary"), and The Bank of New York, not individually but solely as purchase contract agent and as attorney-in-fact of the Holders (as defined in the Purchase Contract Agreement) from time to time of the Securities (as hereinafter defined) (in such capacity, together with its successors in such capacity, the "Purchase Contract Agent") under the Purchase Contract Agreement (as hereinafter defined). RECITALS The Company and the Purchase Contract Agent are parties to the Purchase Contract Agreement, dated as of the date hereof (as modified and supplemented and in effect from time to time, the "Purchase Contract Agreement"), pursuant to which there may be issued up to 16,100,000 FELINE PRIDES of the Company, having a stated amount of $25 (the "Stated Amount") per FELINE PRIDES. The FELINE PRIDES will initially consist of (A) 14,490,000 units (referred to as "Income PRIDES") with a face amount, per Income PRIDES, equal to the Stated Amount and (B)1,610,000 units (referred to as "Growth PRIDES" and, together with the Income PRIDES, the "Securities") with a face amount, per Growth PRIDES, equal to the Stated Amount. Each Income PRIDES will initially be comprised of (a) a stock purchase contract (a "Purchase Contract") under which (i) the holder will purchase from the Company on May 16, 2001 (the "Purchase Contract Settlement Date"), for an amount of cash equal to the Stated Amount, a number of newly issued shares of common stock, $2.00 par value per share (the "Common Stock"), of the Company equal to the Settlement Rate (as defined below) and (ii) the Company will pay the Holder Contract Adjustment Payments (as defined below) at the rate of .53% of the Stated Amount per annum and (b) either bene ficial ownership of a Capital Security (as defined below) or upon the occurrence of a Tax Event Redemption the Applicable Ownership Interest of the Treasury Portfolio. Each Growth PRIDES will initially be comprised of (a) a Purchase Contract under which (i) the holder will purchase from the Company on the Purchase Contract Settlement Date, for an amount in cash equal to the Stated Amount, a number of newly issued shares of Common Stock of the Company, equal to the Settlement Rate, and (ii) the Company will pay the Holder Contract Adjustment Payments, at the rate of .78% of the Stated Amount per annum, and (b) a 1/40 undivided beneficial interest in a zero-coupon U.S. Treasury Security (CUSIP No. 912820BA4) having a principal amount equal to $1,000 and maturing on May 15, 2001 (the "Treasury Securities"). Pursuant to the terms of the Declaration (as defined below), Ingersoll-Rand Financing I, a statutory business trust formed under the laws of the State of Delaware (the "Trust") will issue 16,100,000 6.22% Capital Securities (the "Capital Securities") having a stated liquidation value equal to the Stated Amount. Pursuant to the terms of the Purchase Contract Agreement and the Purchase Contracts, the Holders, from time to time, of the Securities have irrevocably authorized the Purchase Contract Agent, as attorney-in-fact of such Holders, among other things, to execute and deliver this Agreement on behalf of such Holders and to grant the pledge provided hereby of the Capital Securities, any Applicable Ownership Interest in the Treasury Portfolio and any Treasury Securities delivered in exchange there for to secure each Holder's obligations under the related Purchase Contract, as provided herein and subject to the terms hereof. Upon such pledge, the Capital Securities will be beneficially owned by the Holders but will be owned of record by the Purchase Contract Agent subject to the Pledge hereunder. Accordingly, the Company, the Collateral Agent, the Securities Intermediary, the Custodial Agent and the Purchase Contract Agent, on its own behalf and as attorney-in-fact of the Holders from time to time of the Securities, agree as follows: Section 1. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (c) the following terms have the meanings assigned to them in the Purchase Contract Agreement: (i) Act, (ii) Agent, (iii) Board Resolution, (iv) Cash Settlement, (v) Certificate, (vi) Contract Adjustment Payments, (vii) Debentures, (viii) Early Settlement, (ix) Early Settlement Amount, (x) Early Settlement Date, (xi) Failed Remarketing, (xii) Holder, (xiii) Opinion of Counsel, (xiv) Outstanding Securities, (xv) Purchase Agreement, (xvi) Purchase Contract, (xvii) Purchase Contract Settlement Date, (xviii) Remarketing Agent, (xix) Remarketing Agreement, (xx) Remarketing Underwriting Agreement, (xxi) Settlement Rate, and (xxii) Termination Event; and (d) the following terms have the meanings assigned to them in the Declaration: (i) Applicable Ownership Interest (ii) Applicable Principal Amount, (iii) Institutional Trustee, (iv) Investment Company Event,(v) Primary Treasury Dealer, (vi) Quotation Agent, (vii) Redemption Amount, (viii) Redemption Price, (ix) Tax Event, (x) Tax Event Redemption, (xi) Tax Event Redemption Date, (xii) Treasury Portfolio, (xiii) Treasury Portfolio Purchase Price. "Agreement" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more agreements supplemental hereto entered into pursuant to the applicable provisions hereof. "Bankruptcy Code" means title 11 of the United States Code, or any other law of the United States that from time to time provides a uniform system of bankruptcy laws. "Business Day" means any day other than a Saturday, a Sunday or any other day on which banking institutions in The City of New York (in the State of New York) are permitted or required by any applicable law to close. "Capital Securities" has the meaning specified in the Recitals. "Cash" means any coin or currency of the United States as at the time shall be legal tender for payment of public and private debts. "Code" has the meaning specified in Section 6.1 hereof. "Collateral" has the meaning specified in Section 2.1 hereof. "Collateral Account" means the securities account (number C27328) maintained at The Chase Manhattan Bank in the name "The Bank of New York, as Purchase Contract Agent on behalf of the holders of certain securities of Ingersoll-Rand Financing I, Collateral Account subject to the security interest of The Chase Manhattan Bank, as Collateral Agent, for the benefit of Ingersoll- Rand Company, as pledgee" and any successor account. "Collateral Agent" has the meaning specified in the first paragraph of this instrument. "Common Stock" has the meaning specified in the Recitals. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor shall have become such, and thereafter "Company" shall mean such successor. "Custodial Agent" has the meaning specified in the Recitals. "Debenture Trustee" means The Bank of New York, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Declaration" means the Amended and Restated Declaration of Trust, dated as of March 23, 1998, among the Company as sponsor, the trustees named therein and the holders from time to time of undivided beneficial interests in the assets of the Trust. "Intermediary" means any entity that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity. "Permitted Investments" means any one of the following which shall mature not later than the next succeeding Business Day (i) any evidence of indebtedness with an original maturity of 365 days or less issued, or directly and fully guaranteed or insured, by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof or such indebt edness constitutes a general obligation of it); (ii) deposits, certificates of deposit or acceptances with an original maturity of 365 days or less of any institution which is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than US$ 200.0 million at the time of deposit; (iii) investments with an original maturity of 365 days or less of any Person that is fully and unconditionally guaranteed by a bank referred to in clause (ii); (iv) investments in commercial paper, other than commercial paper issued by the Company or its affiliates, of any corporation incorporated under the laws of the United States or any State thereof, which commercial paper has a rating at the time of purchase at least equal to "A-1" by Standard & Poor's Ratings Services ("S&P") or at least equal to "P-1" by Moody's Investors Service, Inc. ("Moody's"); and (v) investments in money market funds registered under the Investment Company Act of 1940, as amended, rated in the highest applicable rating category by S&P or Moody's. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Pledge" has the meaning specified in Section 2.1 hereof. "Pledged Capital Securities" has the meaning specified in Section 2.1 hereof. "Pledged Treasury Securities" has the meaning specified in Section 2.1 hereof. "Proceeds" means all interest, dividends, cash, instruments, securities, financial assets (as defined in 8-102(a)(9) of the Code) and other property from time to time received, receivable or otherwise distributed upon the sale, exchange, collection or disposition of the Collateral or any proceeds thereof. "Purchase Contract" has the meaning specified in the Recitals. "Purchase Contract Agent" has the meaning specified in the first paragraph of this Agreement. "Purchase Contract Agreement" has the meaning specified in the Recitals. "Securities" has the meaning specified in the Recitals. "Securities Intermediary" has the meaning specified in the first paragraph of this Agreement. "Security Entitlement" has the meaning set forth in Section 8-102(a)(17) of the Code. "Separate Capital Securities" means any Capital Securities that are not Pledged Capital Securities. "Stated Amount" has the meaning specified in the Recitals. "TRADES" means the Treasury/Reserve Automated Debt Entry System maintained by the Federal Reserve Bank of New York pursuant to the TRADES Regulations. "TRADES Regulations" means the regulations of the United States Department of the Treasury, published at 31 C.F.R. Part 357, as amended from time to time. Unless otherwise defined herein, all terms defined in the TRADES Regulations are used herein as therein defined. "Transfer" means, with respect to the Collateral and in accordance with the instructions of the Collateral Agent, the Purchase Contract Agent or the Holder, as applicable: (i) in the case of Collateral consisting of securities which cannot be delivered by book-entry or which the parties agree are to be delivered in physical form, delivery in appropriate physical form to the recipient accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient; (ii) in the case of Collateral consisting of securities maintained in book-entry form by causing a "securities intermediary" (as defined in Section 8-102(a)(14) of the Code) to (i) credit a "security entitlement" (as defined in Section 8-102(a)(17) of the Code) with respect to such securities to a "securities account" (as defined in Section 8-501(a) of the Code) maintained by or on behalf of the recipient and (ii) to issue a confirmation to the recipient with respect to such credit. In the case of Collateral to be delivered to the Collateral Agent, the Securities Intermediary shall be the Securities Intermediary and the securities account shall be the Collateral Account. "Treasury Security" means a zero-coupon U.S. Treasury Security (Cusip Number 912820 BA 4) which are the principal strips of the U.S. Treasury Securities which mature on May 15, 2001. "Trust" has the meaning specified in the Recitals. "Value" with respect to any item of Collateral on any date means, as to (i) a Capital Security, the Stated Amount, (ii) Cash, the face amount thereof and (iii) Treasury Securities, the aggregate principal amount thereof at maturity. Section 2. Pledge; Control and Perfection. Section 2.1. The Pledge. The Holders from time to time acting through the Purchase Contract Agent, as their attorney-in- fact, hereby pledge and grant to the Collateral Agent, for the benefit of the Company, as collateral security for the performance when due by such Holders of their respective obligations under the related Purchase Contracts, a security interest in (i) all of the right, title and interest of such Holders (a) in the Capital Securities and Treasury Securities constituting a part of the Securities and any Treasury Securities delivered in exchange for any Capital Securities, and any Capital Securities delivered in exchange for any Treasury Securities, in accordance with Section 4 hereof, in each case that have been Transferred to or received by the Collateral Agent and not released by the Collateral Agent to such Holders under the provisions of this Agreement; (b) in payments made by Holders pursuant to Section 4.4; (c) in the Collateral Account and all securities, financial assets, Cash and other property credited thereto and all Security Entitlements related thereto; (d) in any Debentures delivered to the Collateral Agent upon the occurrence of an Investment Company Event or a liquidation of the Trust as provided in Section 6.2; (e) in the Treasury Portfolio purchased on behalf of the Holders of Income PRIDES by the Collateral Agent upon the occurrence of a Tax Event Redemption as provided in Section 6.2 and (f) all Proceeds of the foregoing (all of the foregoing, collectively, the "Collateral"). Prior to or concur rently with the execution and delivery of this Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the Securities, shall cause the Capital Securities comprising a part of the Income PRIDES, and the Treasury Securities comprising a part of the Growth PRIDES, to be Transferred to the Collateral Agent for the benefit of the Company. Such Capital Securities shall be Transferred by physically delivering such Securities to the Securities Intermediary endorsed in blank and causing the Securities Intermediary to credit the Collateral Account with such Securities and sending the Collateral Agent a confirmation of the deposit of such Securities. In the event a Holder of Income PRIDES so elects, such Holder may Transfer Treasury Securities to the Collateral Agent for the benefit of the Company in exchange for the release by the Collateral Agent on behalf of the Company of Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, with an aggregate stated liquidation amount equal to the aggregate principal amount of the Treasury Securities so Transferred, in the case of Capital Securities, or with an appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio equal to the aggregate principal amount of the Treasury Securities so transferred, in the event that a Tax Event Redemption has occurred, to the Purchase Contract Agent on behalf of such Holder. Treasury Securities and the Treasury Portfolio, as applicable, shall be Transferred to the Collateral Account maintained by the Collateral Agent at the Securities Intermediary by book-entry transfer to the Collateral Account in accordance with the TRADES Regulations and other applicable law and by the notation by the Securities Intermediary on its books that a Security Entitlement with respect to such Treasury Securities or Treasury Portfolio, has been credited to the Collateral Account. For purposes of perfecting the Pledge under applicable law, including, to the extent applicable, the TRADES Regulations or the Uniform Commercial Code as adopted and in effect in any applicable jurisdiction, the Collateral Agent shall be the agent of the Company as provided herein. The pledge provided in this Section 2.1 is herein referred to as the "Pledge" and the Capital Securities (or the Debentures that are delivered pursuant to Section 6.2 hereof) or Treasury Securities subject to the Pledge, excluding any Capital Securities (or the Debentures that are delivered pursuant to Section 6.2 hereof) or Treasury Securities released from the Pledge as provided in Section 4 hereof, are hereinafter referred to as "Pledged Capital Securities" or the "Pledged Treasury Securities," respectively. Subject to the Pledge and the provisions of Section 2.2 hereof, the Holders from time to time shall have full beneficial ownership of the Collateral. Whenever directed by the Collateral Agent acting on behalf of the Company, the Securities Intermediary shall have the right to reregister the Capital Securities or any other Securities held in physical form in its name. Except as may be required in order to release Capital Securities in connection with a Holder's election to convert its investment from an Income PRIDES to a Growth PRIDES, or except as otherwise required to release Securities as specified herein, neither the Collateral Agent nor the Securities Intermediary shall relinquish physical possession of any certificate evidencing a Capital Security prior to the termination of this Agreement. If it becomes necessary for the Securities Intermediary to relinquish physical possession of a certificate in order to release a portion of the Capital Securities evidenced thereby from the Pledge, the Securities Intermediary shall use its best efforts to obtain physical possession of a replacement certificate evidencing any Capital Securities remaining subject to the Pledge hereunder registered to it or endorsed in blank within fifteen days of the date it relinquished possession. The Securities Intermediary shall promptly notify the Company and the Collateral Agent of the Securities Intermediary's failure to obtain possession of any such replacement certificate as required hereby. Section 2.2. Control and Perfection. (a) In connection with the Pledge granted in Section 2.1, and subject to the other provisions of this Agreement, the Holders from time to time acting through the Purchase Contract Agent, as their attorney-in- fact, hereby authorize and direct the Securities Intermediary (without the necessity of obtaining the further consent of the Purchase Contract Agent or any of the Holders), and the Securities Intermediary agrees, to comply with and follow any instructions and entitlement orders (as defined in Section 8- 102(a)(8) of the Code) that the Collateral Agent on behalf of the Company may give in writing with respect to the Collateral Account, the Collateral credited thereto and any security entitlements with respect to any thereof. Such instructions and entitlement orders may, without limitation, direct the Securities Intermediary to transfer, redeem, sell, liquidate, assign, deliver or otherwise dispose of the Capital Securities, the Treasury Securities, the Treasury Portfolio, and any Security Entitlements with respect thereto and to pay and deliver any income, proceeds or other funds derived therefrom to the Company. The Holders from time to time acting through the Purchase Contract Agent hereby further authorize and direct the Collateral Agent, as Agent of the Company, to itself issue instructions and entitlement orders, and to otherwise take action, with respect to the Collateral Account, the Collateral credited thereto and any security entitlements with respect thereto, pursuant to the terms and provisions hereof, all without the necessity of obtaining the further consent of the Purchase Contract Agent or any of the Holders. The Collateral Agent shall be the Agent of the Company and shall act as directed in writing by the Company. Without limiting the generality of the foregoing, the Collateral Agent shall issue entitlement orders to the Securities Intermediary when and as directed by the Company. (b) The Securities Intermediary hereby confirms and agrees that: (i) all securities or other property underlying any financial assets credited to the Collateral Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another Collateral Account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to the Collateral Account be registered in the name of the Purchase Contract Agent, the Collateral Agent, the Company or any Holder, payable to the order of, or specially indorsed to, the Purchase Contract Agent, the Collateral Agent, the Company or any Holder except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank; (ii) all property delivered to the Securities Intermediary pursuant to this Pledge Agreement (including, without limitation, any Capital Securities, the Treasury Portfolio or Treasury Securities) will be promptly credited to the Collateral Account; (iii) the Collateral Account is an account to which financial assets are or may be credited, and the Securities Intermediary shall, subject to the terms of this Agreement, treat the Purchase Contract Agent as entitled to exercise the rights of any financial asset credited to the Collateral Account; (iv) the Securities Intermediary has not entered into, and until the termination of the this Agreement will not enter into, any agreement with any other person relating the Collateral Account and/or any financial assets credited thereto pursuant to which it has agreed to comply with entitle ment orders (as defined in Section 8-102(a)(8) of the Code) of such other person; and (v) the Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with the debtor or the secured party purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in this Section 2.2 hereof. (c) The Securities Intermediary hereby agrees that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Collateral Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the Code. (d) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail. Section 3. Distributions on Pledged Collateral. So long as the Purchase Contract Agent is the registered owner of the Pledged Capital Securities, it shall receive all payments thereon. If the Pledged Capital Securities are reregistered, such that the Collateral Agent becomes the registered holder, all payments of the Stated Amount or, if applicable, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, or cash distributions on, the Pledged Capital Securities or on the appro priate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio, as the case may be, and all payments of the principal of, or cash distributions on, any Pledged Treasury Securities received by the Collateral Agent that are properly payable hereunder shall be paid by the Collateral Agent by wire transfer in same day funds: (i) In the case of (A) cash distributions with respect to the Pledged Capital Securities or the appropriate Applicable Ownership Interest (as specified in clause (B) of the definition of such term) of the Treasury Portfolio, as the case may be, and (B) any payments of the Stated Amount or, if applicable, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio with respect to any Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, that have been released from the Pledge pursuant to Section 4.3 hereof, to the Purchase Contract Agent, for the benefit of the relevant Holders of Securities, to the account designated by the Purchase Contract Agent for such purpose, no later than 2:00 p.m., New York City time, on the Business Day such payment is received by the Collateral Agent (provided that in the event such payment is received by the Collateral Agent on a day that is not a Business Day or after 12:30 p.m., New York City time, on a Business Day, then such payment shall be made no later than 10:30 a.m., New York City time, on the next succeeding Business Day); (ii) In the case of any principal payments with respect to any Treasury Securities that have been released from the Pledge pursuant to Section 4.3 hereof, to the Holders of the Growth PRIDES to the accounts designated by them in writing for such purpose no later than 2:00 p.m., New York City time, on the Business Day such payment is received by the Collateral Agent (provided that in the event such payment is received by the Collateral Agent on a day that is not a Business Day or after 12:30 p.m., New York City time, on a Business Day, then such payment shall be made no later than 10:30 a.m., New York City time, on the next succeeding Business Day); and (iii) In the case of payments of the Stated Amount of any Pledged Capital Securities or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as the case may be, or the principal of any Pledged Treasury Securities, to the Company on the Purchase Contract Settlement Date in accordance with the procedure set forth in Section 4.6(a) or 4.6(b) hereof, in full satisfaction of the respective obligations of the Holders under the related Purchase Contracts. All payments received by the Purchase Contract Agent as provided herein shall be applied by the Purchase Contract Agent pursuant to the provisions of the Purchase Contract Agreement. If, notwithstanding the foregoing, the Purchase Contract Agent shall receive any payments of the Stated Amount or, if applicable, the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) on account of any Capital Security or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as applicable that, at the time of such payment, is a Pledged Capital Security or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, or a Holder of a Growth PRIDES shall receive any payments of principal on account of any Treasury Securities that, at the time of such payment, are Pledged Treasury Securities, the Purchase Contract Agent or such Holder shall hold the same as trustee of an express trust for the benefit of the Company (and promptly deliver the same over to the Company) for application to the obligations of the Holders under the related Purchase Contracts, and the Holders shall acquire no right, title or interest in any such payments of Stated Amount or principal so received. Section 4. Substitution, Release, Repledge and Settlement of Capital Securities. Section 4.1. Substitution for Capital Securities and the Creation of Growth PRIDES. At any time on or prior to the fifth Business Day immediately preceding the Purchase Contract Settlement Date (unless a Tax Event Redemption has occurred), a Holder of Income PRIDES shall have the right to substitute Treasury Securities for the Pledged Capital Securities securing such Holder's obligations under the Purchase Contract(s) comprising a part of its Income PRIDES in integral multiples of 40 Income PRIDES by (a) Transferring to the Collateral Agent Trea sury Securities having a Value equal to the Stated Amount of the Pledged Capital Securities to be released and (b)(i) in the event that Contract Adjustment Payments are at a higher rate for Growth PRIDES than for Income PRIDES, delivering to the Purchase Contract Agent Cash in an amount equal to the excess of the Contract Adjustment Payments that would have accrued since the last Payment Date through the date of substitution on the Growth PRIDES being created by the Holder, over the Contract Adjustment Payments that have accrued over the same time period on the related Income PRIDES, which amount the Purchase Contract Agent shall promptly remit to the Company, and (ii) delivering the related Income PRIDES to the Purchase Contract Agent, accompanied by a notice, substantially in the form of Exhibit B hereto, to the Purchase Contract Agent stating that such Holder has Transferred Treasury Securities to the Collateral Agent pursuant to clause (a) above (stating the Value of the Treasury Securities Transferred by such Holder) and requesting that the Purchase Contract Agent instruct the Collateral Agent to release from the Pledge the Pledged Capital Securities related to such Income PRIDES. The Purchase Contract Agent shall instruct the Collateral Agent in the form provided in Exhibit A; provided, how ever, that if a Tax Event Redemption has occurred and the Treasury Portfolio has become a component of the Income PRIDES, Holders of Income PRIDES may make such substitution only in integral multiples of 1,600,000 Income PRIDES at any time on or prior to the second Business Day immediately preceding the Purchase Contract Settlement Date. Upon receipt of Treasury Securities from a Holder of Income PRIDES and the related instruction from the Purchase Contract Agent, the Collateral Agent shall release the Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, and shall promptly Transfer such Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, free and clear of any lien, pledge or security interest created hereby, to the Purchase Contract Agent. Section 4.2. Substitution of Treasury Securities and the Creation of Income PRIDES. At any time on or prior to the fifth Business Day immediately preceding the Purchase Contract Settlement Date (unless a Tax Event Redemption has occurred), a Holder of Growth PRIDES shall have the right to establish or reestablish Income PRIDES consisting of the Purchase Contracts and Capital Securities in integral multiples of 40 Income PRIDES by (a) Transferring to the Collateral Agent Capital Securities having a Value equal to the Value of the Pledged Treasury Securities to be released and (b) delivering the related Growth PRIDES to the Purchase Contract Agent, accompanied by a notice, substantially in the form of Exhibit B hereto, to the Purchase Contract Agent stating that such Holder has transferred Capital Securities to the Collateral Agent pursuant to clause (a) above and requesting that the Purchase Contract Agent instruct the Collateral Agent to release from the Pledge the Pledged Treasury Securities related to such Growth PRIDES. The Purchase Contract Agent shall instruct the Collateral Agent in the form provided in Exhibit A; provided, however, that if a Tax Event Redemption has occurred and the Treasury Portfolio has become a component of the Income PRIDES, Holders of Growth PRIDES may make such substitution only in integral multiples of 1,600,000 Growth PRIDES, at any time on or prior to the Business Day immediately preceding the Purchase Contract Settlement Date. Upon receipt of the Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, from such Holder and the instruction from the Purchase Contract Agent, the Collateral Agent shall release the Treasury Securities and shall promptly Transfer such Treasury Securities, free and clear of any lien, pledge or security interest created hereby, to the Purchase Contract Agent. Section 4.3. Termination Event. Upon receipt by the Collateral Agent of written notice from the Company or the Purchase Contract Agent that there has occurred a Termination Event, the Collateral Agent shall release all Collateral from the Pledge and shall promptly Transfer any Pledged Capital Securities (or the Applicable Ownership Interest of the Treasury Portfolio if a Tax Event Redemption has occurred) and Pledged Treasury Securities to the Purchase Contract Agent for the benefit of the Holders of the Income PRIDES and the Growth PRIDES, respectively, free and clear of any lien, pledge or security interest or other interest created hereby. If such Termination Event shall result from the Company's becoming a debtor under the Bankruptcy Code, and if the Collateral Agent shall for any reason fail promptly to effectuate the release and Transfer of all Pledged Capital Securities, the Treasury Portfolio or of the Pledged Treasury Securities, as the case may be, as provided by this Section 4.3, the Purchase Contract Agent shall (i) use its best efforts to obtain an opinion of a nationally recognized law firm reasonably acceptable to the Collateral Agent to the effect that, as a result of the Company's being the debtor in such a bankruptcy case, the Collateral Agent will not be prohibited from releasing or Transferring the Collateral as provided in this Section 4.3, and shall deliver such opinion to the Collateral Agent within ten days after the occurrence of such Termination Event, and if (y) the Purchase Contract Agent shall be unable to obtain such opinion within ten days after the occurrence of such Termination Event or (z) the Collateral Agent shall continue, after delivery of such opinion, to refuse to effectuate the release and Transfer of all Pledged Capital Securities, the Treasury Portfolio or the Pledged Treasury Securities, as the case may be, as provided in this Section 4.3, then the Purchase Contract Agent shall within fifteen days after the occurrence of such Termination Event commence an action or proceeding in the court with jurisdiction of the Company's case under the Bankruptcy Code seeking an order requiring the Collateral Agent to effectuate the release and transfer of all Pledged Capital Securities, the Treasury Portfolio or of the Pledged Treasury Securities, as the case may be, as provided by this Section 4.3 or (ii) commence an action or proceeding like that described in subsection (i)(z) hereof within ten days after the occurrence of such Termination Event. Section 4.4. Cash Settlement. (a) Upon receipt by the Collateral Agent of (i) a notice from the Purchase Contract Agent promptly after the receipt by the Purchase Contract Agent of such notice that a Holder of an Income PRIDES or Growth PRIDES has elected, in accordance with the procedures specified in Section 5.4(a)(i) or (d)(i) of the Purchase Contract Agreement, respectively, to settle its Purchase Contract with Cash and (ii) payment by such Holder on or prior to 11:00 a.m., New York City time, on the Business Day immediately preceding the Purchase Contract Settlement Date in lawful money of the United States by certified or cashiers' check or wire transfer in immediately available funds payable to or upon the order of the Company, then the Collateral Agent shall, promptly invest any Cash received from a Holder in connection with a Cash Settlement in Permitted Investments. Upon receipt of the proceeds upon the maturity of the Permitted Investments on the Purchase Contract Settlement Date, the Collateral Agent shall pay the portion of such proceeds and deliver any certified or cashiers' checks received, in an aggregate amount equal to the Purchase Price, to the Company on the Purchase Contract Settlement Date, and shall distribute any funds in respect of the interest earned from the Permitted Invest ments to the Purchase Contract Agent for payment to the relevant Holders. (b) If a Holder of an Income PRIDES fails to notify the Agent of its intention to make a Cash Settlement in accordance with Section 5.4(a)(i) of the Purchase Contract Agreement, such failure shall constitute an event of default under the Purchase Contract Agreement and hereunder, and the Holder shall be deemed to have consented to the disposition of the pledged Capital Securities pursuant to the remarketing as described in Section 5.4(b) of the Purchase Contract Agreement, which is incorporated herein by reference. If a Holder of an Income PRIDES does notify the Agent as provided in Section 5.4(a)(i) of the Purchase Contract Agreement of its intention to pay the Purchase Price in cash, but fails to make such payment as required by Section 5.4(a)(ii) of the Purchase Contract Agreement, the Capital Securities of such a Holder will not be remarketed but instead the Collateral Agent, for the benefit of the Company, will exercise its rights as a secured party with respect to such Capital Securities at the direction of the Company to retain or dispose of the Collateral in accordance with applicable law. In addition, in the event of a Failed Remarketing as described in Section 5.4(b) of the Purchase Contract Agreement, such Failed Remarketing shall constitute an event of default hereunder by such Holder and the Collateral Agent, for the benefit of the Company, will also exercise its rights as a secured party with respect to such Capital Securities at the direction of the Company to retain or dispose of the Collateral in accordance with applicable law. (c) If a Holder of a Growth PRIDES fails to notify the Purchase Contract Agent of such Holder's intention to make a Cash Settlement in accordance with Section 5.4(d)(i) of the Purchase Contract Agreement, or if a Holder of an Income PRIDES does notify the Agent as provided in paragraph (d)(i) of the Purchase Contract Agreement of its intention to pay the Purchase Price in cash, but fails to make such payment as required by paragraph 5.4(d)(ii) of the Purchase Contract Agreement, such failure shall constitute an event of default hereunder by such Holder and upon the maturity of any Pledged Treasury Securities or the Treasury Portfolio, if any, held by the Collateral Agent on the Business Day immediately preceding the Purchase Contract Settlement Date, the principal amount of the Pledged Treasury Securities or the Treasury Portfolio received by the Collateral Agent shall, upon written direction of the Company, be invested promptly in Permitted Investments. On the Purchase Contract Settlement Date, an amount equal to the Purchase Price will be remitted to the Company as payment thereof. In the event the sum of the proceeds from the related Pledged Treasury Securities or the Treasury Portfolio, as the case may be, and the investment earnings earned from such investments is in excess of the aggregate Purchase Price of the Purchase Contracts being settled thereby, the Collateral Agent will distribute such excess to the Purchase Contract Agent for the benefit of the Holder of the related Growth PRIDES or Income PRIDES when received. Section 4.5. Early Settlement. Upon written notice to the Collateral Agent by the Purchase Contract Agent that one or more Holders of Securities have elected to effect Early Settlement of their respective obligations under the Purchase Contracts forming a part of such Securities in accordance with the terms of the Purchase Contracts and the Purchase Contract Agreement (setting forth the number of such Purchase Contracts as to which such Holders have elected to effect Early Settlement), and that the Purchase Contract Agent has received from such Holders, and paid to the Company as confirmed in writing by the Company, the related Early Settlement Amounts pursuant to the terms of the Purchase Contracts and the Purchase Contract Agreement and that all conditions to such Early Settlement have been satisfied, then the Collateral Agent shall release from the Pledge, (a) Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio in the case of a Holder of Income PRIDES or (b) Pledged Treasury Securities in the case of a Holder of Growth PRIDES, as the case may be, with a principal amount equal to the product of (i) the Stated Amount times (ii) the number of such Purchase Contracts as to which such Holders have elected to effect Early Settlement and shall Transfer all such Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio or Pledged Treasury Securities, as the case may be, free and clear of the Pledge created hereby, to the Purchase Contract Agent for the benefit of the Holders. Section 4.6. Application of Proceeds Settlement. (a) In the event a Holder of Income PRIDES (if a Tax Event Redemption has not occurred) has not elected to make an effective Cash Settlement by notifying the Purchase Contract Agent in the manner provided for in paragraph 5.4(a)(i) in the Purchase Contract Agreement or has not made an Early Settlement of the Purchase Contract(s) underlying its Income PRIDES, such Holder shall be deemed to have elected to pay for the shares of Common Stock to be issued under such Purchase Contract(s) from the Proceeds of the related Pledged Capital Securities. The Collateral Agent shall, by 10:00 a.m., New York City time, on the fourth Business Day immediately preceding the Purchase Contract Settlement Date, without any instruction from such Holder of Income PRIDES, present the related Pledged Capital Securities to the Remarketing Agent for remarketing. Upon receiving such Pledged Capital Securities, the Remarketing Agent, pursuant to the terms of the Remarketing Agreement and the Remarketing Underwriting Agreement, will use its reasonable efforts to remarket such Pledged Capital Securities on such date at a price not less than approximately 100.5% of the aggregate Value of such Pledged Capital Securities, plus accrued and unpaid distributions (including deferred distributions), if any, thereon. After deducting as the Remarketing Fee an amount not exceeding 25 basis points (.25%) of the aggregate Value of the Pledged Capital Securities from any amount of such Proceeds in excess of the aggregate Value, plus such accrued and unpaid distributions (including deferred distributions) of the remarketed Pledged Capital Securities, the Remarketing Agent will remit the entire amount of the Proceeds of such remarketing to the Collateral Agent. On the Purchase Contract Settlement Date, the Collateral Agent shall apply that portion of the Proceeds from such remarketing equal to the aggregate Value, plus such accrued and unpaid distributions (including deferred distributions) of such Pledged Capital Securities, to satisfy in full the obligations of such Holders of Income PRIDES to pay the Purchase Price to purchase the Common Stock under the related Purchase Contracts. The remaining portion of such Proceeds, if any, shall be distributed by the Collateral Agent to the Purchase Contract Agent for payment to the Holders. If the Remarketing Agent advises the Collateral Agent in writing that it cannot remarket the related Pledged Capital Securities of such Holders of Income PRIDES at a price not less than 100% of the aggregate Value of such Pledged Capital Securities plus any accrued and unpaid distributions (including deferred distributions), thus resulting in a Failed Remarketing and an event of default under the Purchase Contract Agreement and hereunder, the Collateral Agent, for the benefit of the Company will, at the written direction of the Company, retain or dispose of the Pledged Capital Securities in accordance with applicable law and satisfy in full, from any such disposition or retention, such Holder's obligation to pay the Purchase Price for the Common Stock. (b) In the event a Holder of Growth PRIDES or Income PRIDES (if a Tax Event Redemption has occurred) has not made an Early Settlement of the Purchase Contract(s) underlying its Growth PRIDES or Income PRIDES, such Holder shall be deemed to have elected to pay for the shares of Common Stock to be issued under such Purchase Contract(s) from the Proceeds of the related Pledged Treasury Securities or the Treasury Portfolio, as the case may be. On the Business Day immediately prior to the Purchase Contract Settlement Date, the Collateral Agent shall, at the written direction of the Purchase Contract Agent, invest the Cash proceeds of the maturing Pledged Treasury Securities or the Treasury Portfolio, as the case may be, in overnight Permitted Investments. Without receiving any instruction from any such Holder of Growth PRIDES or Income PRIDES, the Collateral Agent shall apply the Proceeds of the related Pledged Treasury Securities or Treasury Portfolio to the settlement of such Purchase Contracts on the Purchase Contract Settlement Date. In the event the sum of the Proceeds from the related Pledged Treasury Securities or Treasury Portfolio and the investment earnings from the investment in overnight Permitted Investments is in excess of the aggregate Purchase Price of the Purchase Contracts being settled thereby, the Collateral Agent shall distribute such excess, when received, to the Purchase Contract Agent for the benefit of the Holders. (c) Pursuant to the Remarketing Agreement and subject to the terms of the Remarketing Underwriting Agreement, on or prior to the fifth Business Day immediately preceding the Purchase Contract Settlement Date, but no earlier than the Payment Date immediately preceding the Purchase Contract Settlement Date, holders of Separate Capital Securities may elect to have their Separate Capital Securities remarketed by delivering their Sepa rate Capital Securities, together with a notice of such election, substantially in the form of Exhibit C hereto, to the Custodial Agent. The Custodial Agent will hold such Separate Capital Securities in an account separate from the Collateral Account. A holder of Separate Capital Securities electing to have its Separate Capital Securities remarketed will also have the right to withdraw such election by written notice to the Custodial Agent, substantially in the form of Exhibit D hereto, on or prior to the fifth Business Day immediately preceding the Purchase Contract Settlement Date, upon which notice the Custodial Agent will return such Separate Capital Securities to such holder. On the fourth Business Day immediately preceding the Purchase Contract Settlement Date, the Custodial Agent will deliver to the Remarketing Agent for remarketing all separate Capital Securities delivered to the Custodial Agent pursuant to this Section 4.6(c) and not withdrawn pursuant to the terms hereof prior to such date. The portion of the proceeds from such remarketing equal to the aggregate Value of such Separate Capital Securities will automatically be remitted by the Remarketing Agent to the Custodial Agent for the benefit of the holders of such Separate Capital Securities. In addition, after deducting as the Remarketing Fee an amount not exceeding 25 basis points (.25%) of the Value of the remarketed Separate Capital Securities, from any amount of such proceeds in excess of the aggregate Value of the remarketed Separate Capital Securities plus any accrued and unpaid distributions (including deferred distributions, if any), the Remarketing Agent will remit to the Custodial Agent the remaining portion of the proceeds, if any, for the benefit of such holders. If, despite using its reasonable efforts, the Remarketing Agent advises the Custodial Agent in writing that it cannot remarket the related Separate Capital Securities of such holders at a price not less than 100% of the aggregate Value of such Separate Capital Securities plus accrued and unpaid distribu tions (including deferred distributions) and thus resulting in a Failed Remarketing, the Remarketing Agent will promptly return such Capital Securities to the Custodial Agent for redelivery to such holders. In the event of a dissolution of the Trust and the distribution of the Debentures as described in the Declaration, all references to "Separate Capital Securities" in this Section 4.6(c) shall be deemed to be references to Debentures. Section 5. Voting Rights -- Capital Securities. The Purchase Contract Agent may exercise, or refrain from exercising, any and all voting and other consensual rights pertaining to the Pledged Capital Securities or any part thereof for any purpose not inconsistent with the terms of this Agreement and in accordance with the terms of the Purchase Contract Agreement; provided, that the Purchase Contract Agent shall not exercise or, as the case may be, shall not refrain from exercising such right if, in the judgment of the Company, such action would impair or otherwise have a material adverse effect on the value of all or any of the Pledged Capital Securities; and provided, further, that the Purchase Contract Agent shall give the Company and the Collateral Agent at least five days' prior written notice of the manner in which it intends to exercise, or its reasons for refraining from exercising, any such right. Upon receipt of any notices and other communications in respect of any Pledged Capi tal Securities, including notice of any meeting at which holders of Capital Securities are entitled to vote or solicitation of consents, waivers or proxies of holders of Capital Securities, the Collateral Agent shall use reasonable efforts to send promptly to the Purchase Contract Agent such notice or communication, and as soon as reasonably practicable after receipt of a written request therefor from the Purchase Contract Agent, execute and deliver to the Purchase Contract Agent such proxies and other instruments in respect of such Pledged Capital Securities (in form and substance satisfactory to the Collateral Agent) as are prepared by the Purchase Contract Agent with respect to the Pledged Capital Securities. Section 6. Rights and Remedies; Distribution of the Debentures; Tax Event Redemption Section 6.1. Rights and Remedies of the Collateral Agent. (a) In addition to the rights and remedies specified in Section 4.4 hereof or otherwise available at law or in equity, after an event of default hereunder, the Collateral Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code as in effect in the State of New York (the "Code") (whether or not the Code is in effect in the jurisdiction where the rights and remedies are asserted) and the TRADES Regulations and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted. Without limiting the generality of the foregoing, such remedies may include, to the extent permitted by applicable law, (i) retention of the Pledged Capital Securities or other Collateral in full satisfaction of the Holders obligations under the Purchase Contracts or (ii) sale of the Pledged Capital Securities or other Collateral in one or more public or private sales. (b) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, in the event the Collateral Agent is unable to make payments to the Company on account of the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio or on account of principal payments of any Pledged Treasury Securities as provided in Section 3 hereof in satisfaction of the obligations of the Holder of the Securities of which such Pledged Treasury Securities, or the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as applicable, is a part under the related Purchase Contracts, the inability to make such payments shall constitute an event of default hereunder and the Collateral Agent shall have and may exercise, with reference to such Pledged Treasury Securities, or such appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, as applicable, and such obligations of such Holder, any and all of the rights and remedies available to a secured party under the Code and the TRADES Regulations after default by a debtor, and as otherwise granted herein or under any other law. (c) Without limiting any rights or powers otherwise granted by this Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably authorized to receive and collect all payments of (i) the Stated Amount of or, cash distributions on, the Pledged Capital Securities, (ii) the principal amount of the Pledged Treasury Securities, or (iii) the appropriate Applicable Ownership Interest (as specified in clause (A) of the definition of such term) of the Treasury Portfolio, subject, in each case, to the provisions of Section 3, and as otherwise granted herein. (d) The Purchase Contract Agent and each Holder of Securities, in the event such Holder becomes the Holder of a Growth PRIDES, agrees that, from time to time, upon the written request of the Collateral Agent, the Purchase Contract Agent or such Holder shall execute and deliver such further documents and do such other acts and things as the Collateral Agent may reasonably request in order to maintain the Pledge, and the perfection and priority thereof, and to confirm the rights of the Collateral Agent hereunder. The Purchase Contract Agent shall have no liability to any Holder for executing any documents or taking any such acts requested by the Collateral Agent hereunder, except for liability for its own negligent act, its own negligent failure to act or its own willful misconduct. Section 6.2. Distribution of the Debentures; Tax Event Redemption. Upon the occurrence of an Investment Company Event or a liquidation of the Trust, a principal amount of the Debentures constituting the assets of the Trust and underlying the Capital Securities equal to the aggregate stated liquidation amount of the Pledged Capital Securities shall be delivered to the Collateral Agent in exchange for the Pledged Capital Securities. In the event the Collateral Agent receives such Debentures in respect of Pledged Capital Securities upon the occurrence of an Investment Company Event or liquidation of the Trust, the Collateral Agent shall Transfer the Debentures to the Collateral Account in the manner specified herein for Pledged Capital Securities to secure the obligations of the Holders of Income PRIDES to purchase the Company's Common Stock under the related Purchase Contracts. Thereafter, the Collateral Agent shall have such security interests, rights and obligations with respect to the Debentures as it had in respect of the Pledged Capital Securities as provided in Sections 2, 3, 4, 5 and 6 hereof, and any reference herein to the Pledged Capital Securities shall be deemed to be referring to such Debentures. Upon the occurrence of a Tax Event Redemption prior to the Purchase Contract Settlement Date, the Redemption Price payable on the Tax Event Redemption Date with respect to the Applicable Principal Amount of Debentures shall be delivered to the Collateral Agent by the Institutional Trustee or upon a dissolution of the Trust and the distribution of the related Debentures by the Debenture Trustee on or prior to 12:30 p.m., New York City time, by check or wire transfer in immediately available funds at such place and at such account as may be desig nated by the Collateral Agent in exchange for the Pledged Capital Securities or Debentures, as the case may be. In the event the Collateral Agent receives such Redemption Price, the Collateral Agent will, at the written direction of the Company, apply an amount equal to the Redemption Amount of such Redemption Price to purchase from the Quotation Agent, the Treasury Portfolio and promptly remit the remaining portion of such Redemption Price to the Purchase Contract Agent for payment to the Holders of Income PRIDES. The Collateral Agent shall Transfer the Treasury Portfolio to the Collateral Account in the manner specified herein for Pledged Capital Securities to secure the obligation of all Holders of Income PRIDES to purchase Common Stock of the Company under the Purchase Contracts constituting a part of such Income PRIDES, in substitution for the Pledged Capital Securities. Thereafter the Collateral Agent shall have such security interests, rights and obligations with respect to the Treasury Portfolio as it had in respect of the Pledged Capital Securities or Debentures, as the case may be, as provided in Sections 2, 3, 4, 5 and 6, and any reference herein to the Pledged Capital Securities or the Debentures shall be deemed to be reference to such Treasury Portfolio. Section 6.3. Substitutions. Whenever a Holder has the right to substitute Treasury Securities, Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, for Collateral held by the Collateral Agent, such substitution shall not constitute a novation of the security interest created hereby. Section 7. Representations and Warranties; Covenants. Section 7.1. Representations and Warranties. The Holders from time to time, acting through the Purchase Contract Agent as their attorney-in-fact (it being understood that the Purchase Contract Agent shall not be liable for any representation or warranty made by or on behalf of a Holder), hereby represent and warrant to the Collateral Agent, which representations and warranties shall be deemed repeated on each day a Holder Transfers Collateral that: (a) such Holder has the power to grant a security interest in and lien on the Collateral; (b) such Holder is the sole beneficial owner of the Collateral and, in the case of Collateral delivered in physical form, is the sole holder of such Collateral and is the sole beneficial owner of, or has the right to Transfer, the Collateral it Transfers to the Collateral Agent, free and clear of any security interest, lien, encumbrance, call, liability to pay money or other restriction other than the security interest and lien granted under Section 2 hereof; (c) upon the Transfer of the Collateral to the Collateral Account, the Collateral Agent, for the benefit of the Company, will have a valid and perfected first priority security interest therein (assuming that any central clearing opera tion or any Intermediary or other entity not within the control of the Holder involved in the Transfer of the Collateral, including the Collateral Agent, gives the notices and takes the action required of it hereunder and under applicable law for perfection of that interest and assuming the establishment and exercise of control pursuant to Section 2.2 hereof); and (d) the execution and performance by the Holder of its obligations under this Agreement will not result in the creation of any security interest, lien or other encumbrance on the Collateral other than the security interest and lien granted under Section 2 hereof or violate any provision of any existing law or regulation applicable to it or of any mortgage, charge, pledge, indenture, contract or undertaking to which it is a party or which is binding on it or any of its assets. Section 7.2. Covenants. The Holders from time to time, acting through the Purchase Contract Agent as their attorney-in- fact (it being understood that the Purchase Contract Agent shall not be liable for any covenant made by or on behalf of a Holder), hereby covenant to the Collateral Agent that for so long as the Collateral remains subject to the Pledge: (a) neither the Purchase Contract Agent nor such Holders will create or purport to create or allow to subsist any mortgage, charge, lien, pledge or any other security interest whatsoever over the Collateral or any part of it other than pursuant to this Agreement; and (b) neither the Purchase Contract Agent nor such Holders will sell or otherwise dispose (or attempt to dispose) of the Collateral or any part of it except for the beneficial interest therein, subject to the pledge hereunder, transferred in connection with the Transfer of the Securities. Section 8. The Collateral Agent. It is hereby agreed as follows: Section 8.1. Appointment, Powers and Immunities. The Collateral Agent shall act as Agent for the Company hereunder with such powers as are specifically vested in the Collateral Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Each of the Collateral Agent, the Custodial Agent and the Securities Intermediary: (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and no implied covenants or obligations shall be inferred from this Agreement against any of them, nor shall any of them be bound by the provi sions of any agreement by any party hereto beyond the specific terms hereof; (b) shall not be responsible for any recitals contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by it under, this Agreement, the Securities or the Purchase Contract Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement (other than as against the Collateral Agent), the Securities or the Purchase Contract Agreement or any other document referred to or provided for herein or therein or for any failure by the Company or any other Person (except the Collateral Agent, the Custodial Agent or the Securities Intermediary, as the case may be) to perform any of its obligations hereunder or thereunder or for the perfection, priority or, except as expressly required hereby, maintenance of any security interest created hereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder (except in the case of the Collateral Agent, pursuant to directions furnished under Section 8.2 hereof, subject to Section 8.6 hereof); (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other document or instrument referred to or provided for herein or in connection herewith or therewith, except for its own negligence or willful misconduct; and (e) shall not be required to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, the Securities or other property deposited hereunder. Subject to the foregoing, during the term of this Agreement, the Collateral Agent shall take all reasonable action in connection with the safekeeping and preservation of the Collateral hereunder. No provision of this Agreement shall require the Collateral Agent, the Custodial Agent or the Securities Intermediary to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. In no event shall the Collateral Agent, the Custodial Agent or the Securities Intermediary be liable for any amount in excess of the Value of the Collateral. Notwithstanding the foregoing, the Collateral Agent, the Custodial Agent and Securities Intermediary, each in its individual capacity, hereby waive any right of setoff, bankers lien, liens or perfection rights as securities intermediary or any counterclaim with respect to any of the Collateral. Section 8.2. Instructions of the Company. The Company shall have the right, by one or more instruments in writing executed and delivered to the Collateral Agent, the Custodial Agent or the Securities Intermediary, as the case may be, to direct the time, method and place of conducting any proceeding for the realization of any right or remedy available to the Collateral Agent, or of exercising any power conferred on the Collateral Agent, the Custodial Agent or the Securities Intermedi ary, as the case may be, or to direct the taking or refraining from taking of any action authorized by this Agreement; provided, however, that (i) such direction shall not conflict with the provisions of any law or of this Agreement and (ii) the Collateral Agent, the Custodial Agent and the Securities Intermediary shall be adequately indemnified as provided herein. Nothing in this Section 8.2 shall impair the right of the Collateral Agent in its discretion to take any action or omit to take any action which it deems proper and which is not inconsistent with such direction. Section 8.3. Reliance by Collateral Agent. Each of the Securities Intermediary, the Custodial Agent and the Collateral Agent shall be entitled conclusively to rely upon any certification, order, judgment, opinion, notice or other communication (including, without limitation, any thereof by telephone, telecopy, telex or facsimile) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons (without being required to determine the correctness of any fact stated therein), and upon advice and statements of legal counsel and other experts selected by the Collateral Agent, the Custodial Agent or the Securities Intermediary, as the case may be. As to any matters not expressly provided for by this Agreement, the Collateral Agent, the Custodial Agent and the Securities Intermediary shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions given by the Company in accordance with this Agreement. Section 8.4. Rights in Other Capacities. The Collateral Agent, the Custodial Agent and the Securities Intermediary and their affiliates may (without having to account therefor to the Company) accept deposits from, lend money to, make their investments in and generally engage in any kind of banking, trust or other business with the Purchase Contract Agent and any Holder of Securities (and any of their respective subsidiaries or affiliates) as if it were not acting as the Collateral Agent, the Custodial Agent or the Securities Intermediary, as the case may be, and the Collateral Agent, the Custodial Agent and the Securities Intermediary and their affiliates may accept fees and other consideration from the Purchase Contract Agent and any Holder of Securities without having to account for the same to the Company; provided that each of the Securities Intermediary, the Custodial Agent and the Collateral Agent covenants and agrees with the Company that it shall not accept, receive or permit there to be created in favor of itself and shall take no affirmative action to permit there to be created in favor of any other Person, any security interest, lien or other encumbrance of any kind in or upon the Collateral. Section 8.5. Non-Reliance on Collateral Agent. None of the Securities Intermediary, the Custodial Agent or the Collateral Agent shall be required to keep itself informed as to the performance or observance by the Purchase Contract Agent or any Holder of Securities of this Agreement, the Purchase Contract Agreement, the Securities or any other document referred to or provided for herein or therein or to inspect the properties or books of the Purchase Contract Agent or any Holder of Securities. The Collateral Agent, the Custodial Agent and the Securities Intermediary shall not have any duty or responsibility to provide the Company with any credit or other information concerning the affairs, financial condition or business of the Purchase Contract Agent or any Holder of Securities (or any of their respective affiliates) that may come into the possession of the Collateral Agent, the Custodial Agent or the Securities Intermediary or any of their respective affiliates. Section 8.6. Compensation and Indemnity. The Company agrees: (i) to pay each of the Collateral Agent and the Custodial Agent from time to time such compensation as shall be agreed in writing between the Company and the Collateral Agent or the Custodial Agent, as the case may be, for all services rendered by each of them hereunder and (ii) to indemnify the Collateral Agent, the Custodial Agent and the Securities Intermediary for, and to hold each of them harmless from and against, any loss, liability or reasonable out-of-pocket expense incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of its powers and duties under this Agreement, including the reasonable out-of-pocket costs and expenses (including reasonable fees and expenses of counsel) of defending itself against any claim or liability in connection with the exercise or performance of such powers and duties. Section 8.7. Failure to Act. In the event of any ambiguity in the provisions of this Agreement or any dispute between or conflicting claims by or among the parties hereto or any other Person with respect to any funds or property deposited hereunder, the Collateral Agent and the Custodial Agent shall be entitled, after prompt notice to the Company and the Purchase Contract Agent, at its sole option, to refuse to comply with any and all claims, demands or instructions with respect to such property or funds so long as such dispute or conflict shall continue, and neither the Collateral Agent nor the Custodial Agent shall be or become liable in any way to any of the parties hereto for its failure or refusal to comply with such conflicting claims, demands or instructions. The Collateral Agent and the Custodial Agent shall be entitled to refuse to act until either (i) such conflicting or adverse claims or demands shall have been finally determined by a court of competent jurisdiction or settled by agreement between the conflicting parties as evidenced in a writing, satisfactory to the Collateral Agent or the Custodial Agent, as the case may be, or (ii) the Collateral Agent or the Custodial Agent, as the case may be, shall have received security or an indemnity satisfactory to the Collateral Agent or the Custodial Agent, as the case may be, sufficient to save the Collateral Agent or the Custodial Agent, as the case may be, harmless from and against any and all loss, liability or reasonable out-of-pocket expense which the Collateral Agent or the Custodial Agent, as the case may be, may incur by reason of its acting. The Collateral Agent or the Custodial Agent may in addition elect to commence an interpleader action or seek other judicial relief or orders as the Collateral Agent or the Custodial Agent, as the case may be, may deem necessary. Notwith standing anything contained herein to the contrary, neither the Collateral Agent nor the Custodial Agent shall be required to take any action that is in its opinion contrary to law or to the terms of this Agreement, or which would in its opinion subject it or any of its officers, employees or directors to liability. Section 8.8. Resignation of Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent or Custodial Agent as provided below, (a) the Collateral Agent and the Custodial Agent may resign at any time by giving notice thereof to the Company and the Purchase Contract Agent as attorney-in-fact for the Holders of Securities, (b) the Collateral Agent and the Custodial Agent may be removed at any time by the Company and (c) if the Collateral Agent or the Custodial Agent fails to perform any of its material obligations hereunder in any material respect for a period of not less than 20 days after receiving written notice of such failure by the Purchase Contract Agent and such failure shall be continuing, the Collateral Agent or the Custodial Agent may be removed by the Purchase Contract Agent. The Purchase Contract Agent shall promptly notify the Company of any removal of the Collateral Agent pursuant to clause (c) of the immediately preceding sentence. Upon any such resignation or removal, the Company shall have the right to appoint a successor Collateral Agent or Custodial Agent, as the case may be. If no successor Collateral Agent or Custodial Agent, as the case may be, shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Collateral Agent's or Custodial Agent's giving of notice of resignation or such removal, then the retiring Collateral Agent or Custodial Agent, as the case may be, may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent or Custodial Agent, as the case may be. Each of the Collateral Agent and the Custodial Agent shall be a bank which has an office in New York, New York with a combined capital and surplus of at least $75,000,000. Upon the acceptance of any appointment as Collateral Agent or Custodial Agent, as the case may be, hereunder by a successor Collateral Agent or Custodial Agent, as the case may be, such successor shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent or Custodial Agent, as the case may be, and the retiring Collateral Agent or Custodial Agent, as the case may be, shall take all appropriate action to transfer any money and property held by it hereunder (including the Collateral) to such successor. The retiring Collateral Agent or Custodial Agent shall, upon such succession, be discharged from its duties and obligations as Collateral Agent or Custodial Agent hereunder. After any retiring Collateral Agent's or Custodial Agent's resignation hereunder as Collateral Agent or Custodial Agent, the provisions of this Section 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Collateral Agent or Custodial Agent. Any resignation or removal of the Collateral Agent hereunder shall be deemed for all purposes of this Agreement as the simultaneous resignation or removal of the Custodial Agent and the Securities Intermediary. Section 8.9. Right to Appoint Agent or Advisor. The Collateral Agent shall have the right to appoint agents or advisors in connection with any of its duties hereunder, and the Collateral Agent shall not be liable for any action taken or omitted by, or in reliance upon the advice of, such agents or advisors selected in good faith. The appointment of agents pursuant to this Section 8.9 shall be subject to prior consent of the Company, which consent shall not be unreasonably withheld. Section 8.10. Survival. The provisions of this Section 8 shall survive termination of this Agreement and the resignation or removal of the Collateral Agent or the Custodial Agent. Section 8.11. Exculpation. Anything in this Agreement to the contrary notwithstanding, in no event shall any of the Collateral Agent, the Custodial Agent or the Securities Intermediary or their officers, employees or agents be liable under this Agreement to any third party for indirect, special, punitive, or consequential loss or damage of any kind whatsoever, including lost profits, whether or not the likelihood of such loss or damage was known to the Collateral Agent, the Custodial Agent or the Securities Intermediary, or any of them, incurred without any act or deed that is found to be attributable to gross negligence or willful misconduct on the part of the Collateral Agent, the Custodial Agent or the Securities Intermediary. Section 9. Amendment. Section 9.1. Amendment Without Consent of Holders. Without the consent of any Holders or the holders of any Separate Capital Securities, the Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary and the Purchase Contract Agent, at any time and from time to time, may amend this Agreement, in form satisfactory to the Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary and the Purchase Contract Agent, for any of the following purposes: (1) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company so long as such covenants or such surrender do not adversely affect the validity, perfection or priority of the security interests granted or created hereunder; or (3) to evidence and provide for the acceptance of appointment hereunder by a successor Collateral Agent, Securities Intermediary or Purchase Contract Agent; or (4) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other such provisions herein, or to make any other provisions with respect to such matters or questions arising under this Agreement, provided such action shall not adversely affect the interests of the Holders. Section 9.2. Amendment with Consent of Holders. With the consent of the Holders of not less than a majority of the Purchase Contracts at the time outstanding, by Act of said Holders delivered to the Company, the Purchase Contract Agent or the Collateral Agent, as the case may be, the Company, when duly authorized, the Purchase Contract Agent, the Collateral Agent, the Custodial Agent and the Securities Intermediary may amend this Agreement for the purpose of modifying in any manner the provisions of this Agreement or the rights of the Holders in respect of the Securities; provided, however, that no such sup plemental agreement shall, without the consent of the Holder of each Outstanding Security adversely affected thereby, (1) change the amount or type of Collateral underlying a Security (except for the rights of holders of Income PRIDES to substitute the Treasury Securities for the Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as the case may be, or the rights of Holders of Growth PRIDES to substitute Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio, as applicable, for the Pledged Treasury Securities), impair the right of the Holder of any Security to receive distributions on the underlying Collateral or otherwise adversely affect the Holder's rights in or to such Collateral; or (2) otherwise effect any action that would require the consent of the Holder of each Outstanding Security affected thereby pursuant to the Purchase Contract Agreement if such action were effected by an agreement supplemental thereto; or (3) reduce the percentage of Purchase Contracts the consent of whose Holders is required for any such amendment. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3. Execution of Amendments. In executing any amendment permitted by this Section, the Collateral Agent, the Custodial Agent, the Securities Intermediary and the Purchase Contract Agent shall be entitled to receive and (subject to Section 6.1 hereof, with respect to the Collateral Agent, and Section 7.1 of the Purchase Contract Agreement, with respect to the Purchase Contract Agent) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent, if any, to the execution and delivery of such amendment have been satisfied. Section 9.4. Effect of Amendments. Upon the execution of any amendment under this Section 9, this Agreement shall be modified in accordance therewith, and such amendment shall form a part of this Agreement for all purposes; and every Holder of Certificates theretofore or thereafter authenticated, executed on behalf of the Holders and delivered under the Purchase Contract Agreement shall be bound thereby. Section 9.5. Reference to Amendments. Security Certificates authenticated, executed on behalf of the Holders and delivered after the execution of any amendment pursuant to this Section may, and shall if required by the Collateral Agent or the Purchase Contract Agent, bear a notation in form approved by the Purchase Contract Agent and the Collateral Agent as to any matter provided for in such amendment. If the Company shall so deter mine, new Security Certificates so modified as to conform, in the opinion of the Collateral Agent, the Purchase Contract Agent and the Company, to any such amendment may be prepared and executed by the Company and authenticated, executed on behalf of the Holders and delivered by the Purchase Contract Agent in accordance with the Purchase Contract Agreement in exchange for Outstanding Security Certificates. Section 10. Miscellaneous. Section 10.1. No Waiver. No failure on the part of the Collateral Agent or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Collateral Agent or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. Section 10.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Without limiting the foregoing, the above choice of law is expressly agreed to by the Securities Intermediary, the Collateral Agent and the Holders from time to time acting through the Purchase Contract Agent, as their attorney-in-fact, in connection with the establishment and maintenance of the Collateral Account. The Company, the Collateral Agent and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company, the Collateral Agent and the Holders from time to time of the Securities, acting through the Purchase Contract Agent as their attorney-in-fact, irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 10.3. Notices. All notices, requests, consents and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a notice to the other parties. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. Section 10.4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary and the Purchase Contract Agent, and the Holders from time to time of the Securities, by their acceptance of the same, shall be deemed to have agreed to be bound by the provisions hereof and to have ratified the agreements of, and the grant of the Pledge hereunder by, the Purchase Contract Agent. Section 10.5. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 10.6. Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. Section 10.7. Expenses, etc. The Company agrees to reimburse the Collateral Agent and the Custodial Agent for: (a) all reasonable out-of-pocket costs and expenses of the Collateral Agent and the Custodial Agent (including, without limitation, the reasonable fees and expenses of counsel to the Collateral Agent and the Custodial Agent), in connection with (i) the negotiation, preparation, execution and delivery or performance of this Agreement and (ii) any modification, supplement or waiver of any of the terms of this Agreement; (b) all reasonable costs and expenses of the Collateral Agent (including, without limitation, reasonable fees and expenses of counsel) in connection with (i) any enforcement or proceedings resulting or incurred in connection with causing any Holder of Securities to satisfy its obligations under the Purchase Contracts forming a part of the Securities and (ii) the enforcement of this Section 10.7; and (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any other document referred to herein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated hereby. Section 10.8. Security Interest Absolute. All rights of the Collateral Agent and security interests hereunder, and all obligations of the Holders from time to time hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any provision of the Purchase Contracts or the Securities or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or any other term of, or any increase in the amount of, all or any of the obligations of Holders of Securities under the related Purchase Contracts, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Purchase Contract Agreement or any Purchase Contract or any other agreement or instrument relating thereto; or (c) any other circumstance which might otherwise constitute a defense available to, or discharge of, a borrower, a guarantor or a pledgor. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. INGERSOLL-RAND COMPANY By: _______________________ Name: __________________ Title: Address for Notices: INGERSOLL-RAND COMPANY 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attention: Chief Financial Officer Telecopy: (201) 573-3172 THE BANK OF NEW YORK, as Purchase Contract Agent and as attorney-in-fact of the Holders from time to time of the Securities By: _________________________ Name: ____________________ Title: Address for Notices: The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Corporate Trust Administration, Deriva- tive Products Unit Telecopy: (212) 815-7157 THE CHASE MANHATTAN BANK, as Collateral Agent, Custodial Agent and as Securities Intermediary By: Name: Title: Address for Notices: The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, NY 10001-2697 Attention: Corporate Trust Administration Department Telecopy: (212) 946-8160 EXHIBIT A INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10010-2697 Attention: Corporate Trust Administration Department Re: FELINE PRIDES of Ingersoll-Rand Company (the "Company"), and Ingersoll-Rand Financing I We hereby notify you in accordance with Section [4.1] [4.2] of the Pledge Agreement, dated as of March 23, 1998, (the "Pledge Agreement") among the Company, yourselves, as Collateral Agent, Custodial Agent and Securities Intermediary and ourselves, as Purchase Contract Agent and as attorney-in-fact for the holders of [Income PRIDES] [Growth PRIDES] from time to time, that the holder of Securities listed below (the "Holder") has elected to substitute [$_____ aggregate principal amount of Treasury Securities] [$_______Stated Amount of Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] in exchange for an equal Value of [Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] [Pledged Treasury Securities] held by you in accordance with the Pledge Agreement and has delivered to us a notice stating that the Holder has Transferred [Treasury Securities] [Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] to you, as Collateral Agent. We hereby instruct you, upon receipt of such [Pledged Treasury Securities] [Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio], to release the [Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] [Treasury Securities] related to such [Income PRIDES] [Growth PRIDES] to us in accordance with the Holder's instructions. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement. Date:_____________ ___________________________ By:______________________ Name: Title: Signature Guarantee:_____________ Please print name and address of Registered Holder electing to substitute [Treasury Securities] [Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] for the [Pledged Capital Securities or the Treasury Portfolio] [Pledged Treasury Securities]: ___________________________ ______________________________ Name Social Security or other Taxpayer Identification Number, if any ___________________________ Address ___________________________ ___________________________ EXHIBIT B INSTRUCTION TO PURCHASE CONTRACT AGENT The Bank of New York 101 Barclay Street 12E New York, New York 10286 Attention: Corporate Trust Administration, Derivative Products Unit Re: FELINE PRIDES of Ingersoll-Rand Company (the "Company"), and Ingersoll-Rand Financing I The undersigned Holder hereby notifies you that it has delivered to The Chase Manhattan Bank, as Collateral Agent, [$_______ aggregate principal amount of Treasury Securities] [$ aggregate Stated Amount of Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] in exchange for an equal Value of [Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] [Pledged Treasury Securities] held by the Collateral Agent (the "Pledge Agreement"), in accordance with Section 4.1 of the Pledge Agreement, dated March 23, 1998, between you, the Company and the Collateral Agent. The undersigned Holder hereby instructs you to instruct the Collateral Agent to release to you on behalf of the undersigned Holder the [Pledged Capital Securities or the appropriate Applicable Ownership Interest of the Treasury Portfolio] [Pledged Treasury Securities] related to such [Income PRIDES] [Growth PRIDES]. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement. Dated:_____________ _________________________ Signature Signature Guarantee:_______________________ Please print name and address of Registered Holder: _________________________ _________________________ Name Social Security or other Taxpayer Identification _________________________ Number, if any Address _________________________ _________________________ _________________________ EXHIBIT C INSTRUCTION TO CUSTODIAL AGENT REGARDING REMARKETING The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10001-2697 Attention: Corporate Trust Administration Department Re: Capital Securities of Ingersoll-Rand Company (the "Company"), and Ingersoll-Rand Financing I The undersigned hereby notifies you in accordance with Section 4.6(c) of the Pledge Agreement, dated as of March 23, 1998 (the "Pledge Agreement"), among the Company, yourselves, as Collateral Agent, Securities Intermediary and Custodial Agent, and The Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the Holders of Income PRIDES and Growth PRIDES from time to time, that the undersigned elects to deliver $ stated liquidation amount of Capital Securities for delivery to the Remarketing Agent on the fourth Business Day immediately preceding the Purchase Contract Settlement Date for remarketing pursuant to Section 4.6(c) of the Pledge Agreement. The undersigned will, upon request of the Remarketing Agent, execute and deliver any additional documents deemed by the Remarketing Agent or by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Capital Securities tendered hereby. The undersigned hereby instructs you, upon receipt of the Proceeds of such remarketing from the Remarketing Agent to deliver such Proceeds to the undersigned in accordance with the instructions indicated herein under "A. Payment Instructions". The undersigned hereby instructs you, in the event of Failed Remarketing, upon receipt of the Capital Securities tendered herewith from the Remarketing Agent, to be delivered to the person(s) and the address(es) indicated herein under "B. Delivery Instructions." With this notice, the undersigned hereby (i) represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Capital Securities tendered hereby and that the undersigned is the record owner of any Capital Securities tendered herewith in physical form or a participant in The Depositary Trust Company ("DTC") and the beneficial owner of any Capital Securities tendered herewith by book-entry transfer to your account at DTC and (ii) agrees to be bound by the terms and conditions of Section 4.6(c) of the Pledge Agreement. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement. Date:_____________ By: Name: Title: Signature Guarantee: Please print name and address: Name Social Security or other Taxpayer Identification Number, if any Address B. DELIVERY INSTRUCTIONS In the event of a Failed Remarketing, Capital Securities which are in physical form should be delivered to the person(s) set forth below and mailed to the address set forth below. Name(s) ____________________________ (Please Print) Address ____________________________ (Please Print) ____________________________________ ____________________________________ (Zip Code) _____________________________________ (Tax Identification or Social Security Number) In the event of a Failed Remarketing, Capital Securities which are in book-entry form should be credited to the account at The Depositary Trust Company set forth below. ___________________ DTC Account Number Name of Account Party: ______________ A. PAYMENT INSTRUCTIONS Proceeds of the remarketing should be paid by check in the name of the person(s) set forth below and mailed to the address set forth below. Name(s) _____________________________ (Please Print) Address _____________________________ (Please Print) _____________________________________ _____________________________________ (Zip Code) _____________________________________ (Tax Identification or Social Security Number) EXHIBIT D INSTRUCTION TO CUSTODIAL AGENT REGARDING WITHDRAWAL FROM REMARKETING The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10001-2697 Attention: Corporate Trust Administration Department Re: Capital Securities of Ingersoll-Rand Company (the "Company"), and Ingersoll-Rand Financing I The undersigned hereby notifies you in accordance with Section 4.6(c) of the Pledge Agreement, dated as of March 23, 1998 (the "Pledge Agreement") among the Company, yourselves, as Collateral Agent, Securities Intermediary and Custodial Agent and The Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the Holders of Income PRIDES and Growth PRIDES from time to time, that the undersigned elects to withdraw the $_____ aggregate stated liquidation amount of Capital Securities delivered to the Custodial Agent on May 16, 2001 for remarketing pursuant to Section 4.6(c) of the Pledge Agreement. The undersigned hereby instructs you to return such Capital Securities to the undersigned in accordance with the undersigned's instructions. With this notice, the Undersigned hereby agrees to be bound by the terms and conditions of Section 4.6(c) of the Pledge Agreement. Capitalized terms used herein but not defined shall have the meaning set forth in the Pledge Agreement. Date:_____________ By: Name: Title: Signature Guarantee: Please print name and address: Name Social Security or other Taxpayer Identification Number, if any Address A. DELIVERY INSTRUCTIONS In the event of a Failed Remarketing, Capital Securities which are in physical form should be delivered to the person(s) set forth below and mailed to the address set forth below. Name(s) ____________________________ (Please Print) Address ____________________________ (Please Print) ____________________________________ ____________________________________ (Zip Code) _____________________________________ (Tax Identification or Social Security Number) In the event of a Failed Remarketing, Capital Securities which are in book-entry form should be credited to the account at The Depositary Trust Company set forth below. ___________________ DTC Account Number Name of Account Party: ______________ EX-4 5 INGERSOLL-RAND COMPANY, AS ISSUER TO THE BANK OF NEW YORK, AS TRUSTEE Indenture DATED AS OF March 23, 1998 INGERSOLL-RAND COMPANY RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED AND INDENTURE, DATED AS OF MARCH 23, 1998 TRUST INDENTURE INDENTURE SECTION ACT SECTION Section 310(a)(1) 609 (a)(2) 609 (a)(3) Not Applicable (a)(4) Not Applicable (b) 608, 610 Section 311(a) 613 (b) 613 Section 312(a) 701, 702(a) (b) 702(b) (c) 702(c) Section 313(a) 703(a) (b) Not Applicable (c) 703(a), 703(b) (d) 703(b) Section 314(a) 704 (b) Not Applicable (c)(1) 102 (c)(2) 102 (c)(3) Not Applicable (d) Not Applicable (e) 102 Section 315(a) 601(a) (b) 602 (c) 601(b) (d) 601(c) (d)(l) 601(a), 601(c) (d)(2) 601(c) (d)(3) 601(c) (e) 514 Section 316(a)(1)(A) 512 (a)(1)(B) 502, 513 (a)(2) Not Applicable (b) 508 Section 317(a)(1) 503 (a)(2) 504 (b) 1009 Section 318(a) 107 NOTE: THIS RECONCILIATION AND TIE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A PART OF THIS INDENTURE. TABLE OF CONTENTS Page ARTICLE 1DEFINITIONS AND OTHER PROVISIONSOF GENERAL APPLICATION 1 SECTION 101.Definitions 1 Act 1 Affiliate 1 Authenticating Agent 2 Bankruptcy Law 2 Board of Directors 2 Board Resolution 2 Business Day 2 Capitalized Lease Obligation 2 Capital Stock 2 Commission 2 Common Depositary 2 Company 2 Company Request 2 Company Order 2 Corporate Trust Office 2 Covenant Defeasance 2 Custodian 2 Default 2 Defaulted Interest 2 Defeasance 2 Dollars 3 Event of Default 3 Exchange Act 3 Funded Indebtedness 3 GAAP 3 Holder 3 Security holder 3 Indenture 3 Interest 3 Interest Payment Date 3 Maturity 3 Officer 3 Officer's Certificate 3 Opinion of Counsel 3 Original Issue Discount Security 3 Outstanding 3 Paying Agent 4 Person 4 Place of Payment 4 Principal Property 4 Redemption Date 4 Redemption Price 4 Registered Security 4 Regular Record Date 4 Responsible Officer 4 Restricted Subsidiary 4 Securities 4 Security Register 4 Security Registrar 4 Special Record Date 4 Stated Maturity 5 Subsidiary 5 Trust Indenture Act 5 Trustee 5 U.S. Depositary 5 U.S. Government Obligations 5 Vice President 5 SECTION 102.Compliance Certificates and Opinions 5 SECTION 103.Form of Documents Delivered to Trustee 6 SECTION 104.Acts of Holders 6 SECTION 105.Notices, Etc., to Trustee and Company 7 SECTION 106.Notice to Holders; Waiver 7 SECTION 107.Conflict with Trust Indenture Act 8 SECTION 108.Effect of Headings and Table of Contents 8 SECTION 109.Successors and Assigns 8 SECTION 110.Separability Clause 8 SECTION 111.Benefits of Indenture 8 SECTION 112.Governing Law 8 SECTION 113.Legal Holidays 8 SECTION 114.No Recourse Against Others 8 ARTICLE 2 SECURITY FORMS 9 SECTION 201.Forms Generally 9 SECTION 202.Form of Face of Security 9 SECTION 203.Form of Reverse of Security 11 SECTION 204.Form of Trustee's Certificate of Authentication 14 SECTION 205.Securities in Global Form 14 SECTION 206.CUSIP Number 15 SECTION 207. Form of Legend for the Securities in Global Form15 ARTICLE 3 THE SECURITIES 15 SECTION 301.Amount Unlimited; Issuable in Series 15 SECTION 302.Denominations 17 SECTION 303.Execution, Authentication, Delivery and Dating 17 SECTION 304.Temporary Securities 18 SECTION 305.Registration, Registration of Transfer and Exchange 19 SECTION 306.Mutilated, Destroyed, Lost and Stolen Securities 20 SECTION 307.Payment of Interest; Interest Rights Preserved 21 SECTION 308.Persons Deemed Owners 21 SECTION 309.Cancellation 22 SECTION 310.Computation of Interest 22 ARTICLE 4 SATISFACTION AND DISCHARGE 22 SECTION 401.Satisfaction and Discharge of Indenture 22 SECTION 402.Application of Trust Money 23 ARTICLE 5 REMEDIES 23 SECTION 501.Events of Default 23 SECTION 502.Acceleration of Maturity; Rescission and Annulment 24 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee 25 SECTION 504.Trustee May File Proofs of Claim 25 SECTION 505. Trustee May Enforce Claims Without Possession of Securities 26 SECTION 506.Application of Money Collected 26 SECTION 507.Limitation on Suits 26 SECTION 508. UnconditionLa Right of Holders to Receive Principal, Premium and Interest. 27 SECTION 509.Restoration of Rights and Remedies 27 SECTION 510.Rights and Remedies Cumulative 27 SECTION 511.Delay or Omission Not Waiver 27 SECTION 512.Control by Holders 27 SECTION 513.Waiver of Past Defaults 27 SECTION 514.Undertaking for Costs 28 ARTICLE 6 THE TRUSTEE 28 SECTION 601. Certain Duties and Responsibilities of the Trustee 28 SECTION 602. Notice of Defaults 28 SECTION 603. Certain Rights of Trustee 28 SECTION 604. Not Responsible for Recitals or Issuance of Securities 29 SECTION 605. May Hold Securities 29 SECTION 606. Money Held in Trust 30 SECTION 607. Compensation and Reimbursement 30 SECTION 608. Disqualification; Conflicting Interests 30 SECTION 609. Corporate Trustee Required; Eligibility 30 SECTION 610. Resignation and Removal; Appointment of Successor 31 SECTION 611. Acceptance of Appointment by Successor 32 SECTION 612. Merger, Conversion, Consolidation or Succession to Busines 32 SECTION 613. Preferential Collection of Claims Against Company 33 SECTION 614. Appointment of Authenticating Agent 33 ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 34 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders 34 SECTION 702. Preservation of Information; Communications to Holders 34 SECTION 703. Reports by Trustee 35 SECTION 704. Reports by Company 35 ARTICLE 8 CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER 36 SECTION 801. When Company May Merge, Etc. 36 SECTION 802. Opinion of Counsel 36 SECTION 803. Successor Corporation Substituted 36 ARTICLE 9 SUPPLEMENTAL INDENTURES 37 SECTION 901. Supplemental Indentures Without Consent of Holders 37 SECTION 902. Supplemental Indentures with Consent of Holders 37 SECTION 903. Execution of Supplemental Indentures 38 SECTION 904. Effect of Supplemental Indentures 38 SECTION 905. Conformity with Trust Indenture Act 38 SECTION 906. Reference in Securities to Supplemental Indentures 39 ARTICLE 10 COVENANTS 39 SECTION 1001.Payments of Securities 39 SECTION 1002.Maintenance of Office or Agency 39 SECTION 1003.Compliance Certificates 39 SECTION 1004.Money for Securities Payments to Be Held in Trust 39 SECTION 1005.Limitation on Liens 40 SECTION 1006 Limitation on Sale and Leaseback Transactions 42 SECTION 1008 Waiver of Certain Covenants 42 ARTICLE 11 REDEMPTION OF SECURITIES 42 SECTION 1101.Applicability of Article 42 SECTION 1102.Election to Redeem; Notice to Trustee 43 SECTION 1103.Selection by Trustee of Securities to Be Redeemed 43 SECTION 1104.Notice of Redemption 43 SECTION 1105.Deposit of Redemption Price 44 SECTION 1106.Securities Payable on Redemption Date 44 SECTION 1107.Securities Redeemed in Part 44 ARTICLE 12 SINKING FUNDS 44 SECTION 1201.Applicability of Article 44 SECTION 1202.Satisfaction of Sinking Fund Payments with Securities 45 SECTION 1203.Redemption of Securities for Sinking Fund 45 ARTICLE 13 DEFEASANCE AND COVENANT DEFEASANCE 45 SECTION 1301.Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance 45 SECTION 1302.Defeasance and Discharge 45 SECTION 1303.Covenant Defeasance 46 SECTION 1304.Conditions to Defeasance or Covenant Defeasance 46 SECTION 1305.Deposited Money and Government Obligations To Be Held In Trust 47 ARTICLE 14 MISCELLANEOUS 47 SECTION 1401.Miscellaneous 47 Indenture, dated as of March 23, 1998, between INGERSOLL- RAND COMPANY, a corporation duly organized and existing under the laws of the State of New Jersey (herein called the "Company "), having its principal office at 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675 and The Bank of New York, a , as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 11. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (4) the word "including" (and with the correlative meaning "Include") means including, without limiting the generality of, any description preceding such term; and (5) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the board of directors of the Company; provided, however, that when the context refers to actions or resolutions of the Board of Directors, then the term "Board of Directors" shall also mean any duly authorized committee of the Board of Directors of the Company or Officer authorized to act with respect to any particular matter to exercise the power of the Board of Directors of the Company. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day," when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or regulation to close. "Capitalized Lease Obligation" means an obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligations determined ln accordance with such principles. "Capital Stock" of any Person shall mean any and all shares, interests, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Depositary" has the meaning specified in Section 304. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller, an Assistant Controller, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the office of the Trustee in New York, New York at which at any particular time its corporate trust business shall be principally administered, which office at the date hereof is located at 101 Barclay Street, New York, New York 10286. "Covenant Defeasance" has the meaning specified in Section 1303. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1302. "Dollars" and "$" means lawful money of the United States of America. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities and Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. "Funded Indebtedness" means indebtedness created, assumed or guaranteed by a Person for money borrowed which matures by its terms, or is renewable by the borrower to a date, more than one year after the date of its original creation, assumption or guarantee. "GAAP" means such accounting principles that are generally accepted in the United States of America as of the date of any computation required hereunder. "Holder" or "Security holder" means a Person in whose name a Security if registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301. "Interest," when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Maturity," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officer" means the Chairman of the Board, the Vice Chairman of the Board, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Assistant Secretary of the Company. "Officer's Certificate" means a certificate signed by an Officer and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company, and who shall be reasonably acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding," when used with respect to Securities or Securities of any series, means, as of the date of determination, all such Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; and (iv) Securities which have been defeased pursuant to Section 1302; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (a) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be that portion of the principal amount thereof that could be declared to be due and payable upon the occurrence of an Event of Default and the continuation thereof pursuant to the terms of such Original Issue Discount Security as of the date of such determination and (b) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. The Company may act as Paying Agent with respect to any Securities issued hereunder. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Principal Property" means any manufacturing plant or other manufacturing facility of the Company or any Restricted Subsidiary, which plant or facility is located within the United States of America, except any such plant or facility which the Board of Directors by resolution declares is not of material importance to the total business conducted by the Company and its Restricted Subsidiaries. "Redemption Date," when used with respect to any Security of any series to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security of any series to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Security" means any Security issued hereunder and registered in the Security Register. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Responsible Officer," when used with respect to the Trustee, means any officer of the Trustee in its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary which owns a Principal Property excluding, however, any corporation the greater part of the operating assets of which are located or the principal business of which is carried on outside the United States of America. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" of a Person means any corporation of which at least a majority of the outstanding stock having voting power under ordinary circumstances to elect a majority of the Board of Directors of said corporation shall at the time be owned by the Company or by the Company and one or more Subsidiaries or by one or more Subsidiaries. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was executed; provided, however, that in the event that such Act is amended after such date, "Trust Indenture Act" means the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "U.S. Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more permanent global Securities, the Person designated as U.S. Depositary by the Company pursuant to Section 301, which must be a clearing agency registered under the Exchange Act until a successor U.S. Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "U.S. Depositary" shall mean or include each Person who is then a U.S. Depositary hereunder, and if at any time there is more than one such Person, "U.S. Depositary" shall mean the U.S. Depositary with respect to the Securities of that series. "U.S. Government Obligations" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed by the full faith and credit of the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof or otherwise subject to prepayment, and shall also include a depository receipt issued by a New York Clearing House bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment or interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt or from any amount held by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". SECTION 12. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, other than an action permitted by Sections 205 and 704 hereof, the Company shall furnish to the Trustee an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 13. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Officer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 14. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Registered Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 15. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee and received by the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture, attention: Secretary, or at any other address previously furnished in writing to the Trustee by the Company. SECTION 16. Notice to Holders; Waiver. Where this Indenture or any Security provides for notice to Holders of any event, such notice shall be deemed sufficiently given (unless otherwise herein or in such Security expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders or the validity of the proceedings to which such notice relates. Where this Indenture or any Security provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. SECTION 17. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or shall be excluded, as the case may be. SECTION 18. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 19. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws (other than the choice of law provisions) of the State of New York. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day or on such other day as may be set out in the Officer's Certificate pursuant to Section 301 at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. SECTION 114. No Recourse Against Others. No recourse for the payment of the principal of (and premium, if any) or interest, if any, on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby waived and released as a condition of and as a consideration for, the execution of this Indenture and the issue of the Securities. ARTICLE 2 SECURITY FORMS SECTION 21. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, ln each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The Trustee's certificates of authentication shall be in substantially the form set forth in this Article. The definitive Securities shall be photocopied, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the Officers executing such Securities, as evidenced by their execution of such Securities. SECTION 22. Form of Face of Security. (If the Security is an Original Issue Discount Security, insert--FOR PURPOSES OF SECTION 1272 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE AMOUNT OF ORIGINAL ISSUE DISCOUNT (AS DEFINED IN SECTION 1273(a)(1) OF THE CODE AND TREASURY REGULATION SECTION 1.1273-l(a) WITH RESPECT TO THIS SECURITY IS , THE ISSUE PRICE (AS DEFINED IN TREASURY REGULATION SECTION 1.1273-2) OF THIS SECURITY IS , THE ISSUE DATE (AS DEFINED IN SECTION 1275(a)(2) OF THE CODE AND TREASURY REGULATION SECTION 1.1273-2) OF THIS SECURITY IS AND THE YIELD TO MATURITY OF THIS SECURITY IS ). INGERSOLL-RAND COMPANY ........................ No. ________ ($)________ INGERSOLL-RAND COMPANY, a corporation duly organized and existing under the laws of New Jersey (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of $ on . (If the Security is to bear interest prior to Maturity, insert --, and to pay interest thereon from _______________ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, (semi-annually) (quarterly) (monthly) on and in each year, commencing , at the rate of % per annum, until the principal hereof is paid or made available for payment (If applicable insert--, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of % per annum on any overdue principal and premium and on any overdue installment of interest). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the of (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.) (If the Security is not to bear interest prior to Maturity, insert--The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of % per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of % per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.) Payment of the principal of (and premium, if any) and (if applicable, insert--any such) interest on this Security will be made at the office or agency of the Company maintained for that purpose in , in Dollars (if applicable, insert--; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register). Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. INGERSOLL-RAND COMPANY By: By:___________________________ _____________ Attest: (SEAL) SECTION 23. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 17, 1998 (herein called the "Indenture"), between the Company and as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof (limited in aggregate principal amount to $ ). (If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by first class mail to the holders of such securities, (if applicable, insert--(1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)) at any time (on or after , ), as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed (on or before , %, and if redeemed) during the 12-month period beginning of the years indicated, Year Redemption Price Year Redemption Price and thereafter at a Redemption Price equal to _______ of the principal amount, together in the case of any such redemption (if applicable, insert -- (whether through operation of the sinking fund or otherwise)) with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.) (If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by first class mail, (1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time (on or after ____________), as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during a 12-month period beginning of the years indicated, Redemption Price for Redemption Price for Redemption Through Redemption Otherwise Operation of the Than Through Year Sinking Fund Operation of the Sinking Fund and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.) (Notwithstanding the foregoing, the Company may not, prior to redeem any Securities of this series as contemplated by (clause (2) of) the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than % per annum.) (The sinking fund for this series provides for the redemption on in each year beginning with the year and ending with the year of (not less than) $ (("mandatory sinking fund") and not more than $ aggregate principal amount of Securities of this series.) (Securities of this series acquired or redeemed by the Company otherwise than through (mandatory) sinking fund payments may be credited against subsequent (mandatory) sinking fund payments otherwise required to be made--in the (inverse) order in which they become due.) (In the event of redemption of this Security in part only a new Security or Securities of this series for the unredeemed portion hereof will be issued ln the name of the Holder hereof upon the cancellation hereof.) (If the Security is not an Original Issue Discount Security, insert -- If any Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.) (If the Security is an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal -- insert formula for determining the amount.) Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate. This Security is a senior unsecured obligation of the Company and will rank pari passu in right of payment with all other senior unsecured obligations of the Company. This Security is subject to Defeasance as described in the Indenture. The Indenture may be modified by the Company and the Trustee without consent of any Holder with respect to certain matters as described in the Indenture. In addition, the Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall bind such Holder and all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same Stated Maturity and aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of ($1,000) and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture imposes certain limitations on the ability of the Company to, among other things, merge or consolidate with any other Person or sell, assign, transfer or lease all or substantially all of its properties or assets (If other covenants are applicable pursuant to the provisions of Section 301, insert here). All such covenants and limitations are subject to a number of important qualifications and exceptions. The Company must report periodically to the Trustee on compliance with the covenants in the Indenture. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under this Security or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder, by accepting a Security, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Security. (If applicable, insert -- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures ("CUSIP"), the Company has caused CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series. No representation is made as to the correctness or accuracy of such numbers as printed on the Securities of this series and reliance may be placed only on the other identification numbers printed hereon.) All capitalized terms used in this Security without definition which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to (Insert assignee's social security or tax I.D. number) (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated:_________ Your Signature:___________________ (Sign exactly as your name appears on the other side of this Security) Signature Guaranty:_______________________________ (Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Transfer Agent, which requirements will include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP all in accordance with the Exchange Act.) Social Security Number or Taxpayer Identification Number: SECTION 24. Form of Trustee's Certificate of Authentication. This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK as Trustee By:___________________________ Authorized Signatory Dated:_____________________ SECTION 25. Securities in Global Form. If Securities of a series are issuable in global form, as contemplated by Section 301, then, notwithstanding the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made in such manner and upon instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or Section 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel. The provisions of Section 309 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby. Notwithstanding the provisions of Sections 201 and 307, unless otherwise specified as contemplated by Section 301, payment of principal of, premium, if any, and interest on any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat a Person as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security as shall be specified in a written statement of the Holder of such permanent global Security. SECTION 26. CUSIP Number. The Company in issuing Securities of any series may use a "CUSIP" number, and, if so, the Trustee may use the CUSIP number in notices of redemption or exchange as a convenience to Holders of such series; provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed on the notice or on the Securities of such series, and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP number of any series of Securities. SECTION 27. Form of Legend for the Securities in Global Form. Any Security in global form authenticated and delivered hereunder shall bear a legend in substantially the following form: "THIS SECURITY IS IN GLOBAL FORM WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AN IS REGISTERED IN THE NAME OF A COMMON DEPOSITARY OR A U.S. DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE COMMON DEPOSITARY OR A U.S. DEPOSITARY OR BY A NOMINEE OF THE COMMON DEPOSITARY OR A NOMINEE OF THE U.S. DEPOSITARY AS THE CASE MAY BE." ARTICLE 3 THE SECURITIES SECTION 31. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. There shall be established in or pursuant to a Board Resolution, and set forth in an Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series: (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 304, 305, 306, 906 or 1107); (3) whether any Securities of the series are to be issuable in permanent global form with or without coupons and, if so, (i) whether beneficial owners of interests in any such permanent global security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and (ii) the name of the Common Depositary (as defined in Section 304) or the U.S. Depositary, as the case may be, with respect to any global security; (4) the date or dates on which the principal of the Securities of the series is payable; (5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date and, if applicable to such series of Securities, the basis points and United States Treasury rate(s) and any other rates to be used in calculating the reset rate; (6) the place or places where the principal of (and premium, if any) and interest on Securities of the series shall be payable; (7) the right of the Company, if any, to defer any payment of principal of or interest on the Securities of the series, and the maximum length of any such deferral period; (8) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (9) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation, and, where applicable, the obligation of the Company to select the Securities to be redeemed; (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (11) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (12) additional Events of Default with respect to Securities of the series, if any, other than those set forth herein; (13) if either or both of Section 1302 and Section 1303 shall be inapplicable to the Securities of the series (provided that if no such inapplicability shall be specified, then both Section 1302 and Section 1303 shall be applicable to the Securities of the series); (14) if other than U.S. dollars, the currency or currencies or units based on or related to currencies in which the Securities of such series shall be denominated and in which payments or principal of, and any premium and interest on, such Securities shall or may by payable; (15) additional covenants with respect to Securities of the series, if any, other than those set forth herein; (16) if other than the Trustee, the identity of the Registrar and any Paying Agent; and (17) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution and set forth in such Officer's Certificate or in any such Indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officer's Certificate setting forth, or providing the manner for determining, the terms of the Securities of such series. SECTION 32. Denominations. The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 33. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President, any Executive Vice President, any Senior Vice President or one of its Vice Presidents and its Treasurer or one of its Assistant Treasurers or its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any security that has been duly authenticated and delivered by the Trustee. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and make such Securities available for delivery. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Sections 315(a) through (d) of the Trust Indenture Act) shall be fully protected in relying upon, an Opinion of Counsel stating, (a if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (b if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; (c that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding ln equity or at law); and (d that no consent, approval, authorization, order, registration or qualification of or with any court or any governmental agency or body having jurisdiction over the Company is required for the execution and delivery of such Securities by the Company, except such as have been obtained (except that no opinion need be expressed as to state securities or Blue Sky laws). If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee, or in the written opinion of counsel to the Trustee (which counsel may be an employee of the Trustee) such authentication may not lawfully be made or would involve the Trustee in personal liability. Notwithstanding the provisions of Section 301 and of the immediately preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officer's Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to the immediately preceding paragraph at or prior to the time of authentication of each security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first security of such series to be issued. If the Company shall establish pursuant to Section 301 that the Securities of a series are to be issued in the form of one or more global Securities, then the Company shall execute and the Trustee shall, in accordance with this Section and the Company Order with respect to the authentication and delivery of such series, authenticate and deliver one or more global Securities that (i) shall be in an aggregate amount equal to the aggregate principal amount specified in such Company Order, (ii) shall be registered in the name of the Common Depositary or U.S. Depositary, as the case may be, therefor or its nominee, and (iii) shall be made available for delivery by the Trustee to such depositary or pursuant to such depositary's instruction. Each depositary designated pursuant to Section 301 must, at the time of its designation and at all times while it serves as depositary, be a clearing agency registered under the Exchange Act and any other applicable statute or regulation. Unless otherwise provided for in the form of security, each security shall be dated the date of its authentication. No security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any security shall be conclusive evidence, and the only evidence, that such security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. SECTION 34. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form, representing all or a portion of the Outstanding Securities of such series. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with the provisions of Section 305), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations and of like tenor. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. If temporary Securities of any series are issued in global form, any such temporary global Security shall, unless otherwise provided therein, be delivered to the office of a depositary or common depositary (the "COMMON DEPOSITARY") for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct). SECTION 35. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of registration of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any security of any series at the office or agency of the Company in Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and Stated Maturity. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and Stated Maturity, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global security shall be exchangeable only as provided in this paragraph. If the beneficial owners of interests in a permanent global security are entitled to exchange such interests for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified and as subject to the conditions contemplated by Section 301, then without unnecessary delay but in any event not later than the earliest date on which such interests may be so exchanged, the Company shall deliver to the Trustee definitive Securities of that series in aggregate principal amount equal to the principal amount of such permanent global security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such permanent global Securities shall be surrendered from time to time by the Common Depositary or the U.S. Depositary, as the case may be, and in accordance with instructions given to the Trustee and the Common Depositary or the U.S. Depositary, as the case may be (which instructions shall be in writing but need not comply with Section 102 or be accompanied by an Opinion of Counsel), as shall be specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or in part, for definitive Securities of the same series without charge. The Trustee shall authenticate and make available for delivery, in exchange for each portion of such surrendered permanent global security, a like aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such permanent global security to be exchanged which shall be in the form of the Securities of such series; provided, however, that no such exchanges may occur during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing. Promptly following any such exchange in part, such permanent global Security shall be returned by the Trustee to the Common Depositary or the U.S. Depositary, as the case may be, or such other Common Depositary or U.S. Depositary referred to above in accordance with the written instructions of the Company referred to above. If a Security in the form specified for such series is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of interest or Defaulted Interest, as the case may be, such interest or Defaulted Interest will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such security in the form specified for such series, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligation, of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. Unless otherwise provided in the Securities to be transferred or exchanged, no service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any security so selected for redemption in whole or in part, except the unredeemed portion of any security being redeemed in part. SECTION 36. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such Security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, make payment with respect to such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 37. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1 The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Section 307 provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at its address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2 The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Section 307, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 38. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee or any agent of the Company or the Trustee shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interest of a Security in global form, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. Notwithstanding the foregoing, with respect to any Security in global form, nothing herein shall prevent the Company or the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by any Common Depositary (or its nominee), as a Holder, with respect to such Security in global form or impair, as between such Common Depositary and owners of beneficial interests in such Security in global form, the operation of customary practices governing the exercise of the right of such Common Depositary (or its nominee) as holder of such Security in global form. SECTION 39. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. Upon the written request of the Company all cancelled Securities shall be held by the Trustee and may be destroyed (and, if so destroyed, certification of their destruction shall be delivered to the Company, unless, by a Company Order, the Company shall direct that cancelled Securities be returned to it). SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. ARTICLE 4 SATISFACTION AND DISCHARGE SECTION 41. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for or in the form of security for such series), when the Trustee, upon Company Request and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1 either (A all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1009) have been delivered to the Trustee for cancellation; or (B all such Securities not theretofore delivered to the Trustee for cancellation (i)have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or the Stated Maturity or Redemption Date, as the case may be; (2 the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3 the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Company to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1009 shall survive. SECTION 42. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1009, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with or received by the Trustee. ARTICLE 5 REMEDIES SECTION 51. Events of Default. "EVENT OF DEFAULT," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or to be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1 the Company defaults in the payment of interest on any Security of that series when such interest becomes due and payable and the default continues for a period of 30 days; provided, however, that if the Company is permitted by the terms of the Securities of the applicable series to defer the payment in question, the date on which such payment is due and payable shall be the date on which the Company is required to make payment following such deferral, if such deferral has been elected pursuant to the terms of the Securities; or (2 the Company defaults in the payment of the principal of (or premium, if any, on) any Security of that series when the same becomes due and payable at Maturity, upon redemption (including redemptions under Article 11), or otherwise; provided, however, that if the Company is permitted by the terms of the Securities of the applicable series to defer the payment in question, the date on which such payment is due and payable shall be the date on which the Company is required to make payment following such deferral, if such deferral has been elected pursuant to the terms of the Securities; or (3 The Company defaults in the payment of any sinking fund installment, when and as due by the terms of a Security and the default continues for a period of 30 days; or (4 The Company fails to observe or perform any of its other covenants, warranties or agreements in the Securities of that series or this Indenture (other than a covenant, agreement or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and the failure to observe or perform continues for the period and after the notice specified in the last paragraph of this Section; or(5 the Company pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (B) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (C) consents to or acquiesces in the institution of bankruptcy or insolvency proceedings against it, (D) applies for, consents to or acquiesces in the appointment of or taking possession by a Custodian of the Company or for any material part of its property, (E) makes a general assignment for the benefit of its creditors or (F) takes any corporate action in furtherance of or to facilitate, conditionally or otherwise, any of the foregoing; or (6 (i) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company in an involuntary case or proceeding under any Bankruptcy Law which shall (A) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company, (B) appoint a Custodian of the Company or for any material part of its property, or (C) order the winding-up or liquidation of its affairs, and such judgment, decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (ii) any bankruptcy or insolvency petition or application is filed, or any bankruptcy or insolvency proceeding is commenced against the Company and such petition, application or proceeding is not dismissed within 90 days; or (iii) a warrant of attachment is issued against any material portion of the property of the Company which is not released within 90 days of service; or (7 any other Event of Default provided with respect to Securities of that series. A Default under clause (4) above is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series notify the Company and the Trustee of the Default and the Company does not cure the Default within 90 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." When a Default under clause (4) above is cured within such 90-day period, it ceases. SECTION 52. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series (other than an Event of Default specified in clause (5) or (6) of Section 501) occurs and is continuing, the Trustee by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series by notice in writing to the Company and the Trustee, may declare the unpaid principal of and accrued interest to the date of acceleration (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) on all the Outstanding Securities of that series to be due and payable immediately and, upon any such declaration, the Outstanding Securities of that series (or specified principal amount) shall become and be immediately due and payable. If an Event of Default specified in clause (5) or (6) of Section 501 occurs, all unpaid principal of and accrued interest on the Outstanding Securities of that series (or specified principal amount) shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of any Security of that series. Upon payment of all such principal and interest, all of the Company's obligations under the Securities of that series and (upon payment of the Securities of all series) this Indenture shall terminate, except obligations under Section 607. The Holders of a majority in principal amount of the Outstanding Securities of that series by notice to the Trustee may rescind an acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal and interest of the Securities of that series that has become due solely by such declaration of acceleration, have been cured or waived, (ii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal that has become due otherwise than by such declaration of acceleration have been paid, (iii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (iv) all payments due to the Trustee and any predecessor Trustee under Section 607 have been made. SECTION 53.Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1 default is made in the payment of any interest on any Security of any series when such interest becomes due and payable and such default continues for a period of 30 days, or (2 default is made in the payment of the principal of (or premium, if any, on) any Security of any series at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to secure any other proper remedy. SECTION 54. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i0 to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel) and of the Holders allowed in such judicial proceedings, and (ii0 to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 55.Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 56. Application of Money Collected. Any money collected by the Trustee pursuant to this Article in respect of the Securities of any series shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities in respect of which moneys have been collected and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: To the payment of all amounts due the Trustee under Section 607 applicable to such series; Second: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities of such series in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities of such series for principal (and premium, if any) and interest, respectively; and Third: To the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 506. At least fifteen (15) days before such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and the amount to be paid. SECTION 57. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1 such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2 the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3 such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4 the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5 no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of Holders of Securities of any series shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Holders of Securities of the affected series. SECTION 58. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 59. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that: (1 such direction shall not be in conflict with any rule of law or with this Indenture; (2 the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3 subject to Section 601, the Trustee need not take any action which might involve the Trustee in personal liability or be unduly prejudicial to the Holders not joining therein. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may by written notice to the Trustee on behalf of the Holders of all the Securities of such series waive any Default or Event of Default with respect to such series and its consequences, except a Default or Event of Default (1 in respect of the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2 in respect of a covenant or other provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such Default or Event of Default shall cease to exist and shall be deemed to have been cured, for every purpose of this Indenture and the Securities of such series; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE 6 THE TRUSTEE SECTION 61. Certain Duties and Responsibilities of the Trustee. (a Except during the continuance of an Event of Default, the Trustee's duties and responsibilities under this Indenture shall be governed by Section 315(a) of the Trust Indenture Act. (b In case an Event of Default has occurred and is continuing, and is known to the Trustee, the Trustee shall exercise the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c None of the provisions of Section 315(d) of the Trust Indenture Act shall be excluded from this Indenture. SECTION 62. Notice of Defaults. Within 90 days after the occurrence of any Default or Event of Default with respect to the Securities of any series, the Trustee shall give to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such Default or Event of Default known to the Trustee, unless such Default or Event of Default shall have been cured or waived; provided, however, that, except in the case of a Default or Event of Default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series. SECTION 63. Certain Rights of Trustee. Subject to the provisions of the Trust Indenture Act: (a the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d the Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity to its reasonable satisfaction against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval or other paper or document, or the books and records of the Company, unless requested in writing to do so by the Holders of a majority in principal amount of the Outstanding Securities of any series; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is not, in the opinion of the Trustee, reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding; the reasonable expense of every such investigation shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; (g the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h the Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 64. Not Responsible for Recitals or Issuance of Securities. The recitals herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 65. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 66. Money Held in Trust. Money held by the Trustee in trust hereunder (including amounts held by the Trustee as Paying Agent) need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed upon in writing with the Company. SECTION 67. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability, damage, claim or expense, including taxes (other than taxes based upon or determined or measured by the income of the Trustee), incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(5) or Section 501(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section 607 shall survive this Indenture. SECTION 68. Disqualification; Conflicting Interests. The Trustee shall be disqualified only where such disqualification is required by Section 310(b) of the Trust Indenture Act. Nothing shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 310(b) of the Trust Indenture Act. SECTION 69. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act having a combined capital and surplus of at least $50,000,000 subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Neither the Company nor any Person directly or indirectly controlling, controlled by, or under common control with the Company may serve as Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (d) If at any time: (1)the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months; or (2)the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request herefor by the Company or by any such Holder of a Security who has been a bona fide Holder of a Security for at least six months; or (3)the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company with respect to such Securities. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental Indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under the Trust Indenture Act. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein. SECTION 614. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of, and subject to the direction of, the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: Form of Authenticating Agent's Certificate of Authentication This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK As Trustee By: __________________________ As Authenticating Agent By: __________________________ Authorized Signatory Dated: ______________ ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 71. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than January 1 and July 1 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the preceding December 15 or June 15, as the case may be; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the Security Registrar, no such list shall be required to be furnished. SECTION 72. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (i)afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 702(a); or (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 702(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appears in the information preserved at the time by the Trustee in accordance with Section 702(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). SECTION 73. Reports by Trustee. (a) Within 60 days after May 15 of each year commencing with the year 1998, the Trustee shall transmit by mail to all Holders of Securities as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of May 15, if required by and in compliance with Section 313(a) of the Trust Indenture Act. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 74. Reports by Company. The Company shall: (1) file with the Trustee, within 30 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, (a) concurrently with furnishing the same to its shareholders, the Company's annual report to shareholders, containing certified financial statements, and any other financial reports which the Company generally furnishes to its shareholders, and (b) within 30 days after the filing thereof with the Trustee, such summaries of any other information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and ARTICLE 8 CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER SECTION 81. When Company May Merge, Etc. The Company shall not consolidate with, or merge with or into any other corporation (whether or not the Company shall be the surviving corporation), or sell, assign, transfer or lease all or substantially all of its properties and assets as an entirety or substantially as an entirety to any Person or group of affiliated Persons, in one transaction or a series of related transactions, unless: (1) either the Company shall be the continuing Person or the Person (if other than the Company) formed by such consolidation or with which or into which the Company is merged or the Person (or group of affiliated Persons) to which all or substantially all the properties and assets of the Company as an entirety or substantially as an entirety are sold, assigned, transferred or leased shall be a corporation (or constitute corporations) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; and (2) immediately before and after giving effect to such transaction or series of related transactions, no Event of Default, and no Default, shall have occurred and be continuing. SECTION 82. Opinion of Counsel. The Company shall deliver to the Trustee prior to the proposed transaction(s) covered by Section 801 an Officer's Certificate and an Opinion of Counsel stating that the transaction(s) and such supplemental indenture comply with this Indenture and that all conditions precedent to the consummation of the transaction(s) under this Indenture have been met. SECTION 83. Successor Corporation Substituted. Upon any consolidation by the Company with or merger by the Company into an other corporation or any lease, sale, assignment, or transfer of all or substantially all of the property and assets of the Company in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or the successor corporation or affiliated group of corporations to which such lease, sale, assignment, or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation or corporations had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation or corporations shall be relieved of all obligations and covenants under this Indenture and the Securities and in the event of such conveyance or transfer, except in the case of a lease, any such predecessor corporation may be dissolved and liquidated. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of Ingersoll-Rand Company any or all of the Securities of any series issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver Securities of any series which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities of any series so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities of such series theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, conveyance or lease such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE 9 SUPPLEMENTAL INDENTURES SECTION 91. Supplemental Indentures Without Consent of Holders. Without notice to or the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default with respect to all or any series of Securities; or (4) to add or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; or (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental Indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (9) to cure any ambiguity, defect or inconsistency or to correct or supplement any provision herein which may be inconsistent with any other provision herein; or (10) to make any change that does not materially adversely affect the interests of the Holders of Securities of any series. Upon request of the Company, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in (and subject to the last sentence of) Section 903, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture. SECTION 92. Supplemental Indentures with Consent of Holders. With the written consent of the Holders of a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee shall, subject to Section 903, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof or extend the time for payment thereof, or reduce the amount of the principal of an Original Issue Discount security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or Defaults or Events of Default hereunder and their consequences provided for in this Indenture; or (3) change the redemption provisions (including Article Eleven) hereof in a manner adverse to such Holder; or (4) modify any of the provisions of this Section or Section 513, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8). A supplemental indenture which changes or eliminates any covenant or other provisions of this Indenture which as expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 93. Execution of Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article, subject to the last sentence of this Section 903. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 94. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental Indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 95. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 96. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, ln the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticate and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE 10 COVENANTS SECTION 101. Payments of Securities. With respect to each series of Securities, the Company will duly and punctually pay the principal of (and premium, if any) and interest on such Securities in accordance with their terms and this Indenture, and will duly comply with all the other terms, agreements and conditions contained in, or made in the Indenture for the benefit of, the Securities of such series. SECTION 102. Maintenance of Office or Agency. The Company will maintain an office or agency in each Place of Payment where Securities may be surrendered for registration of transfer or exchange or for presentation for payment, where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change ln location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee as set forth in Section 105 hereof and the Company hereby appoints the Trustee as its agent to receive all presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 103. Compliance Certificates. The Company will deliver to the Trustee on or before May 15 in each year ending after the date hereof, an Officers' Certificate stating that in the course of the performance by each signer of his duties as an officer of the Company he would normally have knowledge of any default by the Company in the performance and observance of any of the covenants contained in Sections 1005 and 1006, stating whether or not he has knowledge of any such default and, if so, specifying each such default of which such signer has knowledge and the nature thereof. SECTION 104. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure to so act. The Company will cause each Paying Agent for any series of Securities (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee of such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York, New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 105. Limitation on Liens. (a) The Company covenants and agrees for the benefit of each series of Securities, other than any series established by or pursuant to a Board Resolution or in one or more supplemental indentures hereto which specifically provides otherwise, that it will not, and will not permit any Restricted Subsidiary to, create, assume or guarantee any indebtedness for money borrowed secured by a Mortgage (i) on any Principal Property of the Company or of a Restricted Subsidiary or (ii) on any shares or Funded Indebtedness of a Restricted Subsidiary or (ii) on any shares or Funded Indebtedness of a Restricted Subsidiary (whether such Principal Property, shares or Funded Indebtedness are now owned or hereafter acquired), without, in any such case, effectively providing concurrently with the creation, assumption or guaranteeing of such indebtedness that the Securities (together, if the Company shall so determine, with any other indebtedness then or thereafter existing, created, assumed or guaranteed by the Company or such Restricted Subsidiary ranking equally with the Securities) shall be secured equally and ratably with (or prior to) such indebtedness; excluding, however, from the foregoing any indebtedness secured by a Mortgage (including any extension, renewal or replacement, or successive extensions, renewals or replacements, of any Mortgage hereinafter specified or any indebtedness secured thereby, without increase of the principal of such indebtedness) (1) on property, shares or Funded Indebtedness of any corporation existing at the time such corporation becomes a Restricted Subsidiary; or (2) on property existing at the time of acquisition thereof by the Company or a Restricted Subsidiary, or to secure any indebtedness incurred by the Company or a Restricted Subsidiary prior to, at the time of, or within 180 days after the later of the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operation of such property, which indebtedness is incurred for the purpose of financing all or any part of the purchase price thereof or construction or improvements thereon; provided, however, that in the case of any such acquisition, construction or improvement the Mortgage shall not apply to any property theretofore owned by the Company or a Restricted Subsidiary, other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; or (3) on property, shares or Funded Indebtedness of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary, or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an entirety to the Company or a Restricted Subsidiary; or (4) on property of a Restricted Subsidiary to secure indebtedness of such Restricted Subsidiary to the Company or another Restricted Subsidiary; or (5) on property of the Company or a Restricted Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the property subject to such Mortgage; or (6) existing at the date of this Indenture; provided, however, that any Mortgage permitted by any of the foregoing clauses (1), (2), (3) and (5) of this Section 1005 (a) shall not extend to or cover any property of the Company or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto. (b) Notwithstanding the provisions of subsection (a) of this Section, the Company or any Restricted Subsidiary may create, assume or guarantee secured indebtedness for money borrowed which would otherwise be prohibited in said subsection (a) in an aggregate amount which, together with all other such indebtedness for money borrowed of the Company and its Restricted Subsidiaries and the Attributable Debt of the Company and its Restricted Subsidiaries in respect of Sale and Leaseback Transactions (as defined in Section 1006) existing at such time (other than Sale and Leaseback Transactions entered into prior to the date of this Indenture and Sale and Leaseback Transactions the proceeds of which have been applied in accordance with clause (b) of Section 1006), does not at the time exceed 5% of the shareholders' equity in the Company and its consolidated Subsidiaries, as shown on the audited consolidated balance sheet contained in the latest annual report to shareholders of the Company. (c) For the purposes of this Article Ten, (1) the term "Attributable Debt" shall mean, as of any particular time, the then present value of the total net amount of rent required to be paid under such lease during the remaining term thereof (excluding any renewal term unless the renewal is at the option of the lessor) computed by discounting from the respective due dates to such date such total net amount of rent at the actual interest factor included in such rent, or, if such interest factor cannot readily be determined, at the rate per annum borne by the initial series of Securities, except that if no interest is payable in respect of the initial series of Securities or if such rate is not fixed then at the rate of % per annum. The net amount of rent required to be paid for any such period shall be the aggregate amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of, or measured or determined by, any variable factor, including, without limitation, the cost-of- living index and costs of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges and after excluding any portion of rentals based on a percentage of sales made by the lessee. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated; (2) the term "shareholders' equity in the Company and its consolidated Subsidiaries" shall mean the consolidated capital and surplus (including retained earnings) of the Company and its consolidated Subsidiaries, excluding the cost of shares of the Company held in treasury; and (3) the term "Mortgage" on any specified property shall mean any mortgage, lien, pledge, charge or other security interest or encumbrance of any kind in respect of such property. SECTION 106 Limitation on Sale and Leaseback Transactions. The Company covenants and agrees for the benefit of each series of Securities, other than any series established by or pursuant to a Board Resolution or in one or more supplemental indentures hereto which specifically provides otherwise, that it will not, and will not permit any Restricted Subsidiary to, enter into any arrangement with any person for the leasing by the Company or a Restricted Subsidiary (except for leases for a term of not more than three years and for leases of a part of a Principal Property, which has been sold, for use in connection with the winding up or termination of the business conducted on such Principal Property, and except, in the case of a Restricted Subsidiary, a lease to the Company or another Restricted Subsidiary) of any Principal Property (whether now owned or hereafter acquired), which Principal Property has been or is intended to be sold or transferred by the Company or such Restricted Subsidiary to such person (herein referred to as a "Sale and Leaseback Transaction"), unless (a) the Company or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 1005, to incur indebtedness secured by a Mortgage on such Principal Property without equally and ratably securing the Securities, or (b) the Company shall (and in any such case the Company covenants that it will) apply an amount equal to the fair value of such Principal Property so leased (as determined by the Board of Directors) to the retirement (other than by payment at maturity or to satisfy the mandatory requirements of any sinking, purchase or analogous fund or prepayment provision), within 180 days of the effective date of any such Sale and Leaseback Transaction, of Securities or other Funded Indebtedness of the Company or any Restricted Subsidiary ranking on a parity with the Securities, or to the purchase, improvement or construction of properties which are Principal Properties; provided, however, that the amount to be applied to the retirement of such Funded Indebtedness shall be reduced by (a) the principal amount of any Securities delivered within 180 days after such sale or transfer to the Trustee for retirement and cancellation and (b) the principal amount of other Funded Indebtedness ranking on a parity with the Securities voluntarily retired by the Company within 180 days after such sale or transfer; and promptly after the expiration of such 180-day period the Company shall have delivered to the Trustee an Officers' Certificate setting forth in reasonable detail all material facts necessary to show compliance with this Subsection. SECTION 1008 Waiver of Certain Covenants The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 and 1005 if before the time for such compliance the Holders of at least 66-_% in principal amount of the Outstanding Securities of all series affected by such omission (voting as one class) shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE 11 REDEMPTION OF SECURITIES SECTION 111. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 112. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction. SECTION 113. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, substantially pro rata, by lot or by any other method as the Trustee considers fair and appropriate and that complies with the requirements of the principal national securities exchange, if any, on which such Securities are listed, and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series; provided that in case the Securities of such series have different terms and maturities, the Securities to be redeemed shall be selected by the Company and the Company shall give notice thereof to the Trustee. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of the Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 114. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 45 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at this address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed; (4) that on the Redemption Date the Redemption Price will be come due and payable upon each such security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (6) that the redemption is for a sinking fund, if such is the case; (7) the CUSIP number, if any, of the Securities to be redeemed; and (8) unless otherwise provided as to a particular series of Securities, if at the time of publication or mailing of any notice of redemption the Company shall not have deposited with the Trustee or Paying Agent and/or irrevocably directed the Trustee or Paying Agent to apply, from money held by it available to be used for the redemption of Securities, an amount in cash sufficient to redeem all of the Securities called for redemption, including accrued interest to the Redemption Date, such notice shall state that it is subject to the receipt of the redemption moneys by the Trustee or Paying Agent before the Redemption Date (unless such redemption is mandatory) and such notice shall be of no effect unless such moneys are so received before such date. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 115. Deposit of Redemption Price. Prior to 10:00 a.m. any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1009) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 116. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such security for redemption in accordance with said notice, such security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular or Special Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed thereof or in the security. SECTION 117. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such security without service charge, a new Security or Securities of the same series and Stated Maturity, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the security so surrendered. ARTICLE 12 SINKING FUNDS SECTION 121. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series, except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "Mandatory Sinking Fund Payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "Optional Sinking Fund Payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to redemption as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 122. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Securities of a series (other than any Securities previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 123. Redemption of Securities for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE 13 DEFEASANCE AND COVENANT DEFEASANCE SECTION 131. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance. Unless pursuant to Section 301 provision is made for the inapplicability of either or both of (a) Defeasance of the Securities of a series under Section 1302 or (b) Covenant Defeasance of the Securities of a series under Section 1303, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article, shall be applicable to the Securities of such series, and the Company may at its option by Board Resolution, at any time, with respect to the Securities of such series, elect to have either Section 1302 (unless inapplicable) or Section 1303 (unless inapplicable) be applied to the Outstanding Securities of such series upon compliance with the applicable conditions set forth below in this Article. SECTION 132. Defeasance and Discharge. Upon the Company's exercise of the option provided in Section 1301 to defease the Outstanding Securities of a particular series, the Company shall be discharged from its obligations with respect to the Outstanding Securities of such series on the date the applicable conditions set forth in Section 1304 are satisfied (hereinafter, "Defeasance"). Defeasance shall mean that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same); provided, however, that the following rights, obligations, powers, trusts, duties and immunities shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities of such series to receive, solely from the trust fund provided for in Section 1304, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1009, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article. Subject to compliance with this Article, the Company may exercise its option with respect to Defeasance under this Section 1302 notwithstanding the prior exercise of its option with respect to Covenant Defeasance under Section 1303 in regard to the Securities of such series. SECTION 133. Covenant Defeasance. Upon the Company's exercise of the option provided in Section 1301 to obtain a Covenant Defeasance with respect to the Outstanding Securities of a particular series, the Company shall be released from its obligations under this Indenture (except its obligations under Sections 304, 305, 306, 506, 509, 610, 1001, 1002, 1006, 1008 and 1009) with respect to the Outstanding Securities of such series on and after the date the applicable conditions set forth in Section 1304 are satisfied (hereinafter, "Covenant Defeasance"). Covenant Defeasance shall mean that, with respect to the Outstanding Securities of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in this Indenture (except its obligations under Sections 304, 305, 306, 506, 509, 610, 1001, 1002, 1006, 1008 and 1009), whether directly or indirectly by reason of any reference elsewhere herein or by reason of any reference to any other provision herein or in any other document, and such omission to comply shall not constitute an Event of Default under Section 501(4) with respect to Outstanding Securities of such series, and the remainder of this Indenture and of the Securities of such series shall be unaffected thereby. SECTION 134. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to Defeasance under Section 1302 and Covenant Defeasance under Section 1303 with respect to the Outstanding Securities of a particular series: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article applicable to it), under the terms of an irrevocable trust agreement in form and substance reasonably satisfactory to such Trustee, as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount, or (C) a combination thereof, in each case sufficient, after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium, if any, on) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities. (2) No Default or Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit, and no Default or Event of Default under clause (5) or (6) of Section 501 hereof shall occur and be continuing, at any time during the period ending on the 31st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (3) Such deposit, Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (4) Such Defeasance or Covenant Defeasance shall not cause any Securities of such series then listed on any national securities exchange registered under the Exchange Act to be delisted. (5) In the case of an election with respect to Section 1302, the Company shall have delivered to the Trustee either (A) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred or (B) an Opinion of Counsel, based on such ruling or on a change in the applicable federal income tax law since the date of this Indenture, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred. (6) In the case of an election with respect to Section 1303, the Company shall have delivered to the Trustee an Opinion of Counsel or a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred. (7) Such Defeasance or Covenant Defeasance shall be effected in compliance with any additional terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301. (8) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Defeasance under Section 1302 or the Covenant Defeasance under Section 1303 (as the case may be) have been complied with. SECTION 135. Deposited Money and Government Obligations To Be Held In Trust. Subject to the provisions of the last paragraph of Section 1009, all money and Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee--collectively for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the Outstanding Securities of a particular series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities of such series. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver to pay to the Company from time to time upon Company Request any money or Government Obligations held by it as provided ln Section 1304 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited for the purpose for which such money or Government Obligations were deposited. ARTICLE 14 MISCELLANEOUS SECTION 141. Miscellaneous. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. INGERSOLL-RAND COMPANY By ___________________________ Name: Title: By: ___________________________ Name: Title: Attest: Name: Title: THE BANK OF NEW YORK, as Trustee By __________________________ Name: Title: Attest: _________________________ Name: Title: EX-4 6 FIRST SUPPLEMENTAL INDENTURE Dated as of March 23, 1998 between INGERSOLL-RAND COMPANY AS ISSUER and THE BANK OF NEW YORK AS TRUSTEE TABLE OF CONTENTS Page ARTICLE IDEFINITIONS 1 SECTION 1.1. Definition of Terms 1 ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES 3 SECTION 2.1. Designation and Principal Amount 3 SECTION 2.2. Maturity 3 SECTION 2.3. Form and Payment 3 SECTION 2.4. Global Debenture 3 SECTION 2.5. Interest 4 ARTICLE III REDEMPTION OF THE DEBENTURES 5 SECTION 3.1. Tax Event Redemption 5 SECTION 3.2. Redemption Procedure for Debentures 5 SECTION 3.3. No Sinking Fund 6 SECTION 3.4. Option to Put Debentures upon a Failed Remarketing 6 SECTION 3.5. Repurchase Procedure for Debentures 6 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD 6 SECTION 4.1. Extension of Interest Payment Period 6 SECTION 4.2. Notice of Extension 7 ARTICLE V EXPENSES 8 SECTION 5.1. Payment of Expenses 8 SECTION 5.2. Payment Upon Resignation or Removal 8 ARTICLE VI NOTICE 8 SECTION 6.1. Notice by the Company 8 ARTICLE VII FORM OF DEBENTURE 9 SECTION 7.1. Form of Debenture 9 ARTICLE VIII ORIGINAL ISSUE OF DEBENTURES 17 SECTION 8.1. Original Issue of Debentures 17 ARTICLE IX MISCELLANEOUS 17 SECTION 9.1. Ratification of Indenture 17 SECTION 9.2. Trustee Not Responsible for Recitals 17 SECTION 9.3. Governing Law 17 SECTION 9.4. Separability 17 SECTION 9.5. Counterparts. 17 SECTION 9.6. Guarantee and Declaration 18 ARTICLE X REMARKETING 18 SECTION 10.1. Effectiveness of this Article. 18 SECTION 10.2. Remarketing Procedures. 18 FIRST SUPPLEMENTAL INDENTURE, dated as of March 23, 1998 (the "First Supplemental Indenture"), between INGERSOLL-RAND COMPANY, a corporation duly organized and existing under the laws of the State of New Jersey, (the "Company"), and The Bank of New York, as trustee (the "Trustee"). WHEREAS, the Company executed and delivered the indenture dated as of March 23, 1998 (the "Base Indenture"), to the Trustee to provide for the future issuance of the Company's senior unsecured debentures, notes or other evidence of indebtedness (the "Securities"), to be issued from time to time in one or more series as might be determined by the Company under the Base Indenture; WHEREAS, pursuant to the terms of the Base Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its 6.22% Debentures due May 16, 2003 (the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Base Indenture and this First Supplemental Indenture (together, the "Indenture"); WHEREAS, Ingersoll-Rand Financing I, a Delaware statutory business trust (the "Trust"), has offered to the public its 6.22% Capital Securities (the "Capital Securities"), representing, undivided beneficial ownership interests in the assets of the Trust, and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of its 6.22% Common Securities (the "Common Securities" and together with the Capital Securities, the "Trust Securities"), in the Debentures; and WHEREAS, the Company has requested that the Trustee execute and deliver this First Supplemental Indenture and all requirements necessary to make this First Supplemental Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company and all acts and things necessary have been done and performed to make this First Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects: NOW THEREFORE, in consideration of the purchase and acceptance of the Debentures by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I. DEFINITIONS SECTION I.1. Definition of Terms. Unless the context otherwise requires: (a) a term defined in the Indenture has the same meaning when used in this First Supplemental Indenture; (b) a term defined anywhere in this First Supplemental Indenture has the same meaning throughout; (c) the singular includes the plural and vice versa; (d) headings are for convenience of reference only and do not affect interpretation; (e) the following terms have the meanings given to them in the Declaration: (i) Applicable Principal Amount; (ii)Authorized Newspaper; (iii) Business Day; (iv) Clearing Agency; (v) Delaware Trustee; (vi) DTC; (vii) FELINE PRIDES; (viii) Growth PRIDES; (ix) Income PRIDES; (x) Institutional Trustee; (xi) Investment Company Event; (xii) Capital Security Certificate; (xiii) Pricing Agreement; (xiv) Purchase Agreement; (xv) Put Option (xvi) Quotation Agent; (xvii) Regular Trustees; (xviii) Redemption Amount, (xix) Reset Agent; (xx) Reset Announcement Date; (xxi) Reset Spread;(xxii) Tax Event; (xxiii) Tax Event Redemption Date; (xxvi) Treasury Portfolio Purchase Price; (xxv) Treasury Portfolio; and (xxvi) Treasury Securities and (xxvii) Two-Year Benchmark Treasury. (f) the following terms have the meanings given to them in this Section 1.11(f): "Compounded Interest" shall have the meaning set forth in Section 4.1. "Coupon Rate" shall have the meaning set forth in Section 2.5. "Custodial Agent" means Chase Manhattan Bank, as Custodial Agent. "Debenture Repayment Price" shall have the meaning set forth in Section 3.4. "Declaration" means the Amended and Restated Declaration of Trust of Ingersoll-Rand Financing I, a Delaware statutory business trust, dated as of March 23, 1998. "Deferred Interest" shall have the meaning set forth in Section 4.1 hereof. "Dissolution Event" means that, as a result of the occurrence and continuation of a Tax Event, an Investment Company Event or otherwise, the Trust is to be dissolved in accordance with the Declaration, and, except in the case of a Tax Event Redemption, the Debentures held by the Institutional Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Exchange Agent" means the Institutional Trustee. "Extended Interest Payment Period" shall have the meaning set forth in Section 4.1. "Failed Remarketing" shall have the meaning set forth in Section 5.4(b) of the Purchase Contract Agreement. "Global Debentures" shall have the meaning set forth in Section 2.4. "Non Book-Entry Capital Securities" shall have the meaning set forth in Section 2.4 . "Pledge Agreement" means the Pledge Agreement dated as of March 23, 1998, among the Company, the Trust, Chase Manhattan Bank, as collateral agent and The Bank of New York, as purchase contract agent. "Purchase Contract" shall have the meaning set forth in the Purchase Contract Agreement, dated as of March 23, 1998, between the Company and The Bank of New York, as purchase contract agent. "Purchase Contract Settlement Date" means May 16, 2001. "Remarketing Agent" means Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Remarketing Agreement" means the Remarketing Agreement, dated as of March 23, 1998, among the Company, the Trust, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as remarketing agent and The Bank of New York, as purchase contract agent. "Remarketing Date" shall have the meaning set forth in the Remarketing Agreement. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES SECTION II.1. Designation and Principal Amount. There is hereby authorized a series of Securities designated the 6.22% Debentures (the "Debentures") due May 16, 2003, limited in aggregate principal amount to $414,948,475, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures pursuant to Section 303 of the Base Indenture. SECTION II.2. Maturity. The Maturity Date will be May 16, 2003. SECTION II.3. Form and Payment. Except as provided in Section 2.4, the Debentures shall be issued in fully registered certificated form without interest coupons, bearing identical terms. Principal and interest on the Debentures issued in certificated form will be payable, the transfer of such Debentures will be registrable and such Debentures will be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Institutional Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of any Debentures is the Institutional Trustee, the payment of the principal of and interest (including Compounded Interest and expenses and taxes of the Trust set forth in Section 4.1 hereof, if any) on such Debentures held by the Institutional Trustee will be made at such place and to such account as may be designated by the Institutional Trustee. SECTION II.4. Global Debenture. (a) In connection with a Dissolution Event, (i) the Debentures in certificated form may be presented to the Trustee by the Institutional Trustee in exchange for a global Debenture in an aggregate principal amount equal to the aggregate principal amount of all outstanding Debentures (a "Global Debenture"), to be registered in the name of the Clearing Agency, or its nominee, and delivered by the Institutional Trustee to the Clearing Agency for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture. Payments on the Debentures issued as a Global Debenture will be made to the Clearing Agency; and (ii) if any Capital Securities are held in non book- entry certificated form, the Debentures in certificated form may be presented to the Trustee by the Institutional Trustee and any Capital Security Certificate which represents Capital Securities other than Capital Securities held by the Clearing Agency or its nominee ("Non Book-Entry Capital Securities") will be deemed to represent beneficial interests in the Debentures presented to the Trustee by the Institutional Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Capital Securities until such Capital Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Capital Security Certificates will be cancelled and a Debenture, registered in the name of the holder of the Capital Security Certificate or the transferee of the holder of such Capital Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Capital Security Certificate cancelled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture to such holder. On issue of such Debentures, Debentures with an equivalent aggregate principal amount that were presented by the Institutional Trustee to the Trustee will be deemed to have been cancelled. (b) Unless and until it is exchanged for the Debentures in registered form, a Global Debenture may be transferred, in whole but not in part, only to another nominee of the Clearing Agency, or to a successor Clearing Agency selected or approved by the Company or to a nominee of such successor Clearing Agency. (c) If at any time the Clearing Agency notifies the Company that it is unwilling or unable to continue as a Clearing Agency or if at any time the Clearing Agency for such series shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and a successor Clearing Agency for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, the Company will execute, and, subject to Article III of the Indenture, the Trustee, upon written notice from the Company, will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. In addition, the Company may at any time determine that the Debentures shall no longer be represented by a Global Debenture. In such event the Company will execute, and subject to Section 3.3 of the Base Indenture, the Trustee, upon receipt of an Officer's Certificate evidencing such determination by the Company, will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be cancelled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture shall be registered in such names and in such authorized denominations as the Clearing Agency, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Clearing Agency for delivery to the Persons in whose names such Securities are so registered. SECTION II.5. Interest. (a) Each Debenture will bear interest initially at the rate of 6.22% per annum (the "Coupon Rate") from the original date of issuance until May 15, 2001, and at the Reset Rate thereafter until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate until May 15, 2001 and at the Reset Rate thereafter, compounded quarterly, payable (subject to the provisions of Article IV herein) quarterly in arrears on February 16, May 16, August 16 and November 16 of each year (each, an "Interest Payment Date") commencing on May 16, 1998, to the Person in whose name such Debenture or any predecessor Debenture is registered, at the close of business on the Regular Record Date for such interest installment, which, in respect of (i) Debentures of which the Institutional Trustee is the Holder and the Capital Securities are in book-entry only form or (ii) a Global Debenture, shall be the close of business on the Business Day next preceding that Interest Payment Date. Notwithstanding the foregoing sentence, if (i) the Debentures are held by the Institutional Trustee and the Capital Securities are no longer in book-entry only form or (ii) the Debentures are not represented by a Global Debenture, the Company may select a Regular Record Date for such interest installment which shall be more than one Business Day but less than 60 Business Days prior to an Interest Payment Date. (b) The Coupon Rate on the Debentures will be reset on the third Business Day immediately preceding the Purchase Contract Settlement Date to the Reset Rate (which Reset Rate will become effective on and after the Purchase Contract Settlement Date). On the tenth (10) Business Day immediately preceding the Purchase Contract Settlement Date, the Reset Announcement Date, the Reset Spread and the relevant Two-Year Benchmark Treasury will be announced by the Company. On the Business Day immediately following such Reset Announcement Date, the Holders of Debentures will be notified of such Reset Spread and Two-Year Benchmark Treasury by the Company. Such notice shall be sufficiently given to such Holders of Debentures if published in an Authorized Newspaper. (c) Not later than seven calendar days nor more than 15 calendar days immediately preceding the Reset Announcement Date, the Company will request that the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) or the Institutional Trustee, notify the Holders of Debentures of such Reset Announcement Date and the procedures to be followed by such holders of Debentures wishing to settle the related Purchase Contract with separate cash on the Business Day immediately preceding the Purchase Contract Settlement Date. (d) The amount of interest payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed in such a 90-day period. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. ARTICLE III REDEMPTION OF THE DEBENTURES SECTION III.1. Tax Event Redemption. If a Tax Event shall occur and be continuing, the Company may, at its option, redeem the Debentures in whole (but not in part) at any time at a Redemption Price per Debenture equal to the Redemption Amount plus accrued and unpaid interest thereon, including Compounded Interest and the expenses and taxes of the Trust set forth in Section 4.1 hereof, if any, to the date of such redemption (the "Tax Event Redemption Date"). If, following the occurrence of a Tax Event, the Company exercises its option to redeem the Debentures, then the proceeds of such redemption, if distributed to the Institutional Trustee as the sole Holder of such Debentures, will be applied by the Institutional Trustee to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed, at the Redemption Price. If, following the occurrence of a Tax Event prior to the Purchase Contract Settlement Date, the Company exercises its option to redeem the Debentures, the Company shall appoint the Quotation Agent to assemble the Treasury Portfolio in consultation with the Company. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Tax Event Redemption Date to each registered Holder of the Debentures to be prepaid at its registered address. Unless the Company defaults in payment of the Redemption Price, on and after the redemption date interest shall cease to accrue on such Debentures. SECTION III.2. Redemption Procedure for Debentures. Payment of the Redemption Price to each Holder of Debentures shall be made by the Paying Agent, no later than 12:00 noon, New York City time, on the Tax Event Redemption Date, by check or wire transfer in immediately available funds at such place and to such account as may be designated by each such Holder of Debentures, including the Institutional Trustee or the Collateral Agent, as the case may be. If the Trustee holds immediately available funds sufficient to pay the Redemption Price of the Debentures (or, if the Company is acting as Paying Agent or the Institutional Trustee has received the Redemption Price), then, on such Tax Event Redemption Date, such Debentures will cease to be outstanding and interest thereon will cease to accrue, whether or not such Debentures have been received by the Company, and all other rights of the Holder in respect of the Debentures shall terminate and lapse (other than the right to receive the Redemption Price upon delivery of such Debentures but without interest on such Redemption Price). SECTION III.3. No Sinking Fund. The Debentures are not entitled to the benefit of any sinking fund. SECTION III.4. Option to Put Debentures upon a Failed Remarketing. If a Failed Remarketing (as described in Section 5.4(b) of the Purchase Contract Agreement and incorporated herein by reference) has occurred, each holder of Securities who holds such Securities on the day immediately following the Purchase Contract Settlement Date, shall, upon at least three Business Days' prior notice, have the right (the "Put Option") on the Business Day immediately following May 16, 2001, to require the Trust to distribute their pro rata share of Debentures to the Exchange Agent and to require the Exchange Agent to put such Debentures, on behalf of such holders on June 1, 2001 (the "Put Option Exercise Date") at a repayment price of $25 per Security plus an amount equal to the accrued and unpaid Distributions (including deferred distributions, if any) thereon to the date of payment (the "Debenture Repayment Price"). SECTION III.5. Repurchase Procedure for Debentures. (a) In order for the Debentures to be repurchased on the Put Option Exercise Date, the Company must receive on or prior to 5:00 p.m. New York City time on the third Business Day immediately preceding the Put Option Exercise Date, at the principal executive offices of Ingersoll-Rand Company in Woodcliff Lake, New Jersey, the Debentures to be repurchased with the form entitled "Option to Elect Repayment" on the reverse of or otherwise accompanying such Debentures duly completed. Any such notice received by the Trustee shall be irrevocable. All questions as to the validity, eligibility (including time of re ceipt) and acceptance of the Debentures for repayment shall be determined by the Company, whose determination shall be final and binding. (b) Payment of the Debenture Repayment Price to the Exchange Agent shall be made through the Trustee, subject to the Trustee's receipt of payment from the Company in accordance with the terms of the Indenture either through the Trustee or the Company acting as Paying Agent, no later than 12:00 noon, New York City time, on the Put Option Exercise Date, and to such ac count as may be designated by the Exchange Agent. If the Trustee holds immediately available funds sufficient to pay the Debenture Repayment Price of the Debentures presented for repayment (or, if the Company is acting as Paying Agent and the Institutional Trustee has received the Debenture Repayment Price), then, immediately prior to the close of business on the Business Day immediately preceding the Put Option Exercise Date, such Debentures will cease to be outstanding and interest thereon will cease to accrue, whether or not such Debentures have been received by the Company, and all other rights of the Holder in respect of the Debentures, including the Holder's right to require the Company to repay such Debentures, shall terminate and lapse (other than the right to receive the Debenture Repayment Price upon delivery of such Debentures but without interest on such Debenture Repayment Price). Neither the Trustee nor the Company will be required to register or cease to be registered the transfer of any Debenture for which repayment has been elect ed. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION IV.1. Extension of Interest Payment Period. The Company shall have the right at any time, and from time to time, during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not extending, in the aggregate, beyond the Maturity Date of the Debentures (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Debentures, including any expenses and taxes of the Trust set forth in Section 5.1 hereof and Compounded Interest (together, "Deferred Interest") that shall be payable to the Holders of the Debentures in whose names the Debentures are registered in the Security Register on the first record date after the end of the Extended Interest Payment Period; provided, however, that during any such Extended Interest Payment Period, (a) the Company shall not declare or pay dividends on or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of capital stock of the Company in connection with the satisfaction by the Company of its obligations under any employee benefit plans or the satisfaction by the Company of its obligations pursuant to any contract or security outstanding on the date of such event requiring the Company to purchase capital stock of the Company, (ii) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) dividends or distributions in capital stock of the Company (or rights to acquire capital stock) or repurchases or redemptions of capital stock solely from the issuance or exchange of capital stock or (v) redemptions or repurchases of any rights outstanding under a shareholder rights plan or the declaration thereunder of a dividend of rights in the future), (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank junior to the Debentures, and (c) the Company shall not make any guarantee payments with respect to the foregoing (other than payments pursuant to the Guarantee). Prior to the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such previous and further extensions thereof shall not extend beyond the Maturity Date of the Debentures. Upon the termination of any Extended Interest Payment Period and the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company, at its option, may prepay on any Interest Payment Date all or any portion of the interest accrued during the then elapsed portion of an Extended Interest Payment Period. SECTION IV.2. Notice of Extension. (a) If the Institutional Trustee is the only registered Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Regular Trustees, the Institutional Trustee and the Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Capital Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Institutional Trustee is not the only Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to Holders of the Debentures. ARTICLE V EXPENSES SECTION V.1. Payment of Expenses. In connection with the offering, sale and issuance of the Debentures to the Institutional Trustee and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Debentures, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriters payable pursuant to the Underwriting Agreement and the Pricing Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 607 of the Base Indenture; (b) pay all costs and expenses of the Trust including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Institutional Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets) to which the Trust might become subject; (c) be primarily liable for any indemnification obligations arising with respect to the Declaration; and (d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. SECTION V.2. Payment Upon Resignation or Removal. Upon termination of this First Supplemental Indenture or the Base Indenture or the removal or resignation of the Trustee, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Institutional Trustee, as the case may be, the Company shall pay to the Delaware Trustee or the Institutional Trustee, as the case may be, all amounts accrued to the date of such termination, removal or resignation. ARTICLE VI NOTICE SECTION VI.1. Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article VI. Notwithstanding any of the provisions of the Base Indenture and this First Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of the Base Indenture; provided, however, that if the Trustee shall not have received the notice provided for in this Article VI at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. ARTICLE VII FORM OF DEBENTURE SECTION VII.1. Form of Debenture. The Debentures and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) [IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE CLEARING AGENCY OR A NOMINEE OR THE CLEARING AGENCY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.] UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY DEBENTURE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] No.__________________________________ $ __________________________________ INGERSOLL-RAND COMPANY 6.22% DEBENTURE DUE May 16, 2003 INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to______________________________, the principal sum of _______________________________________________ ($______________) on May 16, 2003 (such date is hereinafter referred to as the "Maturity Date"), and to pay interest on said principal sum from March 23, 1998, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on February 16, May 16, August 16 and November 16 of each year, commencing on May 16, 1998, initially at the rate of 6.22% per annum until May 15, 2001, and at the Reset Rate thereafter until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the rate of 6.22% until May 15, 2001, and at the Reset Date thereafter, compounded quarterly. The interest rate will be reset on the third business day preceding May 16, 2001 to the Reset Rate (as determined by the Reset Agent). The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment which in the case of a Global Debenture shall be the close of business on the business day next preceding such Interest Payment Date; provided, however, if pursuant to the terms of the Indenture the Debentures are no longer represented by a Global Debenture, the Company may select such regular record date for such interest installment which shall be more than one Business Day but less than 60 Business Days prior to an Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holders at such address as shall appear in the Security Register or by wire transfer to an account appropriately designated by the Holders entitled thereto. Notwithstanding the foregoing, so long as the Holder of this Debenture is the Institutional Trustee or the Collateral Agent, the payment of the principal of (and premium, if any) and interest on this Debenture will be made at such place and to such account as may be designated in writing by the Institutional Trustee or the Collateral Agent. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, senior and unsecured and will rank in right of payment on parity with all other senior unsecured obligations of the Company. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated: March 23, 1998 INGERSOLL-RAND COMPANY By: __________________________ Name: Title: By: ____________________ Name: Title: Attest: By: _________________________________________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures described in the within-mentioned Indenture. Dated ______________________________________________________ The Bank of New York as Trustee By ________________________________________________________ Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Securities of the Company (herein sometimes referred to as the "Securities"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of March 23, 1998 (the "Base Indenture"), duly executed and delivered between the Company and The Bank of New York, as Trustee (the "Trustee") (as supplemented by a First Supplemental Indenture, dated March 23, 1998), (the Base Indenture as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Securities is limited in aggregate principal amount as specified in said First Supplemental Indenture. If a Tax Event shall occur and be continuing, the Company may, at its option, redeem Debentures in whole (but not in part) at any time at a Redemption Price per Debenture equal to the Redemption Amount plus accrued and unpaid interest thereon, including Compounded Interest and expenses and taxes of the Trust (each as defined herein), if any, to the Tax Event Redemption Date. The Redemption Price shall be paid to each Holder of the Debenture by the Company, no later than 12:00 noon, New York City time, on the Tax Event Redemption Date, by check or wire transfer in immediately available funds, at such place and to such account as may be designated by each such Holder. The Debentures are not entitled to the benefit of any sinking fund. If a Failed Remarketing (as described in Section 5.4(b) of the Purchase Contract Agreement and incorporated herein by reference) has occurred, each holder of Securities who holds such Securities on the day immediately following The Purchase Contract Settlement Date, shall, upon at least three Business Days' prior notice, have the right (the "Put Option") on the Business Day immediately following May 16, 2001, to require the Trust to distribute their pro rata share of Debentures to the Exchange Agent and to require the Exchange Agent to put such Debentures, on behalf of such holders on June 1, 2001 (the "Put Option Exercise Date") at a repayment price of $25 per Security plus an amount equal to the accrued and unpaid Distributions (including deferred distributions, if any) thereon to the date of payment (the "Debenture Repayment Price"). In order for the Debentures to be so repurchased, the Company must receive, on or prior to 5:00 p.m. New York City Time on the third Business Day immediately preceding the Put Option Exercise Date, at the principal executive offices of Ingersoll-Rand Company in Woodcliff Lake, New Jersey, the Debentures to be repurchased with the form entitled "Option to Elect Repayment" on the reverse of or otherwise accompanying such Debentures duly completed. Any such notice received by the Trustee shall be irrevocable. All questions as to the validity, eligibility (including time of receipt) and acceptance of the Debentures for repayment shall be determined by the Company, whose determination shall be final and binding. The payment of the Debenture Repayment Price in respect of such Debentures shall be made, either through the Trustee or the Company acting as Paying Agent, no later than 12:00 noon, New York City time, on the Put Option Exercise Date. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of, among other things, adding any provisions to or changing or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying the rights of the Holders of the Debentures; provided, however, that, among other things, no such supplemental indenture shall (i) reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon (subject to the Company's right to defer such payments in the manner set forth herein), or reduce any premium payable upon the redemption thereof, without the consent of the Holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of Debentures, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Debenture then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Debentures of such series, to waive a Default or Event of Default with respect to such series, and its consequences, except a Default or Event of Default in the payment of the principal of or premium, if any, or interest on any of the Securities of such series. Any such consent or waiver by the registered Holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Debenture and of any Debenture issued in exchange for or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. So long as the Company is not in default in the payment of interest on the Debenture, the Company shall have the right at any time during the term of the Debentures from time to time to extend the interest payment period of such Debentures for a period not extending, in the aggregate, beyond the Maturity Date of the Debentures (an "Extended Interest Payment Period"). At the end of an Extended Interest Payment Period, the Company shall pay all interest then accrued and unpaid (together with the interest thereon at the rate of 6.22% until May 15, 2001 and at the Reset Rate thereafter to the extent that payment of such interest is enforceable under applicable law). In the event that the Company exercises this right, then (a) the Company shall not declare or pay dividends or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of capital stock of the Company in connection with the satisfaction by the Company of its obligations under any employee benefit plans or the satisfaction by the Company of its obligations pursuant to any contract or security outstanding on the date of such event requiring the Company to purchase capital stock of the Company, (ii) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) dividends or distributions in capital stock of the Company (or rights to acquire capital stock) or repurchases or redemptions of capital stock solely from the issuance or exchange of capital stock or (v) redemptions or purchases of any rights outstanding under a shareholder rights plan or the declaration thereunder of a dividend of rights in the future), (b) the Company shall not make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company that rank junior to the Debentures, and (c) the Company shall not make any guarantee payments with respect to the foregoing (other than payments pursuant to the Guarantee). Prior to the termination of any such Extended Interest Payment Period, the Company may further extend the interest payment period; provided, that such Extended Interest Payment Period, together with all such previous and further extensions thereof, may not extend beyond the Maturity Date of the Debenture. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amount then due, the Company may commence a new Extended Interest Payment Period, subject to the above requirements. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered Holder hereof on the Security Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Trustee in The City of New York and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any Paying Agent and the Security Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor any Security Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, shareholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Indenture imposes certain limitations on the ability of the Company to, among other things, merge or consolidate with any other Person or sell, assign, transfer or lease all or substantially all of its properties or assets. All such covenants and limitations are subject to a number of important qualifications and exceptions. The Company must report periodically to the Trustee on compliance with the covenants in the Indenture. The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. This Global Debenture is exchangeable for Debentures in definitive form only under certain limited circumstances set forth in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, Debentures of this series so issued are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Company to repay $_____ principal amount of the within Debenture, pursuant to its terms, on the "Put Option Exercise Date," together with any interest thereon accrued but unpaid to the date of repayment, to the undersigned at: (Please print or type name and address of the undersigned) and to issue to the undersigned, pursuant to the terms of the Debenture, a new Debenture or Debentures representing the remaining aggregate principal amount of this Debenture. For this Option to Elect Repayment to be effective, this Debenture with the Option to Elect Repayment duly completed must be received by the Company at Ingersoll-Rand Company, Attn: Corporate Secretary, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07679, no later than 5:00 p.m. on June 1, 2001. Dated: Signature:_______________________________ Signature Guarantee:_______________________________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of the within Debenture without alternation or enlargement or any change whatsoever. SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ---------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Debenture to: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ __________________________________________________________ (Insert assignee's social security or tax identification number) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ __________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ____________________________________________________________ agent to transfer this Debenture on the books of the Trust. The agent may substitute another to act for him or her. Date: ____________________________________ Signature: _____________________________ Signature Guarantee: ___________________ (Sign exactly as your name appears on the other side of this Deb enture) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ARTICLE VIII ORIGINAL ISSUE OF DEBENTURES SECTION VIII.1. Original Issue of Debentures. Debentures in the aggregate principal amount of $414,948,475 may, upon execution of this First Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman, its Vice Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of the end of the year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. ARTICLE IX MISCELLANEOUS SECTION IX.1. Ratification of Indenture. The Indenture as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION IX.2. Trustee Not Responsible for Recitals. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. SECTION IX.3. Governing Law. This First Supplemental Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION IX.4. Separability. In case any one or more of the provisions contained in this First Supplemental Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this First Supplemental Indenture or of the Debentures, but this First Supplemental Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION IX.5. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION IX.6. Guarantee and Declaration The Guarantee and the Declaration shall be deemed to be specifically described in this First Supplemental Indenture for purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE X REMARKETING SECTION X.1. Effectiveness of this Article. This Article Ten shall only become effective upon a Dissolution Event which occurs prior to the Remarketing of the Capital Securities pursuant to this Agreement. Until such Dissolution Event, this Article Ten shall have no effect. SECTION X.2. Remarketing Procedures. (a) The Company shall request, not later than 15 nor more than 30 calendar days prior to the Remarketing Date that the Depositary notify the Holders of the Debentures and the holders of FELINE PRIDES of the Remarketing and of the procedures that must be followed if a Holder of Debentures wishes to exercise such Holder's rights with respect to the Put Option if there is a Failed Remarketing. (b) Not later than 5:00 P.M., New York City time, on the fifth Business Day immediately preceding the Purchase Contract Settlement Date, each Holder of the Debentures may elect to have Debentures held by such Holder remarketed. Under Section 5.4 of the Purchase Contract Agreement, Holders of Income PRIDES that do not give notice of their intention to make a Cash Settlement of their related Purchase Contracts in the manner specified in such Section shall be deemed to have consented to the tender for purchase of the Debentures comprising a component of such Income PRIDES. Holders of Debentures that are not a component of Income PRIDES shall give notice of their election to have such Securities remarketed to the Custodial Agent pursuant to the Pledge Agreement. Any such notice shall be irrevocable after 5:00 P.M., New York City time, on the fifth Business Day immediately preceding the Purchase Contract Settlement Date and may not be conditioned upon the level at which the Reset Rate is established. Promptly after 5:30 P.M., New York City time, on such fifth Business Day, the Trustee, based on the notices received by it prior to such time (including notices from the Purchase Contract Agent as to Purchase Contracts as to which Cash Settlement has been elected), shall notify the Trust, the Company and the Remarketing Agent of the number of Debentures to be tendered for purchase. (c) If any Holder of Income PRIDES does not give a notice of intention to make a Cash Settlement or gives a notice of election to tender Debentures as described in Section 10.2(b), the Debentures of such Holder shall be deemed tendered, notwithstanding any failure by such Holder to deliver or properly deliver such Debentures to the Remarketing Agent for purchase. (d) The right of each Holder to have Debentures tendered for purchase shall be limited to the extent that (i) the Remarketing Agent conducts a remarketing pursuant to the terms of the Remarketing Agreement, (ii) Debentures tendered have not been called for redemption, (iii) the Remarketing Agent is able to find a purchaser or purchasers for tendered Debentures and (iv) such purchaser or purchasers deliver the purchase price therefor to the Remarketing Agent. (e) On the Remarketing Date, the Remarketing Agent shall use commercially reasonable efforts to remarket, at a price equal to 100% of the aggregate principal amount thereof, Debentures tendered or deemed tendered for purchase. (f) If none of the Holders elect to have Debentures held by them remarketed, the Reset Rate shall be the rate determined by the Remarketing Agent, in its sole discretion, as the rate that would have been established had a remarketing been held on the Remarketing Date. (g) If the Remarketing Agent has determined that it will be able to remarket all Debentures tendered or deemed tendered for purchase at a price of at least 100% of the aggregate principal amount thereof prior to 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing Agent shall determine the Reset Rate, which shall be the rate per annum (rounded to the nearest one-thousandth (0.001) of one percent per annum) which the Remarketing Agent determines, in its sole judgment, to be the lowest rate per annum that will enable it to remarket all Debentures tendered or deemed tendered for remarketing. (h) If, by 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing Agent is unable to remarket all Debentures tendered or deemed tendered for purchase, a Failed Remarketing shall be deemed to have occurred and the Remarketing Agent shall so advise by telephone the Clearing Agency, the Trustee, the Company and the Collateral Agent. (i) By approximately 4:30 P.M., New York City time, on the Remarketing Date, provided that there has not been a Failed Remarketing, the Remarketing Agent shall advise, by telephone (i) the Clearing Agency, the Trustee, the Company and the Collateral Agent of the Reset Rate determined in the Remarketing and the number of Debentures sold in such remarketing, (ii) each purchaser (or the Depositary Participant thereof) of the Reset Rate and the number of Debentures such purchaser is to purchase and (iii) each purchaser to give instructions to its Clearing Agency Participant to pay the purchase price on the Purchase Contract Settlement Date in same day funds against delivery of the Debentures purchased through the facilities of the Clearing Agency. (j) In accordance with the Clearing Agency's normal procedures, on the Purchase Contract Settlement Date, the transactions described above with respect to each Debenture tendered for purchase and sold in the remarketing shall be executed through the Clearing Agency, and the accounts of the respective Clearing Agency, Participants shall be debited and credited and such Debentures delivered by book entry as necessary to effect purchases and sales of such Debentures. The Clearing Agency shall make payment in accordance with its normal procedures. (k) If any holder selling Debentures in the remarketing fails to deliver such Debentures, the Participant of such selling holder and of any other person that was to have purchased Debentures in the remarketing may deliver to any such other person a number of Debentures that is less than the number of Debentures that otherwise was to be purchased by such person. In such event, the number of Debentures to be so delivered shall be determined by such Clearing Agency Participant, and delivery of such lesser number of Debentures shall constitute good delivery. (l) The Remarketing Agent is not obligated to purchase any Debentures that would otherwise remain unsold in a remarketing. Neither the Trust, any Trustee, the Company nor the Remarketing Agent shall be obligated in any case to provide funds to make payment upon tender of Debentures for remarketing. (m) The tender and settlement procedures set in this Section 10.02, including provisions for payment by purchasers of Securities in the Remarketing, shall be subject to modification, notwithstanding any provision to the contrary set forth herein, to the extent required by the Clearing Agency or if the book- entry system is no longer available for the Debentures at the time of the remarketing, to facilitate the tendering and remarketing of Debentures in certificated form. In addition, the Remarketing Agent may, notwithstanding any provision to the contrary set forth herein, modify the settlement procedures set forth herein in order to facilitate the settlement process. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed by their respective officers thereunto duly authorized, on the date or dates indicated in the acknowledgments and as of the day and year first above written. INGERSOLL-RAND COMPANY, as Issuer By:________________________ Name: Title: By: _______________________ Name: Title: THE BANK OF NEW YORK ___________________________ ____________________ as Trustee By: _______________________ Name: Title: EX-4 7 AMENDED AND RESTATED DECLARATION OF TRUST Ingersoll-Rand Financing I Dated as of March 23, 1998 TABLE OF CONTENTS Page ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 DEFINITIONS 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 TRUST INDENTURE ACT; APPLICATION 10 SECTION 2.2 LISTS OF HOLDERS OF SECURITIES 10 SECTION 2.3 REPORTS BY THE INSTITUTIONAL TRUSTEE 11 SECTION 2.4 PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE 11 SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT 11 SECTION 2.6 EVENTS OF DEFAULT; WAIVER 11 SECTION 2.7 EVENT OF DEFAULT; NOTICE 13 ARTICLE III ORGANIZATION SECTION 3.1 NAME 13 SECTION 3.2 OFFICE 13 SECTION 3.3 PURPOSE 13 SECTION 3.4 AUTHORITY 14 SECTION 3.5 TITLE TO PROPERTY OF THE TRUST 14 SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES 14 SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES 17 SECTION 3.8 POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE 17 SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE 19 SECTION 3.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE 21 SECTION 3.11 DELAWARE TRUSTEE 22 SECTION 3.12 EXECUTION OF DOCUMENTS 22 SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES 23 SECTION 3.14 DURATION OF TRUST 23 SECTION 3.15 MERGERS 23 ARTICLE IV SPONSOR SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES 24 SECTION 4.2 RIGHTS AND RESPONSIBILITIES OF THE SPONSOR 25 SECTION 4.3 RIGHT TO PROCEED 25 SECTION 4.4 EXPENSES 25 ARTICLE V TRUSTEES SECTION 5.1 NUMBER OF TRUSTEES 26 SECTION 5.2 DELAWARE TRUSTEE 26 SECTION 5.3 INSTITUTIONAL TRUSTEE; ELIGIBILITY 27 SECTION 5.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY 28 SECTION 5.5 REGULAR TRUSTEES 28 SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES 28 SECTION 5.7 VACANCIES AMONG TRUSTEES 30 SECTION 5.8 EFFECT OF VACANCIES 30 SECTION 5.9 MEETINGS 30 SECTION 5.10 DELEGATION OF POWER 30 SECTION 5.11 MERGER, CONVERSION. CONSOLIDATION OR SUCCESSION TO BUSINESS 31 ARTICLE VI THE SECURITIES SECTION 6.1 DESIGNATION AND NUMBER. 31 SECTION 6.2 DISTRIBUTIONS. 31 SECTION 6.3 LIQUIDATION DISTRIBUTION UPON DISSOLUTION. 33 SECTION 6.4 REDEMPTION AND DISTRIBUTION 33 SECTION 6.5 REDEMPTION OR DISTRIBUTION PROCEDURES. 34 SECTION 6.6 REPAYMENT AT OPTION OF HOLDERS. 35 SECTION 6.7 VOTING RIGHTS - CAPITAL SECURITIES. 36 SECTION 6.8 VOTING RIGHTS - COMMON SECURITIES. 38 SECTION 6.9 AMENDMENTS TO DECLARATION AND INDENTURE. 39 SECTION 6.10 REFERENCE TO PRO RATA. 39 SECTION 6.11 RANKING. 40 SECTION 6.12 ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. 40 SECTION 6.13 NO PREEMPTIVE RIGHTS 40 SECTION 6.14 MISCELLANEOUS 40 SECTION 6.15 PAYING AGENT 41 ARTICLE VII TERMINATION OF TRUST SECTION 7.1 TERMINATION OF TRUST 41 ARTICLE VIII TRANSFER OF INTERESTS SECTION 8.1 TRANSFER OF SECURITIES 42 SECTION 8.2 TRANSFER OF CERTIFICATES 42 SECTION 8.3 DEEMED SECURITY HOLDERS 43 SECTION 8.4 BOOK ENTRY INTERESTS 43 SECTION 8.5 NOTICES TO CLEARING AGENCY 43 SECTION 8.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY 44 SECTION 8.7 DEFINITIVE CAPITAL SECURITY CERTIFICATES 44 SECTION 8.8 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES 44 ARTICLE IXLIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 9.1 LIABILITY 45 SECTION 9.2 EXCULPATION 45 SECTION 9.3 FIDUCIARY DUTY 46 SECTION 9.4 INDEMNIFICATION 46 SECTION 9.5 OUTSIDE BUSINESSES 49 ARTICLE X ACCOUNTING SECTION 10.1 FISCAL YEAR 49 SECTION 10.2 CERTAIN ACCOUNTING MATTERS 49 SECTION 10.3 BANKING 50 SECTION 10.4 WITHHOLDING 50 ARTICLE XI AMENDMENTS AND MEETINGS SECTION 11.1 AMENDMENTS 50 SECTION 11.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT 52 ARTICLE XIIREPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION 12.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE 53 SECTION 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE 54 ARTICLE XIII MISCELLANEOUS SECTION 13.1 NOTICES 55 SECTION 13.2 GOVERNING LAW 56 SECTION 13.3 INTENTION OF THE PARTIES 56 SECTION 13.4 HEADINGS 56 SECTION 13.5 SUCCESSORS AND ASSIGNS 56 SECTION 13.6 PARTIAL ENFORCEABILITY 56 SECTION 13.7 COUNTERPARTS 56 SECTION 13.8 REMARKETING 56 AMENDED AND RESTATED DECLARATION OF TRUST OF Ingersoll-Rand Financing I March 23, 1998 AMENDED AND RESTATED DECLARATION OF TRUST (the "Declaration") dated and effective as of March 23, 1998, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the Holders (as defined herein), from time to time, of the securities representing undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration; WHEREAS, certain of the Trustees and the Sponsor established Ingersoll-Rand Financing I (the "Trust"), a trust under the Business Trust Act (as defined herein) pursuant to a trust agreement dated as of August 18, 1997 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on August 18, 1997, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures of the Debenture Issuer (as defined herein); WHEREAS, prior to the date hereof, the Sponsor removed a trustee of the Trust and substituted First Chicago Delaware Inc. as a trustee of the Trust; WHEREAS, in connection with such removal and substitution of trustees, a Restated Certificate of Trust was filed with the Secretary of State of Delaware on March 19, 1998; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the Trust and the Holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION I.1 DEFINITIONS Unless the context otherwise requires: (a) capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Agent" means any Paying Agent. "Applicable Ownership Interest" means, with respect to an Income PRIDES and the U.S. Treasury Securities in the Treasury Portfolio, (A) a 1/40, or 2.5%, undivided beneficial ownership interest in a $1,000 principal or interest amount of a principal or interest strip in a U.S. Treasury Security included in such Treasury Portfolio which matures on or prior to May 15, 2001 and (B) for each scheduled interest payment date on the Debentures that occurs after the Tax Event Redemption Date, a .038875% undivided beneficial ownership interest in a $1,000 face amount of such U.S. Treasury Security which is a principal or interest strip maturing on such date. "Applicable Principal Amount" means either (i) if the Tax Event Redemption Date occurs prior to May 16, 2001, the aggregate principal amount of the Debentures corresponding to the aggregate stated liquidation amount of the Capital Securities which are components of Income PRIDES on the Tax Event Redemption Date or (ii) if the Tax Event Redemption occurs on or after May 16, 2001, the aggregate principal amount of the Debentures corre sponding to the aggregate stated liquidation amount of the Capital Securities outstanding on such Tax Event Redemption Date. "Authorized Newspaper" means a daily newspaper, in the English language, customarily published on each day that is a Business Day in The City of New York, whether or not published on days that are Legal Holidays, and of general circulation in The City of New York. The Authorized Newspaper for the purposes of the Reset Announcement Date, is currently anticipated to be The Wall Street Journal. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than Saturday, Sunday or any day on which banking institutions in New York City, in the State of New York, are permitted or required by any applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code 3801 et seq., as it may be amended from time to time, or any successor legislation. "Capital Security" means the 6.22% Capital Securities. "Capital Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Capital Security Certificate" means a certificate representing a Capital Security substantially in the form of Exhibit A-1. "Certificate" means a Common Security Certificate or a Capital Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Capital Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Capital Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the "Closing Time" and each "Date of Delivery" under the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Security" means the 6.22% Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "Company Indemnified Person" means (a) any Regular Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "Corporate Trust Office" means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at One First National Plaza, Suite 0126, Chicago, IL 60670-0126. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Ingersoll-Rand Company, a New Jersey corporation, in its capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means The Bank of New York, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of 6.22% Debentures to be issued by the Debenture Issuer under the Indenture. "Debenture Repayment Price" means, with respect to any Debentures put to the Sponsor on June 1, 2001, an amount per Debenture equal to $25, plus accumulated and unpaid interest (including deferred interest, if any). "Definitive Capital Security Certificates" has the meaning set forth in Section 8.4. "Delaware Trustee" has the meaning set forth in Section 5.2. "Direction" by a Person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. "Direct Action" has the meaning specified in Section 3.8(e). "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.2. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Exchange Agent" shall mean the Person acting as Institutional Trustee. "Failed Remarketing" has the meaning specified in Section 5.4(b) of the Purchase Contract Agreement. "FELINE PRIDES"_ means (A) 14,490,000 units referred to as Income PRIDES_ with a Stated Amount, per Income PRIDES, of $25 and (B) at least 1,610,000 units referred to as Growth PRIDES_ with a face amount, per Growth PRIDES, of $25. "Fiduciary Indemnified Person" has the meaning set forth in Section 9.4(b). "Global Certificate" has the meaning set forth in Section 8.4. "Guarantee" means the guarantee agreement to be dated as of March 23, 1998 of the Sponsor in respect of the Common Securities and the Capital Securities. "Holder" or "holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture dated as of March 23, 1998, among the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued. "Institutional Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Institutional Trustee Account" has the meaning set forth in Section 3.8(c). "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" means that the Regular Trustees shall have received an opinion of independent counsel experienced in practice under the Investment Company Act (an "Investment Company Event Opinion") to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), which Change in 1940 Act Law becomes effective on or after the date of the Prospectus, there is a more than an insubstantial risk that the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act. "Legal Action" has the meaning set forth in Section 3.6(g). "Majority in liquidation amount of the Securities" means, except as provided in the terms and conditions of the Capital Securities set forth in Article VI hereto or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Ministerial Action" means the taking of an action, such as filing a form or making an election, or pursuing some other similar reasonable measure that will have no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holder of the Securities and will involve no material cost. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that the officers signing the Officers' Certificate have read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officers' Certificate; (c) a statement that such officers have made such examination or investigation as, in such officers' opinion, is necessary to enable such officers to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officers, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 6.15. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Pledge Agreement" means the Pledge Agreement dated as of March 23, 1998 among the Sponsor, The Chase Manhattan Bank, as collateral agent (the "Collateral Agent") and Custodial Agent (the "Custodial Agent") and securities intermediary (the "Securities Intermediary"), and The Bank of New York, as purchase contract agent (the "Purchase Contract Agent"). "Pricing Agreement" means the pricing agreement between the Trust, the Debenture Issuer, and the underwriters designated by the Regular Trustees with respect to the offer and sale of the Capital Securities. "Primary Treasury Dealer" means a primary U.S. government securities dealer in The City of New York. "Purchase Contract Agreement" means the Purchase Contract Agreement dated as of March 23, 1998 among The Bank of New York, as Purchase Contract Agent, and the Sponsor. "Purchase Contract Settlement Date" means May 16, 2001. "Put Option" has the meaning specified in Section 6.6. "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Quotation Agent" means (i) Merrill Lynch Government Securities, Inc. and its respective successors, provided, however, that if the foregoing shall cease to be a Primary Treasury Dealer, the Sponsor shall substitute therefor another Primary Treasury Dealer and (ii) any other Primary Treasury Dealer selected by the Sponsor. "Redemption Amount" means for each Debenture, the product of (i) the principal amount of such Debenture and (ii) a fraction whose numerator is the Treasury Portfolio Purchase Price and whose denominator is the Applicable Principal Amount. "Redemption Price" means the redemption price per security equal to the Redemption Amount plus any accrued and unpaid distributions to the date of redemption. "Regular Trustee" has the meaning set forth in Section 5.1. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Remarketing Agent" means Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Remarketing Agreement" means the Remarketing Agreement among the Debenture Issuer, the Trust and The Bank of New York as Purchase Contract Agent. "Remarketing Date" shall have the meaning set forth in the Remarketing Agreement. "Remarketing Underwriting Agreement" means the agreement to be dated as of the third Business Day immediately preceding the Purchase Contract Settlement Date among the Compa ny, the Trust, The Bank of New York, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Reset Agent" means a nationally recognized investment banking firm chosen by the Sponsor to determine the Reset Rate. It is currently anticipated that Merrill Lynch & Co. will act in such capacity. "Reset Announcement Date" means the tenth (10) Business Day immediately preceding the Purchase Contract Settlement Date. "Reset Rate" means the distribution rate per annum (to be determined by the Reset Agent), equal to the sum of (X) the Reset Spread and (Y) the rate of interest on the Two-Year Benchmark Treasury in effect on the third Business Day immediately preceding the Purchase Contract Settlement Date, that the Capital Securities should bear in order for the Capital Securities to have an approximate market value of 100.5% of their aggregate liquidation amount on the third Business Day immediately preceding the Purchase Contract Settlement Date; provided, that the Sponsor may limit such Reset Spread to be no higher than 200 basis points (2%). "Reset Spread" means a spread amount to be determined by the Reset Agent on the tenth (10) Business Day immediately preceding the Purchase Contract Settlement Date. "Responsible Officer" means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including, without limitation, any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Institutional Trustee assigned by the Institutional Trustee to administer its corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. "Securities" means the Common Securities and the Capital Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Sponsor" means Ingersoll-Rand Company, a New Jersey corporation, or any successor entity in a merger or consolidation, in its capacity as sponsor of the Trust. "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Event" means the receipt by the Regular Trustees of an opinion of a nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on the date the Securities are issued, which amendment or change is effective or which interpretation or pronouncement is announced on or after the date of issuance of the Securities under the Declaration, there is more than an insubstantial risk that (i) interest payable by the Debenture Issuer on the Debentures would not be deductible, in whole or in part, by the Debenture Issuer for federal income tax purposes or (ii) the Trust would be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Tax Event Redemption" means, if a Tax Event shall occur and be continuing, the redemption of the Debentures, at the option of the Debenture Issuer, in whole but not in part, on not less than 30 days nor more than 60 days notice. "Tax Event Redemption Date" means the date upon which a Tax Event Redemption is to occur. "10% in liquidation amount of the Securities" means, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on repayment, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Termination Event" has the meaning set forth in Section 1 of the Purchase Contract Agreement. "Treasury Portfolio" means, with respect to the Applicable Principal Amount of Debentures (a) if the Tax Event Redemption Date occurs prior to May 16, 2001, a portfolio of zero- coupon U.S. Treasury Securities consisting of (i) principal or interest strips of U.S. Treasury Securities which mature on or prior to May 15, 2001 in an aggregate amount equal to the Applicable Principal Amount and (ii) with respect to each scheduled interest payment date on the Debentures that occurs after the Tax Event Redemption Date, principal or interest strips of U.S. Treasury Securities which mature on or prior to such date in an aggregate amount equal to the aggregate interest payment that would be due on the Applicable Principal Amount of the Debentures on such date, and (b) if the Tax Event Redemption Date occurs after May 16, 2001, a portfolio of zero-coupon U.S. Treasury Securities consisting of (i) principal or interest strips of U.S. Treasury Securities which mature on or prior to May 15, 2003 in an aggregate amount equal to the Applicable Principal Amount and (ii) with respect to each scheduled interest payment date on the Debentures that occurs after the Tax Event Redemption Date, principal or interest strips of such U.S. Trea sury Securities which mature on or prior to such date in an aggregate amount equal to the aggregate interest payment that would be due on the Applicable Principal Amount of the Debentures on such date. "Treasury Portfolio Purchase Price" means the lowest aggregate price quoted by the Primary Treasury Dealer to the Quotation Agent on the third Business Day immediately preceding the Tax Event Redemption Date for the purchase of the Treasury Portfolio for settlement on the Tax Event Redemption Date. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Treasury Securities" has the meaning set forth in Section 1 of the Purchase Contract Agreement. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Two-Year Benchmark Treasury" means direct obligations of the United States (which may be obligations traded on a when- issued basis only) having a maturity comparable to the remaining term to maturity of the Trust Securities, as agreed upon by the Sponsor and the Reset Agent. The rate for the Two-Year Benchmark Treasury will be the bid side rate displayed at 10:00 A.M., New York City time, on the third Business Day immediately preceding the Purchase Contract Settlement Date in the Telerate system (or if the Telerate system is (a) no longer available on the third Business Day immediately preceding the Purchase Contract Settlement Date or (b) in the opinion of the Reset Agent (after consultation with the Sponsor) no longer an appropriate system from which to obtain such rate, such other nationally recognized quotation system as, in the opinion of the Reset Agent (after consultation with the Sponsor) is appropriate). If such rate is not so displayed, the rate for the Two-Year Benchmark Treasury shall be, as calculated by the Reset Agent, the yield to maturity for the Two-Year Benchmark Treasury, expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis, and computed by taking the arithmetic mean of the secondary market bid rates, as of 10:30 A.M., New York City time, on the third Business Day immediately preceding the Purchase Contract Settlement Date of three leading United States government securities dealers selected by the Reset Agent (after consultation with the Sponsor) (which may include the Reset Agent or an Affiliate thereof). "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Capital Securities. ARTICLE II TRUST INDENTURE ACT SECTION II.1 TRUST INDENTURE ACT; APPLICATION. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Institutional Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) Any application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION II.2 LISTS OF HOLDERS OF SECURITIES. (a) Each of the Sponsor and the Regular Trustees, on behalf of the Trust, shall provide the Institutional Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Institutional Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Regular Trustees, on behalf of the Trust, shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Institutional Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request by the Institutional Trustee for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Institutional Trustee. The Institutional Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in the Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Institutional Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Institutional Trustee shall comply with its obligations under 311(a), 310(b) and 312(b) of the Trust Indenture Act. SECTION II.3 REPORTS BY THE INSTITUTIONAL TRUSTEE. Within 60 days after May 15 of each year, commencing May 15, 1999, the Institutional Trustee shall provide to the Holders of the Trust Securities such reports as are required by 313 of the Trust Indenture Act, if any, in the form and in the manner provided by 313 of the Trust Indenture Act. The Institutional Trustee shall also comply with the requirements of 313(d) of the Trust Indenture Act. SECTION II.4 PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE. Each of the Sponsor and the Regular Trustees, on behalf of the Trust, shall provide to the Institutional Trustee such documents, reports and information as required by 314 (if any) and the compliance certificate required by 314 of the Trust Indenture Act in the form, in the manner and at the times required by 314 of the Trust Indenture Act. SECTION II.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Sponsor and the Regular Trustees, on behalf of the Trust, shall provide to the Institutional Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to 314(c) (1) may be given in the form of an Officers' Certificate. SECTION II.6 EVENTS OF DEFAULT; WAIVER. (a) The Holders of a Majority in liquidation amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default in respect of the Capital Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under this Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under this Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Capital Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of 316(a) (1)(B) of the Trust Indenture Act and such 316(a) (1) (B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Capital Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Capital Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Capital Securities or impair any right consequent thereon. Any waiver by the Holders of the Capital Securities of an Event of Default with respect to the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under this Declaration as provided below in this Section 2.6(b), the Event of Default under this Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under this Declaration as provided below in this Section 2.6(b), the Event of Default under this Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided further, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Institutional Trustee will be deemed to be acting solely on behalf of the Holders of the Capital Securities and only the Holders of the Capital Securities will have the right to direct the Institutional Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Institutional Trustee at the direction of the Holders of the Capital Securities constitutes a waiver of the corresponding Event of Default with respect to the Capital Securities under this Declaration. Any waiver of an Event of Default under the Indenture by the Institutional Trustee at the direction of the Holders of the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of the corresponding Event of Default under this Declaration with respect to the Common Securities for all purposes of this Declaration without further act, vote or consent of the Holders of the Common Securities. The foregoing provisions of this Section 2.6(c) shall be in lieu of 316(a)(1)(B) of the Trust Indenture Act and such 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION II.7 EVENT OF DEFAULT; NOTICE. (a) The Institutional Trustee shall, within 90 days after the occurrence of an Event of Default, actually known to a Responsible Officer of the Institutional Trustee, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all such defaults with respect to the Securities, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures, the Institutional Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Institutional Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Institutional Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 501 and 503 of the Indenture; or (ii) any default as to which the Institutional Trustee shall have received written notice or of which a Responsible Officer of the Institutional Trustee charged with the administration of this Declaration shall have actual knowledge. ARTICLE III ORGANIZATION SECTION III.1 NAME. The Trust is named "Ingersoll-Rand Financing I," as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION III.2 OFFICE. The address of the principal office of the Trust is c/o Ingersoll-Rand Company, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675. On ten Business Days written notice to the Institutional Trustee and Holders of the Securities, the Regular Trustees may designate another principal office. SECTION III.3 PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities and use the gross proceeds from such sale to acquire the Debentures, and (b) except as otherwise set forth herein, to engage in only those other activities necessary, appropriate, convenient or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. It is the intent of the parties to this Declaration for the Trust to be classified as a grantor trust for United States federal income tax purposes under Subpart E of Subchapter J of the Code, pursuant to which the beneficial owners of the Capital Securities and the Common Securities will be the owners of the Trust for United States federal income tax purposes, and such owners will include directly in their gross income the income, gain, deduction or loss of the Trust as if the Trust did not exist. By the acceptance of this Trust, neither the Trustees, the Sponsor nor the Holders of the Capital Securities or Common Securities will take any position for United States federal income tax purposes which is contrary to the classification of the Trust as a grantor trust. SECTION III.4 AUTHORITY. Subject to the limitations provided in this Declaration and to the specific duties of the Institutional Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Institutional Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION III.5 TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 3.8 with respect to the Debentures and the Institutional Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. A Holder shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION III.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Capital Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Capital Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a simultaneous issuance of both Capital Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Capital Securities to: (i) assist and filing with the Commission the registration statement and the prospectus relating to the registration statement on Form S-3 prepared by the Sponsor, including any amendments or supplements, thereto, pertaining to the Capital Securities and to take any other action relating to the registration and sale of the Capital Securities under federal and state securities laws; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the FELINE PRIDES in any State in which the Sponsor has determined to qualify or register such FELINE PRIDES for sale; (iii)assist in filing an application, prepared by the Sponsor, to the New York Stock Exchange, Inc. or any other national stock exchange or the Nasdaq Stock National Market for listing upon notice of issuance of any Capital Securities; (iv) assist in filing with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor, relating to the registration of the Capital Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Remarketing Agreement and Remarketing Underwriting Agreement providing for the sale of the FELINE PRIDES; (c) to acquire the Debentures with the proceeds of the sale of the Capital Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Institutional Trustee for the benefit of the Trust and the Holders of the Capital Securities and the Holders of Common Securities; (d) to give the Sponsor and the Institutional Trustee prompt written notice of the occurrence of a Tax Event or an Investment Company Event; provided that the Regular Trustees shall consult with the Sponsor before taking or refraining from taking any Ministerial Action in relation to a Tax Event or Investment Company Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of 316(c) of the Trust Indenture Act, Distributions, voting rights, repayments, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities and this Declaration; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e) the Institutional Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary, appropriate, convenient or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created; (o) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action relating to this clause (iii) does not adversely affect the interests of Holders; (p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; (q) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary, appropriate, convenient or incidental to the foregoing; and (r) if applicable, to solicit holders of Securities which form a part of the Income PRIDES to timely instruct the Purchase Contract Agent in order to enable the Purchase Contract Agent to vote such Securities. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Institutional Trustee set forth in Section 3.8. No permissive power or authority available to the Regular Trustees shall be construed to be a duty. Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Sponsor. SECTION III.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES. (a) The Trust shall not, and the Trustees (including the Institutional Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Institutional Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than the Debentures and any cash proceeds received with respect thereto; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness for borrowed money, other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the assets of the Trust or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as provided in this Declaration, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause the Trust to be classified as other than a grantor trust for United States federal income tax purposes. SECTION III.8 POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Institutional Trustee does not also act as Delaware Trustee). (c) The Institutional Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Institutional Trustee Account") in the name of and under the exclusive control of the Institutional Trustee on behalf of the Trust and the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Institutional Trustee Account and make payments to the Holders of the Capital Securities and Holders of the Common Securities from the Institutional Trustee Account in accordance with Section 6.1. Funds in the Institutional Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Institutional Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness is rated at least "A" or above by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary, appropriate, convenient or incidental to effect the repayment of the Capital Securities and the Common Securities to the extent the Debentures mature or are redeemed or the Put Option is exercised; and (iii)upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary, appropriate, convenient or incidental to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. (d) The Institutional Trustee shall take all actions and perform such duties as may be specifically required of the Institutional Trustee pursuant to the terms of the Securities and this Declaration. (e) The Institutional Trustee shall take any Legal Action which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or the Institutional Trustee's duties and obligations under this Declaration, the Business Trust Act or the Trust Indenture Act; provided, however, that if the Institutional Trustee fails to enforce its rights under the Debentures after a Holder of Capital Securities has made a written request, such Holder of Capital Securities may, to the fullest extent permitted by applicable law, institute a legal proceeding against the Debenture Issuer without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest on or principal of the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of Common Securities will be subrogated to the rights of such Holders of Capital Securities. In connection with such Direct Action, the Debenture Issuer shall be subrogated to the rights of such Holder of Capital Securities with respect to payments on the Capital Securities under this Declaration to the extent of any payment made by the Debenture Issuer to such Holder of Capital Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Capital Securities will not be able to exercise directly any other remedy available to the Holders of the Debentures. (f) The Institutional Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 5.6. (g) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer of the Institutional Trustee occurs and is continuing, the Institutional Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities and this Declaration. (h) Subject to this Section 3.8, the Institutional Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Institutional Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION III.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE. (a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Institutional Trustee has actual knowledge, the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Institutional Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A the duties and obligations of the Institutional Trustee shall be determined solely by the express provisions of this Declaration and the Institutional Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Institutional Trustee; and (B in the absence of bad faith on the part of the Institutional Trustee, the Institutional Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Institutional Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Institutional Trustee, the Institutional Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii the Institutional Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts; (iii the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration; (iv no provision of this Declaration shall require the Institutional Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Institutional Trustee against such risk or liability is not reasonably assured to it; (v the Institutional Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Institutional Trustee Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration, the Business Trust Act and the Trust Indenture Act; (vi the Institutional Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Institutional Trustee Account maintained by the Institutional Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii the Institutional Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION III.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. (a Subject to the provisions of Section 3.9: (i the Institutional Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v the Institutional Trustee may consult with counsel or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Institutional Trustee security and indemnity, reasonably satisfactory to the Institutional Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Institutional Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Institutional Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Institutional Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii the Institutional Trustee shall be under no obligation to conduct an investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Institutional Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; (x whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Institutional Trustee (i) may request instructions from the Holders of the Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Institutional Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; and (xi except as otherwise expressly provided by this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. (b No provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty. SECTION III.11 DELAWARE TRUSTEE. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Trustees (except as required under the Business Trust Act) described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of 3807 of the Business Trust Act. SECTION III.12 EXECUTION OF DOCUMENTS. Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act, a majority of or, if there are only two, any Regular Trustee or, if there is only one, such Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6. SECTION III.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION III.14 DURATION OF TRUST. The Trust, unless dissolved pursuant to the provisions of Article VIII hereof, shall dissolve on March , 2005. SECTION III.15 MERGERS. (a The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c) or Section 6.3 (b The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Institutional Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that if the Trust is not the surviving entity: (i such successor entity (the "Successor Entity") either: (A expressly assumes all of the obligations of the Trust under the Securities; or (B substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities"), so long as the Successor Securities rank the same as the Capital Securities rank with respect to Distributions and payments upon liquidation, redemption, repayment and otherwise and substitutes for the Common Securities other securities having substantially the same terms as the Common Securities (the "Successor Common Securities"), so long as the Successor Common Securities rank the same as the Common Securities rank with respect to Distributions and payments upon liquidation, redemption, repayment and otherwise; (ii the Debenture Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Institutional Trustee as the holder of the Debentures; (iii if necessary, the Capital Securities or any Successor Securities will be listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Capital Securities are then listed or quoted; (iv such merger, consolidation, amalgamation or replacement does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities and any Successor Common Securities) in any material respect (other than with respect to any dilution of such Holders' interests in the successor entity); (vi such Successor Entity has a purpose substantially identical to that of the Trust; (vii prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities and Successor Common Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the successor entity); (B following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes; and (viii the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities and Successor Common Securities at least to the extent provided by the Guarantee. (c Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE IV SPONSOR SECTION IV.1 SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date the Sponsor will purchase all of the Common Securities issued by the Trust, in an amount at least equal to 3.0% of the total capital of the Trust, at the same time as the Capital Securities are sold. SECTION IV.2 RIGHTS AND RESPONSIBILITIES OF THE SPONSOR. In connection with the issue, sale and, if necessary, the remarketing of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a to prepare, execute and file with the Commission a registration statement on Form S-3 in relation to the Capital Securities, including any amendments thereto; (b if necessary, to determine the States in which to take appropriate action to qualify or register for sale all or part of the FELINE PRIDES and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c if necessary, to prepare, execute and file an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Capital Securities; (d if necessary, to prepare, execute and file with the Commission of a registration statement on Form 8-A relating to the registration of the Capital Securities under Section 12(b) of the Exchange Act, including any amendments thereto; (e to negotiate the terms of the Remarketing Agreement, the Remarketing Underwriting Agreement, the Underwriting Agreement and the Pricing Agreement providing for the sale of the FELINE PRIDES; and (f) execute and enter into the Underwriting Agreement and Pricing Agreement. SECTION IV.3 RIGHT TO PROCEED. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 3.8(e) hereto. SECTION IV.4 EXPENSES. In connection with the offering, sale and issuance of the Debentures to the Institutional Trustee and in connection with the sale of the Securities by the Trust, the Debenture Issuer, in its capacity as borrower with respect to the Debentures, is required under Section 5.1 of the First Supplemental Indenture to: (a pay all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriters payable pursuant to the Underwriting Agreement and Pricing Agreement and compensation of the Debenture Trustee under the Indenture in accordance with the provisions of the Indenture; (b be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization, maintenance and dissolution of the Trust, the offering, sale and issuance of the Securities (including commissions to the underwriters in connection therewith), the fees and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee, the Delaware Trustee and the Regular Trustees (including any amounts payable under Article IX of this Declaration), the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders of the Securities; (c be primarily liable for any indemnification obligations arising under Section 9.4 with respect to this Declaration; and (d pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. The Sponsor's obligations under this Section 4.4 shall be for the benefit of, and shall be enforceable by, any person to whom such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsor's obligations under this Section 4.4 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Debenture Issuer agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 4.4. ARTICLE V TRUSTEES SECTION V.1 NUMBER OF TRUSTEES. The number of Trustees initially shall be five (5), and: (a at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the holders of a majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; provided, however, that, the number of Trustees shall in no event be less than two (2), provided further that (1) one Trustee, shall meet the requirements of Section 5.2 (a) or (b); (2) there shall be at least one Trustee who is an employee or officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (3) one Trustee shall be the Institutional Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Institutional Trustee may also serve as Delaware Trustee if it meets the applicable requirements. SECTION V.2 DELAWARE TRUSTEE. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a a natural person who is a resident of the State of Delaware; or (b if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Institutional Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Institutional Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. (c The initial Delaware Trustee shall be: First Chicago Delaware Inc. 300 King Street Wilmington, DE 19801 SECTION V.3 INSTITUTIONAL TRUSTEE; ELIGIBILITY. (a There shall at all times be one Trustee which shall act as Institutional Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, which shall: (i not be an Affiliate of the Sponsor; and (ii be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 750 million U.S. dollars ($750,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b If at any time the Institutional Trustee shall cease to be eligible to so act under Section 5.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). (c If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of 310(b) of the Trust Indenture Act, the Institutional Trustee and the Holder of the Common Securities (as if it were the obligor referred to in 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of 310(b) of the Trust Indenture Act. (d The Guarantee and the Indenture shall be deemed to be specifically described in this Declaration and the Indenture for purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. (e The initial Institutional Trustee shall be: The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division SECTION V.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY. Each Regular Trustee and the Delaware Trustee (unless the Institutional Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION V.5 REGULAR TRUSTEES. The initial Regular Trustees shall be: Nancy Casablanca Ronald Heller Patricia Nachtigal (a Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (b Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6; and (c a Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents that the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 3.6. SECTION V.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES. (a Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities. (b (i The Trustee that acts as Institutional Trustee shall not be removed in accordance with Section 5.6(a) until a successor Institutional Trustee possessing the qualifications to act as Institutional Trustee under Sections 5.2 and 5.3 (a "Successor Institutional Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Institutional Trustee and delivered to the Regular Trustees and the Sponsor; and (ii The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c A Trustee appointed to office shall hold office until such Trustee's successor shall have been appointed or until such Trustee's death, bankruptcy, dissolution, termination, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i no such resignation of the Trustee that acts as the Institutional Trustee shall be effective: (A until a Successor Institutional Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Institutional Trustee and delivered to the Trust, the Sponsor and the resigning Institutional Trustee; or (B until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d The Holders of the Common Securities shall use all reasonable efforts to promptly appoint a Successor Delaware Trustee or Successor Institutional Trustee, as the case may be, if the Institutional Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e If no Successor Institutional Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Institutional Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Institutional Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. (f No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. SECTION V.7 VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two Regular Trustees, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION V.8 EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust or terminate this Declaration. Whenever a vacancy among the Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION V.9 MEETINGS. If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at (i) a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or (ii) without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. SECTION V.10 DELEGATION OF POWER. (a Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6; and (b the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION V.11 MERGER, CONVERSION. CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Institutional Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VI THE SECURITIES SECTION VI.1 DESIGNATION AND NUMBER. (a Capital Securities. Capital Securities, with an aggregate liquidation amount with respect to the assets of the Trust of $402,500,000 and a liquidation amount with respect to the assets of the Trust of $25 per capital security will be issued by the Trust. The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by applicable law or the rules of any stock exchange on which the Capital Securities are listed or to conform to ordinary usage, custom or practice. (b Common Securities. Common Securities with an aggregate liquidation amount with respect to the assets of the Trust of $12,448,475 and a liquidation amount with respect to the assets of the Trust of $25 per common security will be issued by the Trust. The Common Security Certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by applicable law or to conform to ordinary usage, custom or practice. SECTION VI.2 DISTRIBUTIONS. (a Distributions payable on each Security will be fixed initially at a rate per annum of 6.22% (the "Coupon Rate") of the stated liquidation amount of $25 per Security until May 15, 2001, and at the Reset Rate thereafter, such rates being the rates of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will accumulate and compound quarterly at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such accumulated distribution that are payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year consisting of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. (b Distributions on the Securities will be cumulative, will accrue from March 23, 1998, and will be payable quarterly in arrears, on February 16, May 16, August 16 and November 16 of each year, commencing on May 16, 1998, except as otherwise described below. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not extending, in the aggregate, beyond the maturity date of the Debentures (each an "Extension Period"). During such Extension Period no interest shall be due and payable on the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accumulate at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter, compounded quarterly during any such Extension Period (to the extent permitted by applicable law). Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed beyond the maturity date of the Debentures. (c Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust at the close of business on the Business Day immediately preceding each of the relevant payment dates on the Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Capital Securities will be made as described under the heading "Description of the Capital Securities -- Book Entry Only Issuance -The Depository Trust Company" in the Prospectus Supplement dated March 17, 1998 to the Prospectus dated March 17, 1998 (collectively, the "Prospectus") of the Trust relating to the Registration Statement on Form S-3 (file no. 333-38367) of the Sponsor and the Trust. The relevant record dates for the Common Securities shall be the same record date as for the Capital Securities. If the Capital Securities shall not continue to remain in book-entry only form or are not in book-entry only form at issuance, the relevant record dates for the Capital Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, as shall be selected by the Regular Trustees, which dates shall be at least more than one, but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. So long as the Holder of any Capital Securities is the Collateral Agent, the payment of Distributions on such Capital Securities held by the Collateral Agent will be made at such place and to such account as may be designated by the Collateral Agent. (d The Coupon Rate on the Securities (as well as the interest rate on the Debentures) will be reset on the third Business Day immediately preceding the Purchase Contract Settlement Date to the Reset Rate (which Reset Rate will be in effect on and after the Purchase Contract Settlement Date). On the Reset Announcement Date, the Reset Spread and the Two-Year Benchmark Treasury to be used to determine the Reset Rate will be announced by the Sponsor. On the Business Day immediately following the Reset Announcement Date, the Holders of Securities will be notified of such Reset Spread and Two-Year Benchmark Treasury by the Sponsor. Such notice shall be sufficiently given to Holders of Securities if published in an Authorized Newspaper. (e Not later than seven calendar days nor more than 15 calendar days prior to the Reset Announcement Date, the Sponsor will notify DTC or its nominee (or any successor Clearing Agency or its nominee) by first-class mail, postage prepaid, to notify the Capital Security Beneficial Owners or Clearing Agency Participants holding Capital Securities, Income PRIDES or Growth PRIDES, of such Reset Announcement Date and the procedures to be followed by such Holders of Income PRIDES who intend to settle their obligation under the Purchase Contract with separate cash. (f In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined in Section 6.10 of this Agreement) among the Holders of the Securities. SECTION VI.3 LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution of the Trust (unless a Tax Event Redemption has occurred), the Holders of the Securities on the date of the dissolution will be entitled to receive out of the assets of the Trust, after satisfaction of liabilities to creditors, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the rate of 6.22%, if on or prior to May 15, 2001, and the Reset Rate thereafter, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on such Securities and which shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities (such amount being a "Liquidation Distribution"). If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, except as otherwise provided in Section 6.11 hereof, the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. SECTION VI.4 REDEMPTION AND DISTRIBUTION. (a) Upon the redemption of the Debentures in whole (but not in part), at maturity, the proceeds from such redemption shall, after satisfaction of liabilities to creditors, be simultaneously applied to redeem Securities (on a Pro Rata basis) having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon at the date of the repayment, payable in cash. (b) If an Investment Company Event shall occur and be continuing the Regular Trustees shall dissolve the Trust and, after satisfaction of liabilities to creditors, cause Debentures held by the Institutional Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate the rate of 6.22%, if on or prior to May 15, 2001, and the Reset Rate thereafter, and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Investment Company Event (the "90 Day Period"); provided, however, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90 Day Period, the Investment Company Event by taking some Ministerial Action, the Regular Trustees will pursue such Ministerial Action in lieu of dissolution. (c) If a Tax Event shall occur and be continuing, the Debentures are, at the option of the Debenture Issuer, redeemable pursuant to a Tax Event Redemption. If the Debenture Issuer redeems the Debentures upon the occurrence and continuance of a Tax Event, the proceeds from such redemption shall simultaneously be applied by the Institutional Trustee to redeem the Securities (on a Pro Rata basis) having an aggregate stated liquidation amount equal to the aggregate principal amount of the Debentures so redeemed at the Redemption Price. If, following the occurrence of a Tax Event, the Debenture Issuer exercises its option to redeem the Debentures prior to May 15, 2001, the Debenture Issuer shall appoint the Quotation Agent to assemble the Treasury Portfolio in consultation with the Company. The Institutional Trustee will distribute, to the record Holder of the Securities the Redemption Price payable in liquidation of such Holder's interests in the Trust. On and from the date fixed by the Regular Trustees for a Tax Event Redemption or any distribution of Debentures and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding and (ii) DTC or its nominee (or any successor Clearing Agency or its nominee) or the record Holder of the Capital Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and any certificates representing Securities, except for certificates representing Capital Securities held by DTC or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of $25, with an interest rate of 6.22% if on or prior to May 15, 2001, and at the Reset Rate thereafter, and accrued and unpaid interest equal to accrued and unpaid Distributions on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. SECTION VI.5 REDEMPTION OR DISTRIBUTION PROCEDURES. (a) Notice of any redemption (other than in connection with the maturity of the Debentures) of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the Tax Event Redemption Date. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 6.5(a), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (b) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this Section 6.5(a) (such notice will be irrevocable), then (A) while the Capital Securities are in book-entry only form, with respect to the Capital Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will deposit irrevocably with DTC or its nominee (or any successor Clearing Agency or its nominee) funds sufficient to pay the applicable Redemption Price with respect to the Capital Securities and will give DTC irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities so called for redemption, and (B) with respect to Capital Securities issued in definitive form and Common Securities, provided that the Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust. Notwithstanding the foregoing, so long as the Holder of any Capital Securities is the Collateral Agent or the Purchase Contract Agent, the payment of the Redemption Price in respect of such Capital Securities held by the Collateral Agent or the Purchase Contract Agent shall be made no later than 12:00 noon, New York City time, on the Tax Event Redemption Date by check or wire transfer in immediately available funds at such place and to such account as may be designated by the Collateral Agent or the Purchase Contract Agent. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, distributions will cease to accrue on the Securities so redeemed and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for repayment. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Institutional Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for repayment for purposes of calculating the Redemption Price. (c) Redemption/Distribution Notices shall be sent by the Trust to (A) in respect of the Capital Securities, DTC or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Capital Security Certificates have been issued, to the Holders thereof, and (B) in respect of the Common Securities, to the Holder thereof. (d) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws) the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. SECTION VI.6 REPAYMENT AT OPTION OF HOLDERS. (a) If a Failed Remarketing (as described in Section 5.4(b) of the Purchase Contract Agreement and incorporated herein by reference) has occurred, each holder of Securities who holds such Securities on the day immediately following the Purchase Contract Settlement Date, shall have the right on the Business Day immediately following May 16, 2001 to require the Trust to distribute their pro rata share of the Debentures to the Exchange Agent and to require the Exchange Agent to put such Debentures to the Company on behalf of such holders on June 1, 2001, upon at least three Business Days' prior notice (the "Put Option Exercise Date"), at a repayment price of $25 per Security plus an amount equal to the accrued and unpaid Distributions (including deferred distributions if any) thereon to the date of payment (the "Put Option Repayment Price"). Pursuant to such Put Option. (b) The Exchange Agent shall obtain funds to pay the Put Option Repayment Price of Securities being repaid under the Put Option through presentation by it to the Debenture Issuer of Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities for repayment on the Put Option Exercise Date at the Debenture Repayment Price. (c) In order for the Securities to be repaid on the Put Option Exercise Date, the Trust must receive on or prior to 4:00 p.m. on the third Business Day immediately preceding the Put Option Exercise Date, at the Corporate Trust Office of the Institutional Trustee (who will in turn notify the Exchange Agent), the Securities to be repaid with the form entitled "Option to Elect Repayment" on the reverse thereof or otherwise accompanying such Security duly completed. Any such notice received by the Trust shall be irrevocable. All questions as to the validity, eligibility (including time of receipt) and acceptance of the Securities for repayment shall be determined by the Trust, whose determination shall be final and binding. (d) Payment of the Put Option Repayment Price to Holders of Securities shall be made at the Corporate Trust Office of the Exchange Agent, provided that the Debenture Issuer has paid the Exchange Agent a sufficient amount of cash in connection with the related repayment of the Debenture no later than 1:00 p.m., New York City time, on the Put Option Exercise Date by check or wire transfer in immediately available funds at such place and to such account as may be designated by such Holders. If the Exchange Agent holds immediately available funds sufficient to pay the Put Option Repayment Price of such Securities, then, immediately prior to the close of business on the Put Option Exercise Date, such Securities will cease to be outstanding and distributions thereon will cease to accrue, whether or not Securities are delivered to the Institutional Trustee, and all other rights of the Holder in respect of the Securities, including the Holder's right to require the Trust to repay such Securities, shall terminate and lapse (other than the right to receive the Put Option Repayment Price but without interest on such Put Option Repayment Price). Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities for which repayment has been elected. If payment of the Put Option Repayment Price in respect of Securities is (i) improperly withheld or refused and not paid either by the Exchange Agent or by the Sponsor as guarantor pursuant to the Securities Guarantee, or (ii) not paid by the Exchange Agent as the result of an Event of Default with respect to the Debentures presented for repayment as described in Section 6.6(b), Distributions on such Securities will continue to accrue, from the original Put Option Exercise Date to the actual date of payment, in which case the actual payment date will be considered the Put Option Exercise Date for purposes of calculating the Put Option Repayment Price. (e) The Debenture Issuer will request, not later than seven nor more than 15 calendar days prior to May 16, 2001 (the date on which some or all of the Capital Securities could be remarketed in the manner described in Section 5.4(b) of the Purchase Contract Agreement and incorporated herein by reference) that DTC notify the Capital Securities Beneficial Owner as well as the Income PRIDES and Growth PRIDES holders of such remarketing and of the procedures that must be followed if a Capital Securities Beneficial Owner wishes to exercise such holder's rights with respect to the Put Option. SECTION VI.7 VOTING RIGHTS - CAPITAL SECURITIES. (a) Except as provided under Sections 6.7(b) and 6.8 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. (b) Subject to the requirements set forth in this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waiving any past default and its consequences that is waivable under the Indenture, (iii) exercising any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, or (iv) consenting to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required, provided, however, that, where a consent under the Indenture would require the consent or act of the Holders of greater than a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Capital Securities under this paragraph unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Debentures after a Holder of Capital Securities has made a written request, such Holder of Capital Securities may, to the fullest extent permitted by applicable law, institute a legal proceeding directly against the Debenture Issuer to enforce the Institutional Trustee's rights under the Debentures without first instituting a legal proceeding against the Institutional Trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder on or after the respective due date specified in the Debentures. Except as provided in the preceding sentence, the Holders of Capital Securities shall not exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Capital Securities may be given at a separate meeting of Holders of Capital Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Capital Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to repay and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. SECTION VI.8 VOTING RIGHTS - COMMON SECURITIES. (a) Except as provided under Sections 6.8(b) and (c) and Section 6.9 and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V hereof, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 hereof and only after any Event of Default with respect to the Capital Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided that, where a consent or action under the Indenture would require the consent or act of the Holders of a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Pursuant to this Section 6.8(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for United States federal income tax purposes the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee's rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. SECTION VI.9 AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 11.1 hereof, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution of the Trust, other than as described in Section 7.1 or Section 3.14 hereof, then the Holders of outstanding Securities as a class will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, voting together as a single class; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination on the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided, further, that the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 6.9(b) unless (i) the Institutional Trustee has obtained an opinion of tax counsel to the effect that for United States federal income tax purposes, the Trust will not be classified as other than a grantor trust on account of such action or (ii) such action would not reduce or otherwise adversely affect powers of the Institutional Trustee or cause the Trust to be deemed an "investment company" which is required to be registered under the Investment Company Act of 1940. SECTION VI.10 REFERENCE TO PRO RATA. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities pro rata according to the aggregate liquidation amount of Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. SECTION VI.11 RANKING. The Capital Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Institutional Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities. SECTION VI.12 ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Capital Securities and Common Securities by the acceptance thereof, agrees to the provisions of the Indenture and the Guarantee, respectively. SECTION VI.13 NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. SECTION VI.14 MISCELLANEOUS. (a) The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. (b) The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. (c) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. Such signature shall be the manual or facsimile signature of any present or any future Regular Trustee. In case any Regular Trustee who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (d) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (e) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. Every Person, by virtue of having become a Holder or a Capital Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION VI.15 PAYING AGENT. In the event that the Capital Securities are not in book-entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where the Capital Securities may be presented for payment ("Paying Agent"), and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. The Trust may appoint the Paying Agent and may appoint one or more additional paying agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent. The Trust may change any Paying Agent without prior notice to any Holder. The Trust shall notify the Institutional Trustee of the name and address of any Paying Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent, the Institutional Trustee shall act as such. The Trust or any of its Affiliates (including the Sponsor) may act as Paying Agent. The Bank of New York shall initially act as Paying Agent for the Capital Securities and the Common Securities. ARTICLE VII TERMINATION OF TRUST SECTION VII.1 TERMINATION OF TRUST. (a) The Trust shall dissolve: (i) upon a Termination Event; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor; or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii)upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor or the Trust; (iv)upon the occurrence and continuation of an Investment Company Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; (v) when all the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or (vi)with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a) or a dissolution pursuant to Section 3.14 and upon completion of the winding-up of the Trust, the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Section 4.4 and Article IX shall survive the termination of the Trust. ARTICLE VIII TRANSFER OF INTERESTS SECTION VIII.1 TRANSFER OF SECURITIES. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article VIII, Capital Securities shall be freely transferable. (c) Subject to this Article VIII, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as other than a grantor trust; and (ii) the Trust would be an Investment Company or the transferee to be an Investment Company. SECTION VIII.2 TRANSFER OF CERTIFICATES. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION VIII.3 DEEMED SECURITY HOLDERS. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION VIII.4 BOOK ENTRY INTERESTS. The Capital Securities Certificates, on original issuance, in addition to being issued in the form of one or more definitive, fully registered Capital Securities Certificate (each a "Definitive Capital Securities Certificate") will be issued in the form of one or more, fully registered, global Capital Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificate(s) shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Capital Security Beneficial Owner will receive a definitive Capital Security Certificate representing such Capital Security Beneficial Owner's interests in such Global Certificate(s), except as provided in Section 8.7. Except for the Definitive Capital Security Certificates as specified herein and the definitive, fully registered Capital Securities Certificates that have been issued to the Capital Security Beneficial Owners pursuant to Section 8.7: (a) the provisions of this Section 8.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificate(s) and receiving approvals, votes or consents hereunder) as the Holder of the Capital Securities and the sole holder of the Global Certificate(s) and shall have no obligation to the Capital Security Beneficial Owners; (c) to the extent that the provisions of this Section 8.4 conflict with any other provisions of this Declaration, the provisions of this Section 8.4 shall control; and (d) the rights of the Capital Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Capital Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants to receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants; provided, that, solely for the purposes of determining whether the Holders of the requisite amount of Capital Securities have voted on any matter provided for in this Declaration, so long as Definitive Capital Security Certificates have not been issued, the Trustees may conclusively rely on, and shall be protected in relying on, any written instrument (including a proxy) delivered to the Trustees by the Clearing Agency setting forth the Capital Security Beneficial Owners' votes or assigning the right to vote on any matter to any other Persons either in whole or in part. SECTION VIII.5 NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Capital Security Holders is required under this Declaration, unless and until definitive fully registered Capital Security Certificates shall have been issued to the Capital Security Beneficial Owners pursuant to Section 8.7 or otherwise, the Regular Trustees shall give all such notices and communications specified herein to be given to the Capital Security Holders to the Clearing Agency, and shall have no notice obligations to the Capital Security Beneficial Owners. SECTION VIII.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Capital Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Capital Securities. SECTION VIII.7 DEFINITIVE CAPITAL SECURITY CERTIFICATES. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Capital Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 8.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Capital Securities, then: (c) definitive fully registered Capital Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Capital Securities; and (d) upon surrender of the Global Certificate(s) by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause definitive fully registered Capital Securities Certificates to be delivered to Capital Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The definitive fully registered Capital Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Capital Securities may be listed, or to conform to usage. SECTION VIII.8 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificate should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees and Institutional Trustee such security or indemnity as may be required by them to keep each of them and the Trust harmless, then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 8.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION IX.1 LIABILITY. (a) Except as expressly set forth in this Declaration, the Debentures, the Guarantee and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities, which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) Under Section 5.1 of the First Supplemental Indenture, the Debenture Issuer, in its capacity as Borrower, shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to 3803(a) of the Business Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION IX.2 EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION IX.3 FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Person or any Indemnified Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION IX.4 INDEMNIFICATION. (a) (i) Under Section 5.1 of the First Supplemental Indenture, the Debenture Issuer shall be required to indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) Under Section 5.1 of the First Supplemental Indenture, the Debenture Issuer shall be required to indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii)Any indemnification under paragraphs (i) and (ii) of this Section 10.4(a) (unless ordered by a court) shall be made by the Debenture Issuer only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holders of the Trust. (iv) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Debenture Issuer as authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holders of the Trust, that, based upon the facts known to the Regular Trustees, independent legal counsel or Common Security Holder at the time such determination is made, such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or Common Security Holders reasonably determine that such person deliberately breached such person's duty to the Trust or its Common or Capital Security Holders. (v) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of shareholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4(a) shall be deemed to be provided by a contract between the Debenture Issuer and each Company Indemnified Person who serves in such capacity at any time while this Section 9.4(a) is in effect. Any repeal or modification of this Section 9.4(a) shall not affect any rights or obligations then existing. (vi) The Debenture Issuer or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Debenture Issuer would have the power to indemnify him against such liability under the provisions of this Section 9.4(a). (vii) For purposes of this Section 9.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4(a) with respect to the resulting or surviving entity as such person would have with respect to such constituent entity if its separate existence had continued. (viii)The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the successors, heirs, executors and administrators of such a person. (b) Under Section 5.1 of the First Supplemental Indenture, the Debenture Issuer also shall be required to indemnify the (i) Institutional Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee or the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee or the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without gross negligence and, in the case of the Institutional Trustee, pursuant to Section 3.9, negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section 10.4(b) shall survive the satisfaction and discharge of this Declaration or the resignation or removal of the Institutional Trustee or the Delaware Trustee, as the case may be. SECTION IX.5 OUTSIDE BUSINESSES. Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE X ACCOUNTING SECTION X.1 FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION X.2 CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Trust shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Trust shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Trust shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (c) The Trust shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return, on a Form 1041 or such other form or statement as may be required under United States federal income tax law, and any other annual income tax returns required to be filed by the Trust on behalf of the Trust with any state or local taxing authority. A copy of such returns as filed will be delivered to the Institutional Trustee promptly after filing. SECTION X.3 BANKING. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Institutional Trustee Account and no other funds of the Trust shall be deposited in the Institutional Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Institutional Trustee shall designate the signatories for the Institutional Trustee Account. SECTION X.4 WITHHOLDING. The Trust shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Trust shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XI AMENDMENTS AND MEETINGS SECTION XI.1 AMENDMENTS. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees); and (i) if the amendment affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, also by the Institutional Trustee; and (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, also by the Delaware Trustee; (b) no amendment shall be made: (i) unless, in the case of any proposed amendment, the Institutional Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee shall have first received: (A)an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B)an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii)to the extent the result of such amendment would be to: (A)cause the Trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B)reduce or otherwise adversely affect the powers of the Institutional Trustee in contravention of the Trust Indenture Act; or (C)cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act; (c) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would materially and adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 8.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities; (e) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; (f) the rights of the Holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (g) notwithstanding Section 11.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii)add to the covenants, restrictions or obligations of the Sponsor; (iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders; (v) to modify, eliminate and add to any provision of the Declaration to such extent as may be necessary; and (vi) cause the Trust to continue to be classified for United States federal income tax purposes as a grantor trust. SECTION XI.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration, the terms of the Securities or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii)each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Capital Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION XII.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The Trustee that acts as initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee, that: (a) the Institutional Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing under the laws of the United States of America, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the Institutional Trustee satisfies the requirements set forth in Section 5.3(a); (c) the execution, delivery and performance by the Institutional Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. The Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (d) the execution, delivery and performance of the Declaration by the Institutional Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Institutional Trustee; and (e) no consent, approval or authorization of, or registration with or notice to, any State or Federal banking authority is required for the execution, delivery or performance by the Institutional Trustee, of the Declaration. SECTION XII.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee, that: (a) The Delaware Trustee is a Delaware corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, with power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the execution, delivery and performance by the Delaware Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee. The Declaration has been duly executed and delivered by the Delaware Trustee, and it constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) No consent, approval or authorization of, or registration with or notice to, any State or Federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of the Declaration; and (d) the execution, delivery and performance of the Declaration by the Delaware Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Delaware Trustee; and (e) The Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. ARTICLE XIII MISCELLANEOUS SECTION XIII.1 NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): Ingersoll-Rand Financing I c/o Ingersoll-Rand Company 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attn: Corporate Secretary (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders of the Securities): First Chicago Delaware Inc. 300 King Street Wilmington, DE 19801 Attention: Corporate Trust Services (c) if given to the Institutional Trustee, at its Corporate Trust Office to the attention of Corporate Trust Administration (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities): The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Ingersoll-Rand Company 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attn: Corporate Secretary (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION XIII.2 GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION XIII.3 INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION XIII.4 HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION XIII.5 SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION XIII.6 PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION XIII.7 COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. SECTION XIII.8 REMARKETING (a) The Debenture Issuer will request, not later than 15 nor more than 30 calendar days prior to the Remarketing Date that the Clearing Agency notify the Holders of Capital Securities and the Holders of Income PRIDES and Growth PRIDES of the Remarketing and of the procedures that must be followed if a Holder of Capital Securities wishes to exercise such Holder's rights with respect to the Put Option if there is a Failed Remarketing. (b) Not later than 5:00 P.M., New York City time, on the fifth Business Day immediately preceding the Purchase Contract Settlement Date, each Holder of the Capital Securities may elect to have Capital Securities held by such Holder remarketed. Under Section 5.4 of the Purchase Contract Agreement, Holders of Income PRIDES that do not give notice of intention to make a Cash Settlement of their related Purchase Contract shall be deemed to have consented to the disposition of the Capital Securities comprising a component of such Income PRIDES. Holders of Capital Securities that are not a component Income PRIDES shall give notice of their election to have such Capital Securities remarketed to the Custodial Agent pursuant to the Pledge Agreement. Any such notice shall be irrevocable after 5:00 p.m. New York City time on the fifth Business Day immediately preceding the Purchase Contract Settlement Date and may not be conditioned upon the level at which the Reset Rate is established. Promptly after 5:30 P.M., New York City time, on such fifth Business Day, the Institutional Trustee, based on the notices received by it prior to such time (including notices from the Purchase Contract Agent as to Purchase Contracts for which cash settlement has been elected), shall notify the Trust, the Sponsor and the Remarketing Agent of the number of Capital Securities to be tendered for purchase. (c) If any Holder of Income PRIDES, does not give a notice of its intention to make a Cash Settlement or gives a notice of election to tender Capital Securities, as described in Section 13.8(b), the Capital Securities of such Holder shall be deemed tendered, notwithstanding any failure by such Holder to deliver or properly deliver such Capital Securities to the Remarketing Agent for purchase. (d) The right of each Holder to have Capital Securities tendered for purchase shall be limited to the extent that (i) the Remarketing Agent conducts a remarketing pursuant to the terms of the Remarketing Agreement, (ii) Capital Securities tendered have not been called for redemption, (iii) the Remarketing Agent is able to find a purchaser or purchasers for tendered Capital Securities and (iv) such purchaser or purchasers deliver the purchase price therefor to the Remarketing Agent. (e) On the Remarketing Date, the Remarketing Agent shall use commercially reasonable efforts to remarket at a price equal to 100.5% of the aggregate liquidation amount thereof, Capital Securities tendered or deemed tendered for purchase. (f) If none of the Holders elect to have Capital Securities held by them remarketed, the Reset Rate shall be the rate determined by the Remarketing Agent, subject to the terms of the Remarketing Agreement, as the rate that would have been established had a remarketing been held on the Remarketing Date. (g) If the Remarketing Agent has determined that it will be able to remarket all Capital Securities, tendered or deemed tendered prior to 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing Agent shall determine the Reset Rate, which shall be the rate per annum (rounded to the nearest one-thousandth (0.001) of one percent per annum) which the Remarketing Agent determines, subject to the term of the Remarketing Agreement, to be the lowest rate per annum that will enable it to remarket all Capital Securities tendered or deemed tendered for remarketing. (h) If, by 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing Agent is unable to remarket all Capital Securities tendered or deemed tendered for purchase, a failed remarketing ("Failed Remarketing") shall be deemed to have occurred and the Remarketing Agent shall so advise by telephone the Collateral Agent, Debenture Issuer, Institutional Trustee, Delaware Trustee and Clearing Agency. (i) By approximately 4:30 P.M., New York City time, on the Remarketing Date, provided that there has not been a Failed Remarketing, the Remarketing Agent shall advise, by telephone (i) the Collateral Agent, Debenture Issuer, Institutional Trustee, Delaware Trustee and Clearing Agency of the Reset Rate determined in the Remarketing and the number of Capital Securities sold in the remarketing, (ii) each purchaser (or the Clearing Agency Participant thereof) of the Reset Rate and the number of Capital Securities such purchaser is to purchase and (iii) each purchaser to give instructions to its Clearing Agency Participant to pay the purchase price on the Purchase Contract Settlement Date in same day funds against delivery of the Capital Securities purchased through the facilities of the Clearing Agency. (j) In accordance with the Clearing Agency's normal procedures, on the Purchase Contract Settlement Date, the transactions described above with respect to each Capital Security tendered for purchase and sold in the remarketing shall be executed through the Clearing Agency, and the accounts of the respective Clearing Agency Participants shall be debited and credited and such Capital Securities delivered by book entry as necessary to effect purchases and sales of such Capital Securities. The Clearing Agency shall make payment in accordance with its normal procedures. (k) If any Holder selling Capital Securities in the remarketing fails to deliver such Capital Securities, the Clearing Agency Participant of such selling Holder and of any other person that was to have purchased Capital Securities in the remarketing may deliver to any such other person a number of Capital Securities that is less than the number of Capital Securities that otherwise was to be purchased by such person. In such event, the number of Capital Securities to be so delivered shall be determined by such Clearing Agency Participant, and delivery of such lesser number of Capital Securities shall constitute good delivery. (l) The Remarketing Agent is not obligated to purchase any Capital Securities that would otherwise remain unsold in a remarketing. Neither the Trust, any Trustee, the Sponsor nor the Remarketing Agent shall be obligated in any case to provide funds to make payment upon tender of Capital Securities for remarketing. (m) The tender and settlement procedures set forth in this Section 13.8, including provisions for payment by purchasers of Capital Securities in the remarketing, shall be subject to modification, notwithstanding any provision to the contrary set forth in Article 11, to the extent required by the Clearing Agency or if the book-entry system is no longer available for the Capital Securities at the time of the remarketing, to facilitate the tendering and remarketing of Capital Securities in certificated form. In addition, the Remarketing Agent may, notwithstanding any provision to the contrary set forth in Article 11, modify the settlement procedures set forth herein in order to facilitate the settlement process. IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. ___________________________________ __________ Ronald G. Heller, as Regular Trustee ___________________________________ __________ Patricia Nachtigal, as Regular Trustee ___________________________________ __________ Nancy Casablanca, as Regular Trustee FIRST CHICAGO DELAWARE INC., as Delaware Trustee By ________________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as Institutional Trustee By ________________________________ Name: Title: INGERSOLL-RAND COMPANY, as Sponsor By _______________________________ Name: Title: EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE [IF THE Capital Security IS TO BE A GLOBAL CERTIFICATE INSERT - This Capital Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Capital Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Capital Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number _________ Number of Capital Securities CUSIP NO. ___________ Certificate Evidencing Capital Securities of Ingersoll-Rand Financing I ____% Capital Securities (liquidation amount $25 per Capital Security) Ingersoll-Rand Financing I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that __________ (the "Holder") is the registered owner of__________ Capital Securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust designated as the 6.22% Capital Securities (liquidation amount $25 per capital security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 23, 1998, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this 23rd day of March, 1998. INGERSOLL-RAND FINANCING I By: ___________________________ Name: _________________________ Title: Regular Trustee [FORM OF REVERSE OF SECURITY] Distributions payable on each Capital Security will be fixed at a rate per annum of 6.22% until May 15, 2001, and at the Reset Rate thereafter (the "Coupon Rate") of the stated liquidation amount of $25 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year consisting of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears, on February 16, May 16, August 16 and November 16 of each year, commencing on May 16, 1998, to holders of record, if in book-entry only form, one Business Day prior to such payment date, which payment dates shall correspond to the interest payment dates on the Debentures. In the event that the Capital Securities are not in book-entry form, the Regular Trustees will have the right to select relevant record dates, which will be more than one Business Day but less than 60 Business Days prior to the relevant payment dates. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding beyond the date of maturity of the Debentures (each an "Extension Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter, compounded quarterly during any such Extension Period (to the extent permitted by applicable law). Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed beyond the maturity date of the Debenture. The Capital Securities shall be redeemable as provided in the Declaration. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Trust to repay $_____ stated liquidation amount of the within Capital Security, pursuant to its terms, on the "Put Option Exercise Date," together with distributions thereon accrued but unpaid to the date of repayment, to the undersigned at: (Please print or type Name and Address of the Undersigned) and to issue to the undersigned, pursuant to the terms of the Declaration, a new Capital Security or Capital Securities representing the remaining stated liquidation amount of this Capital Security. For this Option to Elect Repayment to be effective, the within Capital Security with this Option to Elect Repayment duly completed must be received by the Trust at the Corporate Trust Office of the Institutional Trustee at The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670- 0126, Attention: Corporate Trust Administration. Dated: Signature:_________________________ Signature Guarantee: ______________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of the within Capital Security in every particular without alternation or enlargement or any change whatsoever. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to: ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ (Insert assignee's social security or tax identification number) ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ____________________________________ Signature: __________________________ Signature Guarantee: ________________ (Sign exactly as your name appears on the other side of this Cap ital Security Certificate) EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE THE COMMON SECURITIES MAY ONLY BE TRANSFERRED BY THE DEBENTURE ISSUER AND ANY RELATED PARTY TO THE DEBENTURE ISSUER OR A RELATED PARTY OF THE DEBENTURE ISSUER; PROVIDED THAT, ANY SUCH TRANSFER IS SUBJECT TO THE CONDITION PRECEDENT THAT THE TRANSFEROR OBTAIN THE WRITTEN OPINION OF NATIONALLY RECOGNIZED INDEPENDENT COUNSEL EXPERIENCED IN SUCH MATTERS THAT SUCH TRANSFER WOULD NOT CAUSE: (I) THE TRUST TO BE CLASSIFIED FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AS OTHER THAN A GRANTOR TRUST; AND (II) THE TRUST TO BE AN INVESTMENT COMPANY OR THE TRANSFEREE TO BECOME AN INVESTMENT COMPANY. Certificate Number________________ Number of Common Securities Certificate Evidencing Common Securities of Ingersoll-Rand Financing I 6.22% Common Securities (liquidation amount $25 per Common Security) Ingersoll-Rand Financing I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Ingersoll-Rand Company (the "Holder") is the registered owner of 497,939 common securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust designated as the 6.22% Common Securities (liquidation amount $25 per common security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 23_, 1998, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Sponsor is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this 23rd day of March, 1998. INGERSOLL-RAND FINANCING I By: ________________________ Name: ______________________ Title: Regular Trustee [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum of 6.22% until ________, 2001, and at the Reset Rate thereafter (the "Coupon Rate") of the stated liquidation amount of $25 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears, on February 16, May 16, August 16 and November 16, of each year, commencing on May 16, 1998, to Holders of record one Business Day prior to such payment dates, which payment dates shall correspond to the interest payment dates on the Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding beyond the date of maturity of the Debentures (each an "Extension Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the rate of 6.22% until May 15, 2001, and at the Reset Rate thereafter, compounded quarterly during any such Extension Period. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period; provided, that such Extension Period together with all such previous and further extensions thereof may not exceed beyond the maturity date of the Debentures. The Common Securities shall be redeemable as provided in the Declaration. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Trust to repay $_____ stated liquidation amount of the within Common Security, pursuant to its terms, on the "Put Option Exercise Date," together with distributions thereon accrued and unpaid to the date of repayment, to the undersigned at: _________________________________________________ (Please print or type Name and Address of the Undersigned) and to issue to the undersigned, pursuant to the terms of the Declaration, a new Common Security or Common Securities representing the remaining stated liquidation amount of this Common Security. For this Option to Elect Repayment to be effective, the within Common Security with this Option to Elect Repayment duly completed must be received by the Trust at the Corporate Trust Office of the Institutional Trustee at The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670- 0126, Attention: Corporate Trust Administration. Dated:_______________ Signature: ________________________ Signature Guarantee: ________________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of the within Common Security in every particular without alternation or enlargement or any change whatsoever. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (Insert assignee's social security or tax identification number) ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ____________________________________ Signature: ________________________ Signature Guarantee: _______________ (Sign exactly as your name appears on the other side of this Com mon Security Certificate) EXHIBIT B SPECIMEN OF DEBENTURE EXHIBIT C UNDERWRITING AGREEMENT EX-4 8 ___________________________________________ GUARANTEE AGREEMENT INGERSOLL-RAND FINANCING I Dated as of March 23, 1998 ___________________________________________ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATIONS SECTION 1.1Definitions and Interpretation 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1Trust Indenture Act: Application 4 SECTION 2.2List of Holders of Securities 4 SECTION 2.3Reports by the Guarantee Trustee 4 SECTION 2.4Periodic Reports to Guarantee Trustee 4 SECTION 2.5Evidence of Compliance with Conditions Precedent 5 SECTION 2.6Events of Default; Waiver 5 SECTION 2.7Event of Default; Notice 5 SECTION 2.8Conflicting Interests 5 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1Powers and Duties of the Guarantee Trustee 5 SECTION 3.2Certain Rights of the Guarantee Trustee 7 SECTION 3.3Not Responsible for Recitals or Issuance of Guarantee 8 ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1Guarantee Trustee; Eligibility 8 SECTION 4.2Appointment, Removal and Resignation of Guarantee Trustees 9 ARTICLE V GUARANTEE SECTION 5.1Guarantee 9 SECTION 5.2Waiver of Notice and Demand 10 SECTION 5.3Obligations Not Affected 10 SECTION 5.4Rights of Holders 10 SECTION 5.5Guarantee of Payment 11 SECTION 5.6Subrogation 11 SECTION 5.7Independent Obligations 11 ARTICLE VI LIMITATION OF TRANSACTIONS; RANKING SECTION 6.1Limitation of Transactions 11 SECTION 6.2Ranking 12 ARTICLE VII TERMINATION SECTION 7.1Termination 12 ARTICLE VIII INDEMNIFICATION SECTION 8.1Exculpation 12 SECTION 8.2Indemnification 13 ARTICLE IX MISCELLANEOUS SECTION 9.1Successors and Assigns 13 SECTION 9.2Amendments 13 SECTION 9.3Notices 14 SECTION 9.4Benefit 14 SECTION 9.5Governing Law. 14 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Guarantee"), dated as of March 23, 1998, is executed and delivered by Ingersoll-Rand Company, a New Jersey corporation (the "Guarantor"), and "The First National Bank of Chicago", as trustee (the " Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Securities (as defined herein) of Ingersoll-Rand Financing I, a Delaware business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of March 23, 1998, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial ownership interests in the assets of the Issuer, the Issuer is issuing on the date hereof 16,100,000 Capital Securities, liquidation amount $25 per capital security, having an aggregate liquidation amount of $402,500,000 designated the 6.22% Capital Securities (the "Capital Securities") and 497,939 common securities, liquidation amount $25 per common security, having an aggregate liquidation amount $12,448,475, designated the 6.22% Common Securities (the "Common Securities" and, together with the FELINE PRIDES, the "Securities"); WHEREAS, as incentive for the Holders to purchase the Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, if an Event of Default (as defined in the Declaration), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under this Guarantee are subordinated to the rights of the holders of the Capital Securities to receive Guarantee Payments under this Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATIONS SECTION 1.1 Definitions and Interpretation In this Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee has the same meaning throughout; (c) all reference to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time; (d) all references in this Guarantee to Articles and Sections are to Articles and Sections of this Guarantee, unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Business Day" means any day other than Saturday, Sunday or any day on which banking institutions in the City of New York, New York are authorized or required by any applicable law to close. "Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670-0126, Attention: Corporate Services Division "Covered Person" means any Holder or beneficial owner of Securities. "Debentures" means the series of debt securities of the Guarantor designated the % Debentures due , 2003 held by the Institutional Trustee (as defined in the Declaration) of the Issuer. "Direction" by a person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case in the name of such Person by one or more Authorized Officers of that Person. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid distributions to the date of redemption (the "Redemption Price") with respect to Securities in respect of which the related Debentures have been redeemed by the Company upon the occurrence of a Tax Event Redemption, to the extent the Issuer has funds available therefor, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for the Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an event of default under the Indenture has occurred and is continuing, the rights of holders of the Common Securities to receive payments under this Guarantee Agreement are subordinated to the rights of holders of Capital Securities to receive Guarantee Payments under this Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Securities; provided, however, that, in determining whether the holders of the requisite percentage of Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee. "Indenture" means the Indenture dated as of March 23, 1998, among the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee, and any indenture supplemental thereto pursuant to which certain debt securities of the Debenture Issuer are to be issued to the Institutional Trustee of the Issuer. "Majority in liquidation amount of the Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Securities, voting separately as a class, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Guarantee Trustee" means The First National Bank of Chicago, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee. "Responsible Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust office of the Guarantee Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Tax Event Redemption" has the same meaning as defined in Annex I to the Declaration. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act: Application (a) This Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee and shall, to the extent applicable, be governed by such provisions; and (b) If and to the extent that any provision of this Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 List of Holders of Securities (a) The Guarantor shall provide the Guarantee Trustee with a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such date, (i) within 1 Business Day after January 1 and July 1 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Guarantee Trustee provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Guarantee Trustee Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Guarantee Trustee The Guarantor shall provide to the Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver The Holders of a Majority in liquidation amount of Securities may, by vote, on behalf of all Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Event of Default; Notice (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, actually known to a Responsible Officer of the Guarantee Trustee transmit by mail, first class postage prepaid, to the Holders, notices of all such Events of Default, unless such defaults have been cured or waived before the giving of such notice, provided, that, the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice thereof, or a Responsible Officer of the Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge thereof. SECTION 2.8 Conflicting Interests The Declaration and the Indenture shall be deemed to be specifically described in this Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee (a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee; and (iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee or indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of the Guarantee Trustee (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by a Direction or an Officers' Certificate. (iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or reregistration thereof). (v) The Guarantee Trustee may consult with competent legal counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction. (vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Guarantee Trustees, agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2 (a) (vi) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee. (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 750 million U.S. dollars ($750,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1 (a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee. (f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1 Guarantee The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders (a) The Holders of a Majority in liquidation amount of the Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee. (b) If the Guarantee Trustee fails to enforce this Guarantee, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. Notwithstanding the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may directly institute a proceeding against the Guarantor for enforcement of the Guarantee for such payment. The Guarantor waives any right or remedy to require that any action on this Guarantee be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment This Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation The Guarantor shall be subrogated to all rights, if any, of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; RANKING SECTION 6.1 Limitation of Transactions So long as any Securities remain outstanding, if there shall have occurred an Event of Default or an Event of Default under the Declaration and written notice of such Event of Default has been given to the Guarantor, then (a) the Guarantor shall not declare or pay any dividend on, make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of capital stock of the Guarantor in connection with the satisfaction by the Guarantor of its obligations under any employee or agent benefit plans or the satisfaction by the Guarantor of its obligations pursuant to any contract or security outstanding on the date of such event requiring the Guarantor to purchase capital stock of the Guarantor, (ii) as a result of a reclassification of the Guarantor's capital stock or the exchange or conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) dividends or distributions in capital stock of the Guarantor (or rights to acquire capital stock) or repurchases or redemptions of capital stock solely from the issuance or exchange of capital stock or (v) redemptions or purchases of any rights outstanding under a shareholder rights plan (or the declaration thereunder of a dividend of rights in the future), (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor that rank junior to the Debentures, and (c) the Guarantor shall not make any guarantee payments with respect to the foregoing (other than payments pursuant to the Guarantee). SECTION 6.2 Ranking This Guarantee will constitute a senior unsecured obligation of the Guarantor and, at all times when an Event of Default has occurred and is continuing under the Declaration, will rank: (i) pari passu with all of the Guarantor's senior unsecured obligations except those made subordinate hereto by their terms; and (ii) senior to the Guarantor's common stock. If an event of default under the Indenture has occurred and is continuing, the rights of the holders of the Common Securities will be subordinate and junior in right of payment and shall not be paid until the prior payment in full of, all amounts due and owing to the holders of the Capital Securities. ARTICLE VII TERMINATION SECTION 7.1 Termination This Guarantee shall terminate upon (i) full payment of the Repayment Price of all Securities, (ii) upon the distribution of the Debentures to all Holders or (iii) upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Securities or under this Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 8.2 Indemnification (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Guarantee, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, reasonable out-of-pocket expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). (c) The provisions set forth in this Section 8.2 shall survive the termination of the Guarantee or the resignation or removal of the Guarantee Trustee. ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Securities then outstanding. SECTION 9.2 Amendments Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all the outstanding Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders apply to the giving of such approval. SECTION 9.3 Notices All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Securities): The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: Corporate Trust Services Division (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders): Ingersoll-Rand Company 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attn: Corporate Secretary (c) If given to any Holder, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit This Guarantee is solely for the benefit of the Holders and, subject to Section 3.1(a), is not separately transferable from the Securities. SECTION 9.5 Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS GUARANTEE is executed as of the day and year first above written. INGERSOLL-RAND COMPANY, as Guarantor By:_____________________________ Name: Title: By: ____________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as Guarantee Trustee By: _____________________________ Name: Title: EX-10 9 EXHIBIT 10(iii)(c) TO: VICE PRESIDENT AND/OR GROUP PRESIDENT 1. Worldwide Operating Income If the Worldwide Operating Income (WWOI) of your operating Group exceeds the initial threshold of $________, which is ____% above the 1998 actual for your Group and is your PGP target for 1999, you will receive a bonus of ____% of your annual salary rate in effect on December 31, 1999. For each additional $________ of WWOI above that level, up to $________ (which is ____% above last year's actual) you will receive additional ____% of your annual salary rate. For each additional $_______ of WWOI above $__________, up to $_________, you will receive an additional ___% of your annual salary rate, resulting in a maximum bonus opportunity of ___% of your salary for operating income results. 2. Operating Productivity For improvement in operational proudctivity of ____%, you will receive an additional ___% of your annual salary rate. 3. Asset Management If you attain _____% of accounts receivable and inventory as a percent of sales, you will receive ___% of your salary rate. For each additional ___% reduction, you will receive an additional ____% of your annual salary rate, up to a maximum of ____% of your salary for improvements in accounts receivable and inventory as a percent of sales of ___%. This represents a ____% improvement over your 1999 PGP target of ____%. 4. Achievement of Individual Objectives You will receive an additional award of up to __% of your salary rate, based on the achievement of individual and unit objectives, such as process reengineering objectives, strategic sourcing initiatives and other assigned objectives specific to your business unit. Awards in this category are also dependent upon the company's overall performance. 5. Corporate Performance Your are elgible for an additional award based on Company performance measured by earnings per share (EPS). If the comapny achieves or exceeds an EPS level of $______, the total bonus percentage earned by you under the previous paragraphs (1 through 4) will be increased according to the following table: EPS Performance Bonus Increase Factor ____ 10% ____ 15% ____ 20% ____ 25% 6. Scorecard Adjustments Acquisitions, divestitures, changes in assignment, changes in accounting procedures or tax law, abnormal deviations to plan in other income and expenses in your financial income statements, and/or corrections in historical data during 1999 may necessitate pro rata adjustments in the above goals and/or actual operating results. Any such changes will be advised as soon as possible. 7. Calculation Authority The results will be tabulated by the Corporate Controller's Office and reflected on Operating Income and Accounts Receivable and Inventory Reports. It is the present intention of the Company to decide the amount of bonus for 1999 in February 2000. If the above objectives are not attained, any bonus award made will be at the sole discretion of the Company. The Company will be the final arbiter of interpretation of the above arrangements. J. E. Perrella Chairman, President and Chief Executive Officer EX-10 10 EXHIBIT 10(iii)(d) TO: EXECUTIVE VICE PRESIDENT 1. Worldwide Operating Income If the Worldwide Operating Income (WWOI) of your operating Segments exceeds the initial threshold of $_________, which is ____% above the 1998 actual for your Segments, you will receive a bonus of ____% of your annual salary rate in effect on December 31, 1999. For each additional $______ of WWOI above that level, up to $_______, (which is ___% above last year's actual) you will receive an additional ___% of your annual salary rate. For each additional $______ of WWOI above $_______, up to $________, you wil receive an additional ____% of your annual salary rate, resulting in a maximum bonus opportunity of ____% of your salary for operating income results. 2. Operational Productivity For improvement in operational productivity of ___%, you will receive an additional ____% of your annual salary rate. 3. Asset Management If you attain ____% of accounts receivable and inventory as a percent of sales, you will receive____% of your salary rate. For each additional ____% reduction, you will receive an additional ____% of your annual salary rate, up to a maximum of ___% of your salary for improvements in accounts receivable and inventory as a percent of sales of ___%. This represents a ____% improvement over our 1999 PGP target of ____% 4. Achievement of Individual Objectives You will receive an additional award of up to ___% of your annual salary rate, based on the achievement of individual and unit objectives, such as process reengineering objectives, strategic sourcing initiatives and other assigned objectives specific to your business unit. Awards in this category are also dependent upon the company's overall perforance. 5. Corporate Performance You are eligible for an additional award based on Company performance measured by earnings per share (EPS). If the company achieves or exceeds an EPS level of $_____, the total bonus percentage earned by you under the previous paragraphs (1 through 4) will be increased according to the following table: EPS Performance Bonus Increase Factor ____ 10% ____ 15% ____ 20% ____ 25% 6. Scorecard Adjustments Acquisitions, divestitures, changes in assignment, changes in accounting procedures or tax law, abnormal deviations to plan in other income and expenses in your financial income statements, and/or corrections in historical data during 1999 may necessitate pro rata adjustments in the above goals and/or actual operating results. Any such changes will be advised as soon as possible. 7. Calculation Authority The results will be tabulated by the Corporate Controller's Office and reflected on Operating Income and Accounts Receivable and Inventory Reports. It is the present intention of the Company to decide the amount of bonus for 1999 in February 2000. If the above objectives are not attained, any bonus award will be made at the sole discretion of the Company. The Company will be the final arbiter of interpretation of the above arrangements. J. E. Perrella Chairman, President and Chief Executive Officer EX-10 11 AMENDED AND RESTATED FORM OF CHANGE OF CONTROL WITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER This AMENDED AND RESTATED AGREEMENT is made as of March 1, 1999, between INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"), and ________________ (the "Employee"). Unless otherwise indicated, terms used herein and defined in Schedule A hereto shall have the meanings assigned to them in said Schedule. WHEREAS, the Company and the Employee have previously entered into an Agreement, dated as of January 1, 1996, and hereby wish to amend and restate in its entirety such Agreement; NOW, THEREFORE, the Company and the Employee agree as follows: 1. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution and shall continue thereafter from year to year prior to a Change of Control Event unless terminated as of any anniversary of the date hereof by either party upon written notice to the other party given at least 60 days, but not more than 90 days, prior to such anniversary date. Notwithstanding the foregoing, this Agreement may not be terminated after the occurrence of a Change of Control Event. 2. AGREEMENT TERM. The term of this Agreement shall begin on the date hereof and, unless terminated pursuant to paragraph 1 prior to a Change of Control Event, shall end on the fifth anniversary of the occurrence of a Change of Control Event. 3. EMPLOYEE'S POSITION AND RESPONSIBILITIES. (a) The Employee will continue to serve the Company upon the occurrence of a Change of Control Event as the Chief Executive Officer of the Company. In addition, the Company shall, upon the occurrence of such event, make its best efforts to insure the election and retention of the Employee as Chairman of the Board of the Company and any successor or parent company. (b) During the term of this Agreement the Employee shall devote his entire business time and attention exclusively to the business and affairs of the Company and shall use his best efforts to promote the interests of the Company. The partici- pation of the Employee in outside directorships and civic activities not otherwise inconsistent with Company policy and the management of the Employee's personal investments in public companies in which the Employee holdings do not exceed 5% of the voting power or value of such companies shall not be deemed a violation of this paragraph 3. 4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF CONTROL EVENT. The Company and the Employee agree that, upon the occurrence of any Change of Control Event, the Employee shall receive basic annual salary, bonus and fringe and other benefits as follows: (a) Basic Annual Salary and Bonus. The Employee's basic annual salary shall be at a rate not less than the rate of annual salary, which has been paid to the Employee immediately prior to the Change of Control Event, with such annual increases (but not decreases) equal to the greater of (i) salary increases as may be contemplated by any salary adjustment programs of the Company in effect immediately prior to the Change of Control Event and applicable to the Employee and such further increases as shall be determined from time to time by the Board or (ii) a percentage equal to the percentage increase (if any) in the "Consumer Price Index for All Urban Consumers" published by the United States Department of Labor's Bureau of Labor Statistics for the then most recently ended 12-month period. In addition, the Employee shall be entitled to receive an annual bonus in an amount not less than the highest annual bonus received by, or accrued on behalf of, the Employee during the lesser of (i) the five full Fiscal Years immediately preceding the Change of Control Event, or (ii) the number of full Fiscal Years immediately preceding the Change of Control Event during which the Employee has been employed by the Company (whether such bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the Ingersoll-Rand Executive Deferred Compensation and Stock Bonus Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (b) Fringe Benefits; Business Expenses. The Employee shall be entitled to receive benefits, including but not limited to pension (and supplemental pension), savings and stock investment plan (and supplemental savings and stock investment and retirement account plans), leveraged employee stock ownership plan, stock award, stock option, deferred compensation, and welfare benefit plans and programs including, but not limited to, life, medical, prescription drugs, dental, disability, accidental death and travel accident coverage plans, post-retirement welfare benefits, and an estate enhancement program on terms no less favorable than those in effect under each such plan immediately prior to the Change of Control Event, and at no less than the same benefit levels (and no more than the same employee contribution levels) then in effect under each such plan and to receive all other fringe benefits and perquisites (or their equivalent) from time to time in effect for the benefit of any executive, management or administrative group for which the employment position then held by the Employee entitles the Employee to participate. The Company shall provide for the payment of, or reimburse the Employee for, all travel and other out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder. (c) Management Incentive Unit Award Plan. The Company and the Employee further agree that immediately upon the occurrence of any Change of Control Event, all amounts theretofore credited to the Employee under the Company's Management Incentive Unit Award Plan, as amended (the "MIU Plan"), shall become fully vested and all such amounts thereafter credited shall become fully vested immediately upon such crediting. 5. PAYMENTS AND BENEFITS UPON TERMINATION. The Employee shall be entitled to the following payments and benefits upon Termination: (a) Salary and Bonus. The Company shall pay to the Employee, in a cash lump sum on the Termination Date, an amount equal to the sum of (i) the basic annual salary and any annual bonus in respect of a completed fiscal year, which have not yet been paid to, the Employee through the Termination Date; (ii) an amount equal to the last annual bonus received by, or awarded to, the Employee for the full Fiscal Year immediately preceding the Termination Date multiplied by a fraction the numerator of which shall be the number of full months the Employee was employed by the Company during the Fiscal Year containing the Employee's Termination Date and the denominator of which shall be 12; and (iii) an amount equal to the number of unused vacation days to which the Employee is entitled as of the Termination Date and any other amounts normally paid to an employee by the Company upon termination of employment. For these purposes, any partial month during which the Employee is employed shall be deemed a full month. (b) Severance. The Company shall pay to the Employee, in a cash lump sum not more than 30 days following the Termination Date, an amount equal to three times the sum of (i) the highest basic annual salary in effect at any time during the period beginning immediately prior to the Change of Control Event and ending on the Termination Date; and (ii) the highest annual bonus received by, or accrued on behalf of, the Employee during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date (whether such bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the Ingersoll- Rand Executive Deferred Compensation and Stock Bonus Plans) or is foregone by the Employee pursuant to the Ingersoll- Rand Company Estate Enhancement Program). (c) Employee Benefit Plans. For the three-year period following the Termination Date (or, if sooner, until the Employee is covered under a comparable plan offered by a subsequent employer), the Company shall continue to cover the Employee under those employee welfare benefit plans and programs (including, but not limited to, life, medical, prescription drugs, dental, accidental death and travel accident and disability coverage, but not including any severance pay plan or program other than that provided pursuant to this Agreement or any pension plan) applicable to the Employee on the Termination Date at the same benefit levels then in effect (or shall provide their equivalent); provided, however, that if the Employee becomes employed by a new employer that maintains any welfare plan that either (i) does not cover the Employee with respect to a pre- existing condition which was covered under the applicable Company welfare plan, or (ii) does not cover the Employee for a designated waiting period, the Employee's coverage hereunder under the applicable Company welfare plan (or the equivalent) shall continue (but shall be limited in the event of noncoverage due to a preexisting condition, to the preexisting condition itself) until the earlier of the end of the applicable period of noncoverage under the new employer's plan or the third anniversary of the Termination Date. (d) Deferred Compensation,Savings and Leveraged Employee Stock Ownership Plans. As soon as practicable following the determination thereof (but in any event no later than 30 days following the Termination Date), the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the value of the sum of: (i) the number of stock units credited to the Employee's Deferred Compensation Accounts under the Ingersoll-Rand Executive Deferred Compensation and Stock Bonus Plan at the Termination Date multiplied by the Company Stock Value (as defined in Section 5(g) below; (ii) the number of Common Stock equivalents credited to the Employee's account under the Supplemental Savings and Stock Investment Plan at the Termination Date multiplied by the Company Stock Value (as defined in Section 5(g) below); (iii) the amount credited to the Employee's account under the Supplemental Retirement Account Plan at the Termination Date; (iv) all contributions to, or amounts credited to, the Company's Savings and Stock Investment Plan, IR/Clark Leveraged Employee Stock Ownership Plan, Supplemental Savings and Stock Investment Plan and Supplemental Retirement Account Plan (and earnings and appreciation attributable thereto) that theretofore were made by the Company on behalf of the Employee and are forfeited as a result of the Employee's Termination; and (v) three percent of the aggregate amount payable pursuant to subparagraphs 5(a) and 5(b) for each of the Savings and Stock Investment Plan and the Supplemental Savings and Stock Investment Plan and two percent for the Supplemental Retirement Account Plan. (e) Pension Benefits. (i) No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the Present Value of the sum of the pension benefits the Employee is entitled to receive under (A) the Restated Ingersoll-Rand Company Supplemental Pension Plan (the "Section 415 Excess Plan"), (B) the Ingersoll-Rand Company Elected Officers Supplemental Program (the "Elected Officer Supplemental Program" or the "Program"), and (C) the Executive Supplementary Retirement Agreement (the "Ten Year Annuity"), all as in effect immediately prior to the Change of Control Event (collectively the "Pension Benefit"). (ii) In calculating the portion of the Pension Benefit under section 1.1 of the Section 415 Excess Plan the Company shall credit the Employee with five additional years of Credited Service (within the meaning of the Plan and including wage, vesting and age credit) and five additional years of age for purposes of the Section 415 Excess Plan but not the Qualified Pension Plan. (If, after crediting five years of age, the Employee is less than fifty- five years old, it will be assumed that the benefit commencement age is fifty-five). (iii) In calculating the portion of the Pension Benefit under the Elected Officer Supplemental Program, the Company shall: (A) credit the Employee with an additional five Years of Service and an additional five years of age for purposes of computing the amount of the Pension Benefit; and (B) define "Final Average Salary" in Section 1.8 of the Program as 1/3 of the severance amount determined pursuant to Section 5(b) of this Agreement. (iv) In calculating the portion of the Pension Benefit under the Ten-Year Annuity the Company shall credit the Employee with five additional years of age but to an age no greater than 65. (v) The Present Value of the Pension Benefit shall be calculated using (A) an interest rate equal to the product of (I) the 10-year Treasury Note rate as used in the Elected Officer Supplemental Program's definition of Actuarial Equivalent and (II) 1 minus the federal income tax rate at the highest bracket of income for individuals in effect for the year containing the date of payment, (B) the mortality rate used to determine lump sum values in the Elected Officer Supplemental Program, and (C) actual age without the five year addition to age except that the Ten- Year Annuity Present Value shall be calculated using no mortality assumption and actual age plus the additional five years but to an age no greater than 65. (vi) Calculation of all pension benefits amounts hereunder shall be made, at the expense of the Company, by the Wellesley Hills, Massachusetts office of Watson Wyatt (or the Company's then actuary immediately prior to the Change of Control Event). (f) Retiree Welfare Benefits. For purposes of determining the Employee's eligibility for post-retirement benefits under any welfare benefit plan (as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) maintained by the Company prior to the occurrence of a Change of Control Event, the Employee shall be credited with an additional five years of service and five years of age (or any combination of years of service and age not exceeding 10 years, to the extent necessary to qualify for benefits). If, after taking into account such additional age and service, the Employee is eligible for the Company's post-retirement welfare benefits (or would have been eligible under the terms of such plans as in effect prior to the occurrence of the Change of Control Event), the Employee shall receive, commencing on the third anniversary of the Termination Date, post-retirement welfare benefits no less favorable than the benefits the Employee would have received under the terms and conditions of the applicable plans in effect immediately prior to the occurrence of the Change of Control Event. (g) Employee Stock Awards, Options, SARs and MIUs. No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the aggregate Company Stock Value (defined below) of 100% of the Employee's then outstanding and unpaid stock and stock based awards under the Company's Incentive Stock Plans, the MIU Plan and any similar plans of the Company (or any other company) hereafter adopted (at which time such stock and stock based awards shall be cancelled and be of no further force or effect). In addition, all options to purchase shares of Common Stock of the Company (or the stock of any company in respect of which options have been granted to the Employee) ("Company Stock") and all stock appreciation rights held by the Employee immediately prior to Termination shall become exercisable at any time on and after the Termination Date, whether or not otherwise exercisable in accordance with the terms of the employee benefit plans pursuant to which such options and stock appreciation rights were granted. For purposes of this Agreement, Company Stock Value shall be deemed to be the highest of: (i) the closing sale price of the Company Stock on the New York Stock Exchange on the Change of Control Event; (ii) the closing sale price of the Company Stock on the New York Stock Exchange on the Termination Date; and (iii) the highest closing sale price of the Company Stock on the New York Stock Exchange during the 30 trading days immediately preceding the acquisition of more than 50% of the outstanding Company Stock by any person or group (including affiliates of such person or group). If, as of any valuation date, the Company Stock is not traded on the New York Stock Exchange, the Company Stock Value shall be the closing sale price of the Company Stock on the principal national securities exchange on which the Common Stock is traded or, if the Common Stock is not traded on any national securities exchange, the closing bid price of the Common Stock in the over-the-counter market. (h) Valuation of MIU Plan Common Stock Equivalents. The Employee's Common Stock Equivalents under the MIU Plan shall, for purposes of payments pursuant thereto, be valued at the Company Stock Value. (i) Estate Enhancement Program. If the Employee participates in the Ingersoll-Rand Estate Enhancement Program, the terms of the Program shall apply. (j) Outplacement Expenses. For the three year period following the Termination Date, the Company shall reimburse the Employee for all reasonable expenses (up to a maximum of $15,000 per 12 month period) incurred by the Employee for professional outplacement services by qualified consultants selected by the Employee. 6. PARACHUTE EXCISE TAX GROSS-UP. (a) If, as a result of any payment or benefit provided under this Agreement, either alone or together with other payments and benefits which the Employee receives or is then entitled to receive from the Company, the Employee becomes subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (together with any income, employment or other taxes, interest and penalties thereon an "Excise Tax"), the Company shall pay the Employee an amount (the "Gross-Up Payment") sufficient to place the Employee in the same after- tax financial position that he would have been in if he had not incurred any tax liability under Section 4999 of the Code. For purposes of determining whether the Employee is subject to an Excise Tax, (i) any payments or benefits received by the Employee (whether pursuant to the terms hereof or pursuant to any plan, arrangement or other agreement with the Company or any entity affiliated with the Company) which payments ("Contingent Payments") are deemed to be contingent on a change described in Section 280G(b)(2)(A)(i) of the Code shall be taken into account, (ii) the amount of payments or benefits under this Agreement treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of all such payments and benefits hereunder as are Contingent Payments and (B) the amount of excess parachute payments within the meaning of 280G(b)(1) of the Code payable to the Employee, and (iii) the Employee shall be deemed to pay the taxes at the highest marginal applicable rates of such taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum deduction in federal income taxes which could be obtained from deduction of such state and local taxes. (b) The determination of whether the Employee is subject to Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as other calculations hereunder, shall be made at the expense of the Company by the independent auditors of the Company immediately prior to the Change of Control Event, which shall provide the Employee with prompt written notice (the "Company Notice") setting forth their determinations and calculations. Within 30 days following the receipt by the Employee of the Company Notice, the Employee may notify the Company in writing (the "Employee Notice") if the Employee disagrees with such determinations or calculations, setting forth the reasons for any such disagreement. If the Company and the Employee do not resolve such disagreement within 10 business days following receipt by the Company of the Employee Notice, the Company and the Employee shall agree upon a nationally recognized accounting or compensation firm (the "Resolving Firm") to make a determination with respect to such disagreement. If the Employee and the Company are unable to agree upon the Resolving Firm within 20 business days following the Employee Notice, the New York office of Towers, Perrin shall be the Resolving Firm. Within 30 business days following the Employee Notice, if the disagreement is not resolved by such time, each of the Employee and the Company shall submit its position to the Resolving Firm, which shall make a determination as to all such disagreements within 30 days following the last of such submissions, which determination shall be binding upon the Employee and the Company. The Company shall pay all reasonable expenses incurred by either party in connection with the determinations, calculations, disagreements or resolutions pursuant to this paragraph, including, but not limited to, reasonable legal, consulting or other similar fees. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30 day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Employee; (iii)cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or other tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Employee is required to extend the statute of limitations to enable the Company to contest such claim, the Employee may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Employee's consent if such position or resolution could reasonably be expected to adversely affect the Employee (including any other tax position of the Employee unrelated to the matters covered hereby). (e) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company or the Resolving Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies and the Employee thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax, the Company or the Resolving Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall promptly be paid by the Company to or for the benefit of the Employee. (f) If, after the receipt by Employee of an amount advanced by the Company in connection with the contest of Excise Tax claim, the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, by the amount of the Gross-Up Payment. 7. EFFECT ON OTHER ARRANGEMENTS. Except to the extent expressly provided herein, no provision of this Agreement shall affect or limit any interests or rights vested in the Employee under any other agreement or arrangement with the Employee or under any pension, profit- sharing, medical or other insurance or other benefit plans of the Company which may be in effect and in which the Employee may be participating at any time. 8. CONFIDENTIALITY. The Employee agrees to hold in confidence any and all confidential information known to him concerning the Company and its businesses so long as such information is not otherwise publicly disclosed. 9. MISCELLANEOUS. (a) Legal Expenses. The Company shall pay all costs and expenses, including attorneys' fees, of the Company and, at least quarterly, the Employee, in connection with any legal proceedings, whether or not instituted by the Company, relating to the interpretation or enforcement of this Agreement. In the event that the provisions of this paragraph shall be determined to be invalid or unenforceable in any respect, such declaration shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. (b) Mitigation. All payments or benefits required by the terms of this Agreement shall be made or provided without offset, deduction, or mitigation on account of income the Employee may receive from other employment or otherwise and the Employee shall not have any obligation or duty to seek any other employment or otherwise earn any amounts to reduce or mitigate any payments required hereunder. (c) Death of the Employee. In the event of the Employee's death subsequent to Termination, all payments called for hereunder shall be paid to the Employee's designated beneficiary or beneficiaries, or to his estate if he has not designated a beneficiary or beneficiaries. (d) Notices. Any notice or other communication provided for in this Agreement or contemplated hereby shall be sufficiently given if given in writing and delivered by certified mail, return receipt requested, and addressed, in the case of the Company, to the Company at: 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attention: Chairman of the Board of Directors and, in the case of the Employee, to the Employee at: _______________________ _______________________ Either party may designate a different address by giving notice of change of address in the manner provided above. (e) Waiver. No waiver or modification in whole or in part of this Agreement, or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or any right or power by any party on one occasion shall not be construed as a waiver of, or a bar to, the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. (f) Binding Effect; Successors. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Employee and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph shall continue to apply to each subsequent employer of the Employee hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. (g) Plan Limitations. In the event the Company is unable to provide any benefit required to be provided under this Agreement through a plan sponsored by the Company or its Affiliates, the Company shall, at its own cost and expense, take appropriate actions to insure that alternative arrangements are made so that equivalent benefits can be provided to the Employee, including to the extent appropriate purchasing for the benefit of the Employee (and if applicable the Employee's dependents) individual policies of insurance providing benefits, which on an after-tax basis, are equivalent to the benefits required to be provided hereunder. (h) Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed therein. 10. EFFECT ON PRIOR AGREEMENTS. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior employment or severance agreement or understanding between the Company (or any affiliate thereof) and the Employee. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. INGERSOLL-RAND COMPANY By _______________________ Employee Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate", used to indicate a relationship with a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such a specified person. "Associate", used to indicate a relationship with a specified person, means (i) any corporation, partnership, or other organization of which such specified person is an officer or partner; (ii) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person, or who is a director or officer of the Company or any of its parents or subsidiaries; and (iv) any person who is a director, officer, or partner of such specified person or of any corporation (other than the Company or any wholly-owned subsidiary of the Company), partnership or other entity which is an Affiliate of such specified person. "Beneficial Owner" means the same as such term is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor provision at the time in effect); provided, however, that any individual, corporation, partnership, group, association, or other person or entity which has the right to acquire any of the Company's outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement, or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such securities. "Board" means the Board of Directors of the Company (or, if the Company is then a subsidiary of any other company, of the ultimate parent company). "Cause" means (i) any action by the Employee involving willful malfeasance or willful gross misconduct having a demonstrable adverse effect on the Company; (ii) substantial and continuing refusal by the Employee in willful breach of this Agreement to perform his employment duties hereunder; or (iii) the Employee being convicted of a felony under the laws of the United States or any state. Termination of the Employee for Cause shall be communicated by a Notice of Termination given within one year after the Board (i) has knowledge of conduct or an event allegedly constituting Cause; and (ii) has reason to believe that such conduct or event could be grounds for Cause. For purposes of this Agreement a "Notice of Termination" shall mean delivery to the Employee of a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board at a meeting of that Board called and held for the purpose (after reasonable notice to the Employee ("Preliminary Notice") and reasonable opportunity for the Employee, together with the Employee's counsel, to be heard before the Board prior to such vote) of finding, in the good faith opinion of the Board, that the Employee has engaged in the conduct constituting Cause and specifying the particulars thereof in detail. Upon the receipt of the Preliminary Notice, the Employee shall have 30 days in which to appear with counsel or take such other action as he desires on his behalf, and such 30- day period is hereby agreed to by the parties as a reasonable opportunity for the Employee to be heard. The Board shall no later than 45 days after the receipt of the Preliminary Notice by the Employee communicate its findings to Employee. A failure by the Board to make its finding of Cause or to communicate its conclusion within such 45-day period shall be deemed to be a finding that the Employee has not engaged in the conduct described herein. Any termination of the Employee's employment (other than by death or Permanent Disability) within 45 days after the date that the Preliminary Notice has been given to the Employee shall be deemed to be a termination for Cause; provided, however, that if during such period the Employee voluntarily terminates other than for Good Reason or the Company terminates the Employee other than for Cause, and the Employee is found (or is deemed to be found) not to have engaged in the conduct described herein, such termination shall not be deemed to be for Cause. "Change of Control Event" means the date (i) any individual, corporation, partnership, group, association or other person or entity, together with its Affiliates and Associates (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company), is or becomes the Beneficial Owner of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; (ii) the Continuing Directors fail to constitute a majority of the members of the Board; (iii) of consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power of the voting securities of the Company or such surviving entity or its parent corporation outstanding immediately after such merger or consolidation; or (iv) of any sale, lease, exchange or other transfer, in one transaction or a series of related transactions, of all, or substantially all, of the assets of the Company, other than any sale, lease, exchange or other transfer to any person or entity where the Company owns, directly or indirectly, at least 80% of the outstanding voting securities of such person or entity or its parent corporation after any such transfer. "Continuing Director" means a director who either was a member of the Board on the date hereof or who became a member of the Board subsequent to such date and whose election, or nomination for election by the Company's shareholders, was Duly Approved by the Continuing Directors on the Board at the time of such nomination or election, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Board in which such person is named as nominee for director, without due objection to such nomination, but ex- cluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board. "Duly Approved by the Continuing Directors" means an action approved by the vote of at least two-thirds of the Continuing Directors then on the Board. "Fiscal Year" means the fiscal year of the Company. "Good Reason" means (i) a material adverse change in the Employee's job responsibilities, title or status from those in effect prior to the Change of Control Event which change continues for a period of at least 15 days after written notice from the Employee; (ii) a reduction of the Employee's base salary or target bonus, the failure to pay Employee's salary or bonus when due, or the failure to maintain on behalf of the Employee (and his or her dependents) benefits which are at least as favorable in the aggregate to those provided for in paragraph 4(b); (iii) the relocation of the principal place of the Employee's employment to a location that is more than 35 miles further from the Employee's residence than such principal place of employment immediately prior to the Change of Control Event, or the imposition of travel requirements on the Employee not substantially consistent with such travel requirements existing immediately prior to the Change of Control Event; (iv) the failure of the Company to obtain the assumption of, and the agreement to perform, this Agreement by any successor as contemplated in paragraph 8(f); (v) any voluntary resignation of employment by Employee following a Change of Control Event or (vi) the failure of the Company to perform any of its other material obligations under this Agreement and the continuation of such failure for a period of 15 days after written notice from the Employee. "Permanent Disability", as applied to the Employee, means that (i) he has been totally incapacitated by bodily injury or disease so as to be prevented thereby from performing his duties hereunder; (ii) such total incapacity shall have continued for a period of six consecutive months; and (iii) such total incapacity will, in the opinion of a qualified physician, be permanent and continuous during the remainder of the Employee's life. "Termination" means (i) following the occurrence of a Change of Control Event, (A) the termination of the Employee's employment without Cause or (B) the resignation by an Employee for Good Reason upon ten days' prior written notice (or such shorter period as may be agreed upon between the Employee and the Company), and (ii) prior to the occurrence of a Change of Control Event, the termination of the Employee's employment or a material adverse change in the Employee's job responsibilities, title or status, at the request of any individual or entity acquiring ownership and control of the Company; provided, that such term shall not include any termination of employment for Cause, any resignation without Good Reason, or any termination of employment on account of an Employee's death or Permanent Disability. "Termination Date" shall mean the effective date of an Employee's Termination; provided, that with respect to a Termination that occurs prior to a Change of Control Event, the effective date of such Termination shall be deemed to be the date immediately following the Change of Control Event. EX-10 12 AMENDED AND RESTATED FORM OF CHANGE OF CONTROL AGREEMENT WITH SELECTED EXECUTIVE OFFICERS This AMENDED AND RESTATED AGREEMENT is made as of March 1, 1999, between INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"), and , the "Employee"). Unless otherwise indicated, terms used herein and defined in Schedule A hereto shall have the meanings assigned to them in said Schedule. WHEREAS, the Company and the Employee have previously entered into an Agreement, dated December 3, 1997, and hereby wish to amend and restate in its entirety such Agreement; NOW, THEREFORE, the Company and the Employee agree as follows: 1. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution and shall continue thereafter from year to year prior to a Change of Control Event unless terminated as of any anniversary of the date hereof by either party upon written notice to the other party given at least 60 days, but not more than 90 days, prior to such anniversary date. Notwithstanding the foregoing, this Agreement may not be terminated after the occurrence of a Change of Control Event. 2. AGREEMENT TERM. The term of this Agreement shall begin on the date hereof and, unless terminated pursuant to paragraph 1 prior to a Change of Control Event, shall end on the fifth anniversary of the occurrence of a Change of Control Event. 3. EMPLOYEE'S POSITION AND RESPONSIBILITIES. (a) The Employee will continue to serve the Company upon the occurrence of a Change of Control Event in the same capacity as he serves the Company immediately prior thereto, or in such other comparable executive, administrative or management capacities, requiring substantially equivalent expertise and responsibility, as the Board or Chief Executive Officer of the Company shall determine and deem suitable and in the best interests of the Company in accordance with the Employee's experience, expertise and capabilities. (b) During the term of this Agreement the Employee shall devote his entire business time and attention exclusively to the business and affairs of the Company and shall use his best efforts to promote the interests of the Company. The partici- pation of the Employee in outside directorships and civic activities not otherwise inconsistent with Company policy and the management of the Employee's personal investments in public companies in which the Employee holdings do not exceed 5% of the voting power or value of such companies shall not be deemed a violation of this paragraph 3. 4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF CONTROL EVENT. The Company and the Employee agree that, upon the occurrence of any Change of Control Event, the Employee shall receive basic annual salary, bonus and fringe and other benefits as follows: (a) Basic Annual Salary and Bonus. The Employee's basic annual salary shall be at a rate not less than the rate of annual salary, which has been paid to the Employee immediately prior to the Change of Control Event, with such annual increases (but not decreases) equal to the greater of (i) salary increases as may be contemplated by any salary adjustment programs of the Company in effect immediately prior to the Change of Control Event and applicable to the Employee and such further increases as shall be determined from time to time by the Board or (ii) a percentage equal to the percentage increase (if any) in the "Consumer Price Index for All Urban Consumers" published by the United States Department of Labor's Bureau of Labor Statistics for the then most recently ended 12-month period. In addition, the Employee shall be entitled to receive an annual bonus in an amount not less than the highest annual bonus received by, or accrued on behalf of, the Employee during the lesser of (i) the five full Fiscal Years immediately preceding the Change of Control Event, or (ii) the number of full Fiscal Years immediately preceding the Change of Control Event during which the Employee has been employed by the Company (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the Ingersoll- Rand Executive Deferred Compensation and Stock Bonus Plan) or is foregone by the Employee pursuant to the Ingersoll- Rand Company Estate Enhancement Program). (b) Fringe Benefits; Business Expenses. The Employee shall be entitled to receive benefits, including but not limited to pension (and supplemental pension), savings and stock investment plan (and supplemental savings and stock investment and retirement plans), leveraged employee stock ownership plan, stock award, stock option, deferred compensation, and welfare benefit plans and programs including, but not limited to, life, medical, prescription drugs, dental, disability, accidental death and travel accident coverage plans, post-retirement welfare benefits, and an estate enhancement program on terms no less favorable than those in effect under each such plan immediately prior to the Change of Control Event, and at no less than the same benefit levels (and no more than the same employee contribution levels) then in effect under each such plan and to receive all other fringe benefits and perquisites (or their equivalent) from time to time in effect for the benefit of any executive, management or administrative group for which the employment position then held by the Employee entitles the Employee to participate. The Company shall provide for the payment of, or reimburse the Employee for, all travel and other out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder. (c) Management Incentive Unit Award Plan. The Company and the Employee further agree that immediately upon the occurrence of any Change of Control Event, all amounts theretofore credited to the Employee under the Company's Management Incentive Unit Award Plan, as amended (the "MIU Plan"), shall become fully vested and all such amounts thereafter credited shall become fully vested immediately upon such crediting. 5. PAYMENTS AND BENEFITS UPON TERMINATION. The Employee shall be entitled to the following payments and benefits upon Termination: (a) Salary and Bonus. The Company shall pay to the Employee, in a cash lump sum on the Termination Date, an amount equal to the sum of (i) the basic annual salary and any annual bonus in respect of a completed fiscal year, which have not yet been paid to the Employee through the Termination Date; (ii) an amount equal to the last annual bonus received by, or awarded to, the Employee for the full Fiscal Year immediately preceding the Termination Date multiplied by a fraction the numerator of which shall be the number of full months the Employee was employed by the Company during the Fiscal Year containing the Employee's Termination Date and the denominator of which shall be 12; and (iii) an amount equal to the number of unused vacation days to which the Employee is entitled as of the Termination Date and any other amounts normally paid to an employee by the Company upon termination of employment. For these purposes, any partial month during which the Employee is employed shall be deemed a full month. (b) Severance. The Company shall pay to the Employee, in a cash lump sum not more than 30 days following the Termination Date, an amount equal to three times the sum of (i) the highest basic annual salary in effect at any time during the period beginning immediately prior to the Change of Control Event and ending on the Termination Date; and (ii) the highest annual bonus received by, or accrued on behalf of, the Employee during the period beginning five full Fiscal Years immediately preceding the Change of Control Event and ending on the Termination Date (whether the bonus is paid to, is accrued on behalf of, is a Deferral Amount (as such term is defined in the Ingersoll-Rand Executive Deferred Compensation and Stock Bonus Plan) or is foregone by the Employee pursuant to the Ingersoll-Rand Company Estate Enhancement Program). (c) Employee Benefit Plans. For the three-year period following the Termination Date (or, if sooner, until the Employee is covered under a comparable plan offered by a subsequent employer), the Company shall continue to cover the Employee under those employee welfare benefit plans and programs (including, but not limited to, life, medical, prescription drugs, dental, accidental death and travel accident and disability coverage, but not including any severance pay plan or program other than that provided pursuant to this Agreement or any pension plan) applicable to the Employee on the Termination Date at the same benefit levels then in effect (or shall provide their equivalent); provided, however, that if the Employee becomes employed by a new employer that maintains any welfare plan that either (i) does not cover the Employee with respect to a pre- existing condition which was covered under the applicable Company welfare plan, or (ii) does not cover the Employee for a designated waiting period, the Employee's coverage hereunder under the applicable Company welfare plan (or the equivalent) shall continue (but shall be limited in the event of noncoverage due to a preexisting condition, to the preexisting condition itself) until the earlier of the end of the applicable period of noncoverage under the new employer's plan or the third anniversary of the Termination Date. (d) Deferred Compensation, Savings and Leveraged Employee Stock Ownership Plans. As soon as practicable following the determination thereof (but in any event no later than 30 days following the Termination Date), the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the value of the sum of: (i) the number of stock units credited to the Employee's Deferred Compensation Accounts under the Executive Deferred Compensation and Stock Bonus Plan at the Termination Date multiplied by the Company Stock Value (as defined in Section 5(g) below); (ii) the number of Common Stock equivalents credited to the Employee's account under the Supplemental Savings and Stock Investment Plan at the Termination Date multiplied by the Company Stock Value (as defined in Section 5(g) below); (iii) the amount credited to the Employee's account under the Supplemental Retirement Account Plan at the Termination Date; (iv) all contributions to, or amounts credited to, the Company's Savings and Stock Investment Plan, IR/Clark Leveraged Employee Stock Ownership Plan, Supplemental Savings and Stock Investment Plan, and Supplemental Retirement Account Plan (and earnings and appreciation attributable thereto) that theretofore were made by the Company on behalf of the Employee and are forfeited as a result of the Employee's Termination; and (v) five percent of the aggregate amount payable pursuant to subparagraphs 5(a) and 5(b) for the Savings and Stock Investment Plan, three percent of such amount for the Supplemental Savings and Stock Investment Plan and two percent of such amount for the Supplemental Retirement Account Plan. (e) Pension Benefits. (i) No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the Present Value of the sum of the pension benefits the Employee is entitled to receive under (A) the Restated Ingersoll-Rand Company Supplemental Pension Plan (the "Section 415 Excess Plan"), (B) the Ingersoll-Rand Company Elected Officers Supplemental Program (the "Elected Officer Supplemental Program" or the "Program"), and (C) the Executive Supplementary Retirement Agreement (the "Ten Year Annuity), all as in effect immediately prior to the Change of Control Event (collectively the "Pension Benefit"). (ii) In calculating the portion of the Pension Benefit under section 1.1 of the Section 415 Excess Plan the Company shall credit the Employee with five additional years of Credited Service (within the meaning of the Plan and including wage, vesting and age credit) and five additional years of age for purposes of the Section 415 Excess Plan but not the Qualified Pension Plan. (If, after crediting five years of age, the Employee is less than fifty- five years old, it will be assumed that the benefit commencement date is the first date on which the Employee becomes eligible to begin receiving payment of benefits under the Qualified Pension Plan). (iii) In calculating the portion of the Pension Benefit under the Elected Officer Supplemental Program, the Company shall: (A) credit the Employee with an additional five Years of Service and an additional five years of age for purposes of computing the amount of the Pension Benefit; and (B) define "Final Average Salary" in Section 1.8 of the Program as 1/3 of the severance amount determined pursuant to Section 5(b) of this Agreement. (iv) In calculating the portion of the Pension Benefit under the Ten-Year Annuity the Company shall credit the Employee with five additional years of age but to an age no greater than 62. (v) The Present Value of the Pension Benefit shall be calculated using (A) an interest rate equal to the product of (I) the 10-year Treasury Note rate as used in the Elected Officer Supplemental Program's definition of Actuarial Equivalent and (II) 1 minus the federal income tax rate at the highest bracket of income for individuals in effect for the year containing the date of payment, (B) the mortality rate used to determine lump sum values in the Elected Officer Supplemental Program, and (C) actual age without the five year addition to age except that the Ten-Year Annuity Present Value shall be calculated using no mortality assumption and actual age plus the additional five years but to an age no greater than 62. (vi) Calculation of all pension benefits amounts hereunder shall be made, at the expense of the Company, by the Wellesley Hills, Massachusetts office of Watson Wyatt (or the Company's then actuary immediately prior to the Change of Control Event). (f) Retiree Welfare Benefits. For purposes of determining the Employee's eligibility for post-retirement benefits under any welfare benefit plan (as defined in section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) maintained by the Company prior to the occurrence of a Change of Control Event, the Employee shall be credited with an additional five years of service and five years of age (or any combination of years of service and age not exceeding 10 years, to the extent necessary to qualify for benefits). If, after taking into account such additional age and service, the Employee is eligible for the Company's post-retirement welfare benefits (or would have been eligible under the terms of such plans as in effect prior to the occurrence of the Change of Control Event), the Employee shall receive, commencing on the third anniversary of the Termination Date, post-retirement welfare benefits no less favorable than the benefits the Employee would have received under the terms and conditions of the applicable plans in effect immediately prior to the occurrence of the Change of Control Event. (g) Employee Stock Awards, Options, SARs and MIUs. No later than 30 days following the Termination Date, the Company shall pay the Employee an amount (in one lump sum cash payment) equal to the aggregate Company Stock Value (defined below) of 100% of the Employee's then outstanding and unpaid stock and stock based awards under the Company's Incentive Stock Plans, the MIU Plan and any similar plans of the Company (or any other company) hereafter adopted (at which time such stock and stock based awards shall be cancelled and be of no further force or effect). In addition, all options to purchase shares of Common Stock of the Company (or the stock of any company in respect of which options have been granted to the Employee) ("Company Stock") and all stock appreciation rights held by the Employee immediately prior to Termination shall become exercisable at any time on and after the Termination Date, whether or not otherwise exercisable in accordance with the terms of the employee benefit plans pursuant to which such options and stock appreciation rights were granted. For purposes of this Agreement, Company Stock Value shall be deemed to be the highest of: (i) the closing sale price of the Company Stock on the New York Stock Exchange on the Change of Control Event; (ii) the closing sale price of the Company Stock on the New York Stock Exchange on the Termination Date; and (iii) the highest closing sale price of the Company Stock on the New York Stock Exchange during the 30 trading days immediately preceding the acquisition of more than 50% of the outstanding Company Stock by any person or group (including affiliates of such person or group). If, as of any valuation date, the Company Stock is not traded on the New York Stock Exchange, the Company Stock Value shall be the closing sale price of the Company Stock on the principal national securities exchange on which the Common Stock is traded or, if the Common Stock is not traded on any national securities exchange, the closing bid price of the Common Stock in the over-the-counter market. (h) Valuation of MIU Common Stock Equivalents. The Employee's Common Stock Equivalents under the MIU Plan shall, for purposes of payments pursuant thereto, be valued at the Company Stock Value. (i) Estate Enhancement Program. If the Employee participates in the Ingersoll-Rand Estate Enhancement Program, the terms of the Program shall apply. (j) Outplacement Expenses. For the three year period following the Termination Date, the Company shall reimburse the Employee for all reasonable expenses (up to a maximum of $15,000 per 12 month period) incurred by the Employee for professional outplacement services by qualified consultants selected by the Employee. 6. PARACHUTE EXCISE TAX GROSS-UP. (a) If, as a result of any payment or benefit provided under this Agreement, either alone or together with other payments and benefits which the Employee receives or is then entitled to receive from the Company, the Employee becomes subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (together with any income, employment or other taxes, interest and penalties thereon an "Excise Tax"), the Company shall pay the Employee an amount (the "Gross-Up Payment") sufficient to place the Employee in the same after-tax financial position that he would have been in if he had not incurred any tax liability under Section 4999 of the Code. For purposes of determining whether the Employee is subject to an Excise Tax, (i) any payments or benefits received by the Employee (whether pursuant to the terms hereof or pursuant to any plan, arrangement or other agreement with the Company or any entity affiliated with the Company) which payments ("Contingent Payments") are deemed to be contingent on a change described in Section 280G(b)(2)(A)(i) of the Code shall be taken into account, (ii) the amount of payments or benefits under this Agreement treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of all such payments and benefits hereunder as are Contingent Payments and (B) the amount of excess parachute payments within the meaning of 280G(b)(1) of the Code payable to the Employee, and (iii) the Employee shall be deemed to pay the taxes at the highest marginal applicable rates of such taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum deduction in federal income taxes which could be obtained from deduction of such state and local taxes. (b) The determination of whether the Employee is subject to Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as other calculations hereunder, shall be made at the expense of the Company by the independent auditors of the Company immediately prior to the Change of Control Event, which shall provide the Employee with prompt written notice (the "Company Notice") setting forth their determinations and calculations. Within 30 days following the receipt by the Employee of the Company Notice, the Employee may notify the Company in writing (the "Employee Notice") if the Employee disagrees with such determinations or calculations, setting forth the reasons for any such disagreement. If the Company and the Employee do not resolve such disagreement within 10 business days following receipt by the Company of the Employee Notice, the Company and the Employee shall agree upon a nationally recognized accounting or compensation firm (the "Resolving Firm") to make a determination with respect to such disagreement. If the Employee and the Company are unable to agree upon the Resolving Firm within 20 business days following the Employee Notice, the New York office of Towers, Perrin shall be the Resolving Firm. Within 30 business days following the Employee Notice, if the disagreement is not resolved by such time, each of the Employee and the Company shall submit its position to the Resolving Firm, which shall make a determination as to all such disagreements within 30 days following the last of such submissions, which determination shall be binding upon the Employee and the Company. The Company shall pay all reasonable expenses incurred by either party in connection with the determinations, calculations, disagreements or resolutions pursuant to this paragraph, including, but not limited to, reasonable legal, consulting or other similar fees. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30 day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably satisfactory to the Employee; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) The Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or other tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Employee is required to extend the statute of limitations to enable the Company to contest such claim, the Employee may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without the Employee's consent if such position or resolution could reasonably be expected to adversely affect the Employee (including any other tax position of the Employee unrelated to the matters covered hereby). (e) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company or the Resolving Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies and the Employee thereafter is required to pay to the Internal Revenue Service an additional amount in respect of any Excise Tax, the Company or the Resolving Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall promptly be paid by the Company to or for the benefit of the Employee. (f) If, after the receipt by Employee of an amount advanced by the Company in connection with the contest of Excise Tax claim, the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company in connection with an Excise Tax claim, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, by the amount of the Gross-Up Payment. 7. EFFECT ON OTHER ARRANGEMENTS. Except to the extent expressly provided herein, no provision of this Agreement shall affect or limit any interests or rights vested in the Employee under any other agreement or arrangement with the Employee or under any pension, profit- sharing, medical or other insurance or other benefit plans of the Company which may be in effect and in which the Employee may be participating at any time. 8. CONFIDENTIALITY. The Employee agrees to hold in confidence any and all confidential information known to him concerning the Company and its businesses so long as such information is not otherwise publicly disclosed. 9. MISCELLANEOUS. (a) Legal Expenses. The Company shall pay all costs and expenses, including attorneys' fees, of the Company and, at least quarterly, the Employee, in connection with any legal proceedings, whether or not instituted by the Company, relating to the interpretation or enforcement of this Agreement. In the event that the provisions of this paragraph shall be determined to be invalid or unenforceable in any respect, such declaration shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. (b) Mitigation. All payments or benefits required by the terms of this Agreement shall be made or provided without offset, deduction, or mitigation on account of income the Employee may receive from other employment or otherwise and the Employee shall not have any obligation or duty to seek any other employment or otherwise earn any amounts to reduce or mitigate any payments required hereunder. (c) Death of the Employee. In the event of the Employee's death subsequent to Termination, all payments called for hereunder shall be paid to the Employee's designated beneficiary or beneficiaries, or to his estate if he has not designated a beneficiary or beneficiaries. (d) Notices. Any notice or other communication provided for in this Agreement or contemplated hereby shall be sufficiently given if given in writing and delivered by certified mail, return receipt requested, and addressed, in the case of the Company, to the Company at: 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07675 Attention: Chairman of the Board of Directors and, in the case of the Employee, to the Employee at: Either party may designate a different address by giving notice of change of address in the manner provided above. (e) Waiver. No waiver or modification in whole or in part of this Agreement, or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or any right or power by any party on one occasion shall not be construed as a waiver of, or a bar to, the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. (f) Binding Effect; Successors. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Employee and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph shall continue to apply to each subsequent employer of the Employee hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. (g) Plan Limitations. In the event the Company is unable to provide any benefit required to be provided under this Agreement through a plan sponsored by the Company or its Affiliates, the Company shall, at its own cost and expense, take appropriate actions to insure that alternative arrangements are made so that equivalent benefits can be provided to the Employee, including to the extent appropriate purchasing for the benefit of the Employee (and if applicable the Employee's dependents) individual policies of insurance providing benefits, which on an after-tax basis, are equivalent to the benefits required to be provided hereunder. (h) Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed therein. 10. EFFECT ON PRIOR AGREEMENTS. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior employment or severance agreement or understanding between the Company (or any affiliate thereof) and the Employee. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. INGERSOLL-RAND COMPANY By Employee Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate", used to indicate a relationship with a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such a specified person. "Associate", used to indicate a relationship with a specified person, means (i) any corporation, partnership, or other organization of which such specified person is an officer or partner; (ii) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person, or who is a director or officer of the Company or any of its parents or subsidiaries; and (iv) any person who is a director, officer, or partner of such specified person or of any corporation (other than the Company or any wholly-owned subsidiary of the Company), partnership or other entity which is an Affiliate of such specified person. "Beneficial Owner" means the same as such term is defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor provision at the time in effect); provided, however, that any individual, corporation, partnership, group, association, or other person or entity which has the right to acquire any of the Company's outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement, or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such securities. "Board" means the Board of Directors of the Company (or, if the Company is then a subsidiary of any other company, of the ultimate parent company). "Cause" means (i) any action by the Employee involving willful malfeasance or willful gross misconduct having a demonstrable adverse effect on the Company; (ii) substantial and continuing refusal by the Employee in willful breach of this Agreement to perform his employment duties hereunder; or (iii) the Employee being convicted of a felony under the laws of the United States or any state. Termination of the Employee for Cause shall be communicated by a Notice of Termination given within one year after the Board (i) has knowledge of conduct or an event allegedly constituting Cause; and (ii) has reason to believe that such conduct or event could be grounds for Cause. For purposes of this Agreement a "Notice of Termination" shall mean delivery to the Employee of a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board at a meeting of that Board called and held for the purpose (after reasonable notice to the Employee ("Preliminary Notice") and reasonable opportunity for the Employee, together with the Employee's counsel, to be heard before the Board prior to such vote) of finding, in the good faith opinion of the Board, that the Employee has engaged in the conduct constituting Cause and specifying the particulars thereof in detail. Upon the receipt of the Preliminary Notice, the Employee shall have 30 days in which to appear with counsel or take such other action as he desires on his behalf, and such 30- day period is hereby agreed to by the parties as a reasonable opportunity for the Employee to be heard. The Board shall no later than 45 days after the receipt of the Preliminary Notice by the Employee communicate its findings to Employee. A failure by the Board to make its finding of Cause or to communicate its conclusion within such 45-day period shall be deemed to be a finding that the Employee has not engaged in the conduct described herein. Any termination of the Employee's employment (other than by death or Permanent Disability) within 45 days after the date that the Preliminary Notice has been given to the Employee shall be deemed to be a termination for Cause; provided, however, that if during such period the Employee voluntarily terminates other than for Good Reason or the Company terminates the Employee other than for Cause, and the Employee is found (or is deemed to be found) not to have engaged in the conduct described herein, such termination shall not be deemed to be for Cause. "Change of Control Event" means the date (i) any individual, corporation, partnership, group, association or other person or entity, together with its Affiliates and Associates (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company), is or becomes the Beneficial Owner of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; (ii) the Continuing Directors fail to constitute a majority of the members of the Board; (iii) of consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power of the voting securities of the Company or such surviving entity or its parent corporation outstanding immediately after such merger or consolidation; or (iv) of any sale, lease, exchange or other transfer, in one transaction or a series of related transactions, of all, or substantially all, of the assets of the Company, other than any sale, lease, exchange or other transfer to any person or entity where the Company owns, directly or indirectly, at least 80% of the outstanding voting securities of such person or entity or its parent corporation after any such transfer. "Continuing Director" means a director who either was a member of the Board on the date hereof or who became a member of the Board subsequent to such date and whose election, or nomination for election by the Company's shareholders, was Duly Approved by the Continuing Directors on the Board at the time of such nomination or election, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Board in which such person is named as nominee for director, without due objection to such nomination, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board. "Duly Approved by the Continuing Directors" means an action approved by the vote of at least two-thirds of the Continuing Directors then on the Board. "Fiscal Year" means the fiscal year of the Company. "Good Reason" means (i) a material adverse change in the Employee's job responsibilities, title or status from those in effect on the date hereof or as enhanced from time to time which change continues for a period of at least 15 days after written notice from the Employee; (ii) a reduction of the Employee's base salary or target bonus, the failure to pay Employee's salary or bonus when due, or the failure to maintain on behalf of the Employee (and his or her dependents) benefits which are at least as favorable in the aggregate to those provided for in paragraph 4(b); (iii) the relocation of the principal place of the Employee's employment to a location that is more than 35 miles further from the Employee's residence than such principal place of employment immediately prior to the Change of Control Event, or the imposition of travel requirements on the Employee not substantially consistent with such travel requirements existing immediately prior to the Change of Control Event; (iv) the failure of the Company to obtain the assumption of, and the agreement to perform, this Agreement by any successor as contemplated in paragraph 8(f); or (v) the failure of the Company to perform any of its other material obligations under this Agreement and the continuation of such failure for a period of 15 days after written notice from the Employee. "Permanent Disability", as applied to the Employee, means that (i) he has been totally incapacitated by bodily injury or disease so as to be prevented thereby from performing his duties hereunder; (ii) such total incapacity shall have continued for a period of six consecutive months; and (iii) such total incapacity will, in the opinion of a qualified physician, be permanent and continuous during the remainder of the Employee's life. "Termination" means (i) following the occurrence of a Change of Control Event, (A) the termination of the Employee's employment without Cause or (B) the resignation by an Employee for Good Reason upon ten days' prior written notice (or such shorter period as may be agreed upon between the Employee and the Company), and (ii) prior to the occurrence of a Change of Control Event, the termination of the Employee's employment or a material adverse change in the Employee's job responsibilities, title or status at the request of any individual or entity acquiring ownership and control of the Company; provided, that such term shall not include any termination of employment for Cause, any resignation without Good Reason, or any termination of employment on account of an Employee's death or Permanent Disability. "Termination Date" shall mean the effective date of an Employee's Termination; provided, that with respect to a Termination that occurs prior to a Change of Control Event, the effective date of such Termination shall be deemed to be the date immediately following the Change of Control Event. EX-10 13 INGERSOLL-RAND COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM (As Amended and Restated Effective March 3, 1999) Introduction Ingersoll-Rand Company (the "Company") adopted the Ingersoll-Rand Company Elected Officers Supplemental Program (the "Program") effective June 30, 1995 to provide retirement benefits to certain individuals employed by the Company in addition to the benefits provided from other qualified and non-qualified plans maintained by the Company. This amendment and restatement of the Program is effective as of March 3, 1999 and supersedes the prior provisions of the Program. The Program is intended to be treated as a plan which is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of the Employee Retirement Income Security Act of 1974, as amended. Generally, the provisions of the Program as set forth herein shall apply only to an Employee who terminates employment on or after March 3, 1999. The rights and benefits, if any, of an Employee who terminated employment prior to March 3, 1999 shall be determined in accordance with the provisions of the Program in effect on the date he terminated employment. INGERSOLL-RAND COMPANY ELECTED OFFICERS SUPPLEMENTAL PROGRAM TABLE OF CONTENTS Page INTRODUCTION i ARTICLE 1 - DEFINITIONS 1.1 Actuarial Equivalent 1 1.2 Board 1 1.3 Change in Control 1 1.4 Company 1 1.5 Committee 1 1.6 Deferral Plan 1 1.7 Elected Officer 1 1.8 Employee 1 1.9 Estate Program 1 1.10 Final Average Pay 1 1.11 Pension Pla 2 1.12 Program 2 1.13 Year of Service 2 ARTICLE 2 - PARTICIPATION 2.1 Commencement of Participation 3 2.2 Duration of Participation 3 ARTICLE 3 - AMOUNT OF BENEFIT 3.1 Amount of Benefit 4 ARTICLE 4 - VESTING 4.1 Vesting 5 4.2 Forfeiture for Cause 5 ARTICLE 5 - DISTRIBUTIONS 5.1 Retirement 6 5.2 Form of Distribution 7 5.3 Disability 7 5.4 Death 8 5.5 Payment of Benefits 8 ARTICLE 6 - FUNDING 6.1 Funding 9 6.2 Company Obligation 9 ARTICLE 7 - CHANGE IN CONTROL 7.1 Contributions to Trust 10 7.2 Amendments 10 ARTICLE 8 - MISCELLANEOUS 8.1 Amendment and Termination 11 8.2 No Contract of Employment 11 8.3 Withholding 11 8.4 Loans 11 8.5 Compensation and Nominating Committee 11 8.6 Entire Agreement; Successors 12 8.7 Severability 12 8.8 Governing Law 12 8.9 Participant as General Creditor 12 8.10 Nonassignability 12 APPENDIX A 14 ARTICLE 1 DEFINITIONS 1.1 "Actuarial Equivalent" means an amount having equal value when computed on the basis of the 1983 Group Annuity Mortality Table (blended) and an interest rate equal to the average of the monthly rates for ten-year Constant Maturities for US Treasury Securities for the twelve-month period immediately preceding the month prior to the month in which a determination of benefit occurs, such rate as published in Federal Reserve statistical release H.15(519). 1.2 "Board" means the Board of Directors of Ingersoll-Rand Company. 1.3 "Change in Control" shall have the same meaning as such term is defined in the most recent Company Incentive Stock Plan, unless a different definition is used for purposes of a change in control event in any severance or employment agreement between an Employer and an Employee, in which event as to such Employee such definition shall apply. 1.4 "Company" means Ingersoll-Rand Company, and its successors or assigns. 1.5 "Committee" means the Compensation and Nominating Committee of the Board. 1.6 "Deferral Plan" means the Ingersoll-Rand Company Executive Deferred Compensation and Stock Bonus Plan. 1.7 "Elected Officer" means an individual elected by the Board as an officer of the Company. 1.8 "Employee" means an individual eligible to participate in the Program as provided in Section 2.1. 1.9 "Estate Program" means the Ingersoll-Rand Company Estate Enhancement Program. 1.10 "Final Average Pay" means, except as provided in Section 5.3 for purposes of disability, the sum of the following: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forego a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee's retirement or death occurs, or a Change in Control occurs, but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and (b) the Employee's annualized base salary in effect immediately prior to the date of determination. 1.11 "Pension Plan" means the Ingersoll-Rand Pension Plan Number One as in effect on March 3, 1999 and as amended from time to time. 1.12 "Program" means the Ingersoll-Rand Company Elected Officers Supplemental Program as stated herein and as may be amended from time to time. 1.13 "Year of Service" shall be determined in accordance with the provisions of the qualified defined benefit pension plan(s) (as defined below) in which an individual participates while an Employee that are applicable to determining years of vesting service under such plan. For purposes of this Section a qualified defined benefit pension plan means a plan (a) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, or any other entity designated by the Company and (b) which is defined in Section 414(j) of the Internal Revenue Code of 1986, as amended. Notwithstanding any provision of the Program to the contrary, in the event an Employee earns one or more hours of service during a calendar year, he shall be credited with a Year of Service with respect to such year for purposes of the Program. Whenever the word "he", "his," or "him" is used in the Program, such word is intended to embrace within its purview the word "she" or "her", as may be appropriate. ARTICLE 2 PARTICIPATION 2.1 Commencement of Participation An individual employed by the Company shall commence participation in the Program upon becoming an Elected Officer of the Company. 2.2 Duration of Participation An Employee shall continue to participate in the Program until the earlier of his termination of employment, death, or election to waive the benefit provided under the Program. ARTICLE 3 AMOUNT OF BENEFIT 3.1 Amount of Benefit An Employee shall be entitled to receive a benefit under the Program equal to (a) minus (b) minus (c) below: (a) the product of: (i) his Final Average Pay, (ii) his Years of Service (up to a maximum of 35 Years of Service), and (iii)1.9% (b)the amount set forth in Appendix A as attached hereto (c)the benefit he would be entitled to receive under Section 5.2 of the Program but for his election to forego such benefit pursuant to the Estate Program. ARTICLE 4 VESTING 4.1 Vesting An Employee shall become vested in the benefit provided under the Program upon the earlier of (i) the attainment of age 55 and the completion of 15 Years of Service, (ii) the attainment of age 62, (iii) death, or (iv) a Change in Control. 4.2 Forfeiture for Cause All benefits for which an Employee would otherwise be eligible hereunder may be forfeited, at the discretion of the Committee, prior to the occurrence of a Change in Control under the following circumstances: (a) The Employee is discharged by the Company for cause, which shall be a breach of the standards set forth in the Ingersoll-Rand Company Code of Conduct; or (b) Determination by the Committee no later than 12 months after termination of employment that the Employee has engaged in serious or willful misconduct in connection with his employment with the Company; or (c) The Employee (whether while employed or for two years thereafter) without the written consent of the Company is employed by, becomes associated with, renders service to, or owns an interest in any business that is competitive with the Company or with any business in which the Company has a substantial interest as determined by the Committee; provided, however, that an Employee may own up to 1% of the publicly traded equity securities of any business, notwithstanding the foregoing. ARTICLE 5 DISTRIBUTIONS 5.1 Retirement Employee retirement distributions under the Program shall be as follows: (a) Normal Retirement - An Employee shall retire and receive the benefit under Section 3.1 upon attaining age 62, provided that the Chief Executive Officer of the Company (or in the case of the Chief Executive Officer, the Board) may request an Employee to remain in the employ of the Company after the Employee has attained age 62. (b) Early Retirement - An Employee may retire under the Program at any time after he becomes vested in accordance with Section 4.1. In the event he retires before age 62, he will receive a benefit under the Program in accordance with Section 5.5. Such benefit shall be equal to the benefit he would have received at age 62 under Section 3.1, provided however that: (i) the amount determined under Section 3.1(a) shall be reduced by 0.429% for each month that the benefit commences prior to age 62, (ii)the benefit offset amount derived from defined contribution account balances, if any, as identified in the applicable Appendix, shall be converted to immediate annuities using the Actuarial Equivalent as defined in Section 1.1, and shall be based on the Employee's age at date of retirement, (iii)the benefit offset amount derived from defined benefit plans, as identified in Appendix A and as adjusted for retirement at the earliest date on which the Employee may retire and begin receiving a benefit under such defined benefit plans and as further adjusted, if necessary, to the Actuarial Equivalent of the benefit payable on the date benefits under the Program commence, shall be as determined under the applicable plans irrespective of whether the Employee elects to receive a benefit under such plans, and (iv)for years prior to Social Security normal retirement age, the Social Security Primary Insurance Amount shall be reduced by the same factors used by the Social Security Administration to adjust benefits payable at age 62 or later, and by .3% for each month that benefits under the Program commence prior to age 62. (c) Late Retirement - If an Employee retires after age 62 as provided under (a) above, he will receive a benefit equal to the greater of: (i) the benefit determined under Section 3.1 as of his date of retirement, or (ii)the benefit he would have received had he retired at age 62, credited with interest from the date he attained age 62 until his date of retirement. For purposes of this subsection (ii), the interest rate will be equal to the rate of return earned by the Fixed Income Fund of the Ingersoll-Rand Company Savings and Stock Investment Plan during such period. 5.2 Form of Distribution Benefits under the Program shall be payable solely in a single lump sum. The lump sum amount, determined as of the Employee's date of retirement, shall be the Actuarial Equivalent value of a single life annuity of the benefit under Section 3.1 adjusted, if applicable, to reflect the provisions of Section 5.1. The lump sum distribution determined under this Section 5.2 shall be credited with interest at a rate equal to the rate of return earned by the Fixed Income Fund of the Ingersoll-Rand Company Savings and Stock Investment Plan from the Employee's date of retirement until the date of distribution. Notwithstanding the foregoing, an Employee who retires under the Program and receives a lump sum payment under this Section 5.2 may elect within the 30-day period immediately preceding his date of retirement to have his benefit determined as of his date of retirement using an alternative interest rate. The alternative interest rate used to determine the Actuarial Equivalent benefit payable in a lump sum shall be the interest rate equal to the 10-Year Treasury Note rate as published in The New York Times in the Key Rate Table under the Credit Market Section, or, if such rate is unavailable, as provided by Telerate, in both cases as of the business day immediately preceding the date payment is made to the Employee. In the event an Employee elects to have his benefit determined under this paragraph, no interest will be payable from the Employee's date of retirement until the date of distribution. 5.3 Disability An Employee who becomes disabled and who remains continuously disabled until attaining age 65 shall continue to accrue benefits under the Program as if he continued to be employed by the Company. Such Employee shall receive an immediate lump sum payment determined under Section 5.2 of the Program as of the Employee's 65th birthday. Notwithstanding any other provision of the Program to the contrary, when determining Final Average Pay for an Employee who is disabled under the provisions of this Section, Final Average Pay means the sum of: (a) the average of each of the five highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forego a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee's disability occurs, (or, if the average of the five highest bonus awards would be greater, the six most recent calendar years prior to the year in which the Employee's disability occurs), but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and (b) the Employee's annualized base salary in effect as of the date he becomes disabled. An Employee who is no longer disabled under this Section and who returns to the employ of the Company or an affiliated company, shall be entitled to accrue benefits under this Section for the period of his disability. An Employee who is no longer disabled under this Section and who does not return to the employ of the Company or an affiliated company, shall not be entitled to accrue any benefits under this Section for any portion of the period of his disability. For purposes of the Program, an Employee shall be disabled if he is unable to continue to perform the duties of his position due to a physical or mental impairment. 5.4 Death In the event that an Employee dies prior to retirement, his beneficiary shall receive a lump sum payment determined under Section 5.2 of the Program as of the date of the Employee's death as if the Employee retired on the date of his death; provided that if the Employee's death occurs prior to his attainment of age 55, his benefit shall be reduced by .3% for each month that the benefit commences before the Employee would have reached age 65. The Employee's beneficiary under the Program shall be the beneficiary under the Ingersoll-Rand Company Savings and Stock Investment Plan unless the Employee designates another beneficiary in writing, and such written designation has been received by the Committee prior to the date of death. An Employee may change the designated beneficiary under the Program at any time by providing such designation in writing to the Committee. 5.5 Payment of Benefits The benefit under the Program shall be paid on the later of (i) the first business day of the sixth month following the Employee's retirement or death, or (ii) the first business day of the calendar year following the Employee's retirement. In the event an Employee is disabled in accordance with Section 5.3, his benefit shall be paid on the first day of the month following the date that the Employee attains age 65. ARTICLE 6 FUNDING 6.1 Funding Except as provided in Section 8.9 hereof, the Company shall have no obligation to fund the benefit that an Employee earns under the Program. 6.2 Company Obligation Notwithstanding the provisions of any trust agreement or similar funding vehicle to the contrary, the Company shall remain obligated to pay benefits under the Program. Nothing in the Program or any trust agreement shall relieve the Company of its liabilities to pay benefits under the Program except to the extent that such liabilities are met by the distribution of trust assets. ARTICLE 7 CHANGE IN CONTROL 7.1 Contributions to Trust In the event that a Change in Control has occurred, the Company shall be obligated to establish a trust and to contribute to the trust an amount necessary to fund the accrued benefit earned by the Employee under the Program (assuming immediate benefit commencement) as of the last day of the calendar month immediately preceding the date the Board determines that a Change in Control has occurred. If the Employee shall not have attained age 55, his annual benefit shall be determined on the same basis used to determine his accrued benefit in the case of death as specified in Section 5.4. 7.2 Amendments Following a Change in Control of the Company, any amendment modifying or terminating the Program shall have no force or effect. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination Except as provided in Section 7.2 hereof, the Program may, at any time and from time to time, be amended or terminated without the consent of any Employee or beneficiary, (a) by the Board, or (b) in the case of amendments which do not materially modify the provisions hereof, the Committee or such other committee appointed by the Board; provided, however, that no such amendment or termination shall reduce any benefits accrued under the terms of the Program prior to the date of termination or amendment. 8.2 No Contract of Employment The establishment of the Program or any modification hereof shall not give any Employee or other person the right to remain in the service of the Company or any of its subsidiaries, and all Employees and other persons shall remain subject to discharge to the same extent as if the Program had never been adopted. 8.3 Withholding The Company shall be entitled to withhold from any payment due under the Program any and all taxes of any nature required by any government to be withheld from such payment. 8.4 Loans No loans to Employees shall be permitted under the Program. 8.5 Compensation and Nominating Committee The Program shall be administered by the Committee (or any successor committee) of the Board. The primary responsibility of the Committee is to administer the Program for the exclusive benefit of the Employees and their beneficiaries, subject to the specific terms of the Program. The Committee shall administer the Program in accordance with its terms to the extent consistent with applicable law, and shall have the power to determine all questions arising in connection with the administration, interpretation, and application of the Program. Any such determination by the Committee shall be conclusive and binding upon all affected parties. Any denial by the Committee of a claim for benefits under the Program by an Employee or beneficiary shall be stated in writing by the Committee and delivered or mailed to the Employee or beneficiary. Such notice shall set forth the specific reasons for the Committee's decision. In addition, the Committee shall afford a reasonable opportunity to any Employee or beneficiary whose claim for benefits has been denied for a review of the decision denying this claim. 8.6 Entire Agreement; Successors The Program, including any subsequently adopted amendments, shall constitute the entire agreement or contract between the Company and any Employee regarding the Program. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between the Company and any Employee relating to the subject matter hereof, other than those set forth herein. The Program and any amendment hereof shall be binding on the Company and the Employees and their respective heirs, administrators, trustees, successors and assigns, including but not limited to, any successors of the Company by merger, consolidation or otherwise by operation of law, and on all designated beneficiaries of the Employee. 8.7 Severability If any provisions of the Program shall, to any extent, be invalid or unenforceable, the remainder of the Program shall not be affected thereby, and each provision of the Program shall be valid and enforceable to the fullest extent permitted by law. 8.8 Governing Law The laws of the State of New Jersey shall govern the Program. 8.9 Participant as General Creditor Benefits under the Program shall be payable by the Company out of its general funds. The Company shall have the right to establish a reserve or make any investment for the purposes of satisfying its obligations hereunder for payment of benefits at its discretion, provided, however, that no Employee eligible to participate in the Program shall have any interest in such investment or reserve. To the extent that any person acquires a right to receive benefits under the Program, such rights shall be no greater than the right of any unsecured general creditor of the Company. 8.10 Nonassignability To the extent permitted by law, the right of any Employee or any beneficiary in any benefit hereunder shall not be subject to attachment or any other legal process for the debts of such Employee or beneficiary nor shall any such benefit be subject to anticipation, alienation, sale, transfer, assignment or encumbrance. APPENDIX A Unless otherwise specified in another Appendix attached hereto, the sum of the following shall be used for purposes of Section 3.1(b) of the Program: (a) All employer-paid benefits under any qualified defined benefit plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) and associated supplemental plans sponsored by the Company, Ingersoll-Dresser Pump Company, and Dresser Industries, Inc., provided that the Employee's intervening employment between employment with Dresser Industries, Inc. and the Company is solely with Ingersoll -Dresser Pump Company. For purposes of this Paragraph (a), the amount of any pension payable under the Clark Equipment Company Retirement Program for Salaried Employees shall be determined without reduction by the lifetime pension equivalent of the Employee's vested interest in his PPOA Account (as such term is defined in the I-R/Clark Leveraged Employee Stock Ownership Plan). For purposes of determining the benefit under Section 3.1 of the Program, the Employee's benefit, if any, under any qualified defined benefit plan and associated supplemental plans described in the previous paragraph, shall be determined as a life annuity at the date of determination. (b) The Social Security Primary Insurance Amount as defined in the Pension Plan estimated at age 65, multiplied by a fraction, the numerator of which is his Years of Service (up to a maximum of 35 Years of Service), and the denominator of which is 35. For purposes of the Program, "Social Security Primary Insurance Amount" means the amount of the Employee's annual primary old age insurance determined under the Social Security Act in effect at the date of determination and payable in accordance with (i) or (ii) below. (i) For benefits determined on or after age 65, payable for the year following his date of retirement. (ii)For benefits determined before the Employee attains age 65, payable for the year following his retirement or death (or which would be payable when he first would have become eligible if he were then unemployed), assuming he will not receive after retirement (or death) any income that would be treated as wages for purposes of the Social Security Act. For purposes of determining the Social Security Benefit under paragraphs (i) and (ii) above, an Employee's covered earnings under said Act for each calendar year preceding the Employee's first full calendar year of employment shall be determined by multiplying his covered earnings subsequent to the year being determined by the ratio of the average per worker total wages as reported by the Social Security Administration for the calendar year being determined to such average for the calendar year subsequent to the year being determined. (c) An Employee's accrued benefit under any qualified defined benefit pension plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) and any nonqualified pension plan with respect to any business that was acquired by the Company ("Acquired Business"), (each such pension plan shall be referred to in this Paragraph (c) as a "Former Plan"), shall be used for purposes of Section 3.1(b) of the Program if the Employee: (i) was an employee of the Acquired Business on the date it was acquired by the Company, (ii)became an employee of the Company as a result of the acquisition of the Acquired Business, and (iii)was granted vesting service under any qualified defined benefit pension plan (as defined in Section 414(j) of the Internal Revenue Code of 1986, as amended) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, and any other entity designated by the Company for service performed while an employee of the Acquired Business. The Employee's accrued benefit under the Former Plan shall be determined as a life annuity payable as of the date of determination, using the Former Plan's early retirement factors, if applicable. Notwithstanding anything to the contrary in this Paragraph (c), if the Committee determines that the accrued benefit under a Former Plan cannot reasonably be calculated due to lack of information about the Former Plan or otherwise, the provisions of this Paragraph (c) shall not apply with respect to such Former Plan. EX-11 14 EXHIBIT 11 INGERSOLL-RAND COMPANY COMPUTATION OF EARNINGS PER SHARE (In millions of dollars except for shares and per share amounts) Years ended December 31, 1998 1997 1996 1995 1994 Net earnings applicable to common stock............. $509.1 $380.5 $358.0 $270.3 $211.1 Average number of common shares outstanding.......... 163,669,777 163,206,932 161,238,547 159,103,617 158,187,174 Number of common shares issuable assuming exercise under incentive stock plans.. 1,812,035 1,617,803 1,031,137 495,479 542,153 Average number of outstanding shares for diluted earnings per share calculations........... 165,481,812 164,824,735 162,269,684 159,599,096 158,729,327 Basic earnings per share....................... $3.11 $2.33 $2.22 $1.70 $1.33 Diluted earnings per share........................ $3.08 $2.31 $2.21 $1.69 $1.33 Note: All common share and per share amounts have been adjusted for the 3-for-2 stock split which was made in the form of a stock dividend in August of 1997. EX-12 15
INGERSOLL-RAND COMPANY EXHIBIT 12 COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar Amounts in Millions) Years Ended December 31, Fixed charges: 1998 1997 1996 1995 1994 Interest expense........................... $227.5 $138.8 $ 122.4 $ 90.0 $ 46.9 Amortization of debt discount and expense.. 7.0 2.0 1.5 0.8 0.4 Rentals (one-third of rentals)............. 25.0 25.5 22.4 21.6 18.8 Capitalized interest....................... 4.0 3.3 4.6 3.6 3.2 Equity-linked security charges............ 19.7 -- -- -- -- Total fixed charges.......................... $283.2 $169.6 $150.9 $ 116.0 $ 69.3 Net earnings .......................... $509.1 $380.5 $358.0 $270.3 $211.1 Add: Minority income of majority- owned subsidiaries.................. 54.2 17.3 18.9 14.5 15.1 Taxes on income....................... 280.1 233.2 210.3 158.9 118.8 Fixed charges......................... 283.2 169.6 150.9 116.0 69.3 Less: Capitalized interest.................. 4.0 3.3 4.6 3.6 3.2 Undistributed earnings (losses) from less than 50% owned affiliates...... 33.7 16.2 (23.1) 33.3 33.3 Earnings available for fixed charges ....... $1,088.9 $781.1 $756.6 $522.8 $377.8 Ratio of earnings to fixed charges .......... 3.84 4.61 5.01 4.51 5.46 Undistributed earnings (losses) from less than 50% owned affiliates: Equity in earnings (losses)............... $ 37.3 $ 19.4 $ 36.4 $ 36.6 $ 36.6 Less: Amounts distributed.............. 3.6 3.2 59.5 3.3 $ 3.3 Undistributed earnings (losses) from less-than 50% owned affiliates........... $ 33.7 $16.2 $ (23.1) $ 33.3 $ 33.3
EX-13 16 Exhibit 13 Consolidated Statement of Income In millions except per share amounts For the years ended December 31 1998 1997 1996 Net sales $8,291.5 $7,103.3 $6,702.9 Cost of goods sold 6,046.6 5,263.7 5,029.9 Administrative, selling and service engineering expenses 1,200.5 1,079.3 989.5 Operating income 1,044.4 760.3 683.5 Interest expense (225.8) (136.6) (119.9) Other income (expense), net (22.0) (21.5) (18.8) Equity in earnings of partially-owned affiliates 46.8 28.8 42.4 Minority interests (54.2) (17.3) (18.9) Earnings before income taxes 789.2 613.7 568.3 Provision for income taxes 280.1 233.2 210.3 Net earnings $ 509.1 $ 380.5 $ 358.0 Basic earnings per share $3.11 $2.33 $2.22 Diluted earnings per share $3.08 $2.31 $2.21 See accompanying Notes to Consolidated Financial Statements.
Consolidated Balance Sheet In millions except share amounts December 31 1998 1997 Assets Current assets: Cash and cash equivalents $ 71.9 $ 104.9 Marketable securities 5.7 6.9 Accounts and notes receivable, less allowance for doubtful accounts of $42.0 in 1998 and $33.9 in 1997 1,177.1 1,281.5 Inventories 940.8 854.8 Prepaid expenses 88.7 136.0 Deferred income taxes 143.4 160.8 2,427.6 2,544.9 Investments in and advances with partially-owned equity affiliates 344.7 328.0 Property, plant and equipment, at cost: Land and buildings 683.3 682.7 Machinery and equipment 1,733.0 1,592.5 2,416.3 2,275.2 Less-accumulated depreciation 1,068.7 992.0 1,347.6 1,283.2 Intangible assets, net 3,774.3 3,833.0 Deferred income taxes 235.9 214.9 Other assets 179.4 211.6 $8,309.5 $8,415.6 Liabilities and Equity Current liabilities: Accounts payable and accruals $1,488.6 $1,370.5 Loans payable 318.7 925.1 Customers' advance payments 13.3 14.5 Income taxes 28.2 17.7 1,848.8 2,327.8 Long-term debt 2,166.0 2,528.0 Postemployment liabilities 897.1 937.1 Minority interests 133.6 127.9 Other liabilities 154.0 153.4 5,199.5 6,074.2 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 402.5 - Shareholders' equity: Common stock, $2 par value, authorized 600,000,000 shares; issued: 1998-168,883,779; 1997-167,410,183 337.8 334.8 Capital in excess of par value 133.4 92.4 Retained earnings 2,567.3 2,156.5 3,038.5 2,583.7 Unallocated LESOP shares, at cost (27.0) (41.4) Treasury stock, at cost (150.9) (44.5) Accumulated other comprehensive income (153.1) (156.4) Shareholders' equity 2,707.5 2,341.4 $8,309.5 $8,415.6 See accompanying Notes to Consolidated Financial Statements. Consolidated Statement of Shareholders' Equity In millions Capital in Accumulated Total excess other shareholders' Common stock of par Retained Unallocated Treasury comprehensive Comprehensive equity Amount Shares value earnings LESOP stock income income Balance at December 31, 1995 $1,795.5 $219.4 109.7 $121.6 $1,595.5 $(70.2) $(11.5) $(59.3) Net earnings 358.0 358.0 $358.0 Foreign currency translation (16.5) (16.5) (16.5) Reclassification adjustment 6.3 Total comprehensive income $347.8 Exercise of stock options 18.6 1.1 0.5 17.5 Issuance of shares under stock plans 1.9 0.1 0.1 1.8 Allocation of LESOP shares 17.2 2.6 14.6 Cash dividends (83.9) (83.9) Balance at December 31, 1996 2,090.8 220.6 110.3 143.5 1,869.6 (55.6) (11.5) (75.8) Net earnings 380.5 380.5 380.5 Foreign currency translation (80.6) (80.6) (80.6) Reclassification adjustment 3.1 Total comprehensive income $303.0 Issuance of shares under stock plans 2.8 0.1 0.1 2.7 Exercise of stock options 52.6 2.7 1.3 49.9 Stock split 3-for-2 - 111.4 55.7 (111.4) Allocation of LESOP shares 21.9 7.7 14.2 Purchase of treasury shares (33.0) (33.0) Cash dividends (93.6) (93.6) Balance at December 31, 1997 2,341.4 334.8 167.4 92.4 2,156.5 (41.4) (44.5) (156.4) Net earnings 509.1 509.1 509.1 Foreign currency translation 3.3 3.3 3.3 Total comprehensive income $512.4 Issuance of shares under stock plans 2.2 0.1 0.1 2.1 Exercise of stock options 45.8 2.9 1.4 42.9 Issuance of equity-linked securities (16.4) (16.4) Allocation of LESOP shares 26.8 12.4 14.4 Purchase of treasury shares (106.4) (106.4) Cash dividends (98.3) (98.3) Balance at December 31, 1998 $2,707.5 $337.8 168.9 $133.4 $2,567.3 $(27.0) $(150.9) $(153.1)
Consolidated Statement of Cash Flows In millions For the years ended December 31 1998 1997 1996 Cash flows from operating activities: Net earnings $ 509.1 $ 380.5 $ 358.0 Adjustments to arrive at net cash provided by operating activities: Depreciation and amortization 282.6 212.3 202.6 Gain on sale of businesses (6.6) (7.7) (58.0) Gain on sale of property, plant and equipment (9.6) (3.2) (10.3) Minority interests, net of dividends 31.4 14.9 18.0 Equity earnings/losses, net of dividends (38.3) (19.9) (35.6) Deferred income taxes 1.6 8.2 (4.5) Other items 26.7 27.1 12.3 Restructure of operations - 38.7 42.4 Changes in assets and liabilities (Decrease) increase in: Accounts and notes receivable 98.2 (21.5) (1.0) Inventories (76.8) 48.7 (5.3) Other current and noncurrent assets 22.7 (5.2) (36.8) (Increase) decrease in: Accounts payable and accruals 91.7 53.8 (17.8) Other current and noncurrent liabilities (33.7) (23.2) (78.3) Net cash provided by operating activities 899.0 703.5 385.7 Cash flows from investing activities: Capital expenditures (221.0) (186.0) (195.0) Proceeds from sales of property, plant and equipment 24.6 34.8 33.3 Proceeds from business dispositions 58.0 252.8 183.8 Acquisitions, net of cash* (55.6) (2,891.3) (133.5) Decrease (increase) in marketable securities 1.4 (0.4) (3.6) Cash (invested in) or advances (to) from equity companies 9.2 47.6 (34.9) Net cash used in investing activities (183.4) (2,742.5) (149.9) Cash flows from financing activities: (Decrease) increase in short-term borrowings (712.4) 685.8 (24.3) Debt issuance costs - (19.1) - Proceeds from long-term debt 0.2 1,508.6 0.1 Payments of long-term debt (261.2) (133.8) (104.7) Net change in debt (973.4) 2,041.5 (128.9) Issuance of equity-linked securities 402.5 - - Equity-linked securities issuance costs and fees (12.9) - - Net proceeds from issuance of equity- linked securities 389.6 - - Proceeds from exercise of stock options 36.1 43.3 16.3 Purchase of treasury stock (106.4) (33.0) - Dividends paid (98.3) (93.6) (83.9) Net cash (used in) provided by financing activities (752.4) 1,958.2 (196.5) Effect of exchange rate changes on cash and cash equivalents 3.8 1.6 7.5 Net (decrease) increase in cash and cash equivalents (33.0) (79.2) 46.8 Cash and cash equivalents- beginning of year 104.9 184.1 137.3 Cash and cash equivalents-end of year $ 71.9 $ 104.9 $ 184.1 *Acquisitions: Working capital, other than cash $ (13.5) $ (113.8) $ (22.1) Property, plant and equipment (14.5) (186.6) (33.1) Intangibles and other assets (34.9) (2,739.5) (81.7) Long-term debt and other liabilitie 7.3 148.6 3.4 Net cash used to acquire businesses $ (55.6) $(2,891.3) $(133.5) Cash paid during the year for: Interest, net of amounts capitalized $ 207.4 $ 136.1 $ 120.2 Income taxes 272.0 227.0 262.3 See accompanying Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Ingersoll-Rand is a multinational manufacturer of primarily nonelectrical industrial equipment and components. The company's principal lines of business are air compressors, architectural hardware products, automotive parts and components, construction equipment, golf cars and utility vehicles, pumps, tools and transport temperature control systems. The company's broad product line has applications in numerous industries including automotive, construction, utilities, housing, recreational and transportation, as well as the general industrial market. A summary of significant accounting policies used in the preparation of the accompanying financial statements follows: Principles of Consolidation: The consolidated financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated. Partially-owned equity affiliates companiesare accounted for under the equity method. In conformity with generally accepted accounting principles, management has used estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Reclassifications: Certain amounts in the financial statements and notes have been reclassified to conform to the 1998 presentation. Cash Equivalents: The company considers all highly liquid investments, consisting primarily of time deposits and commercial paper with maturities of three months or less when purchased, to be cash equivalents. Cash equivalents were $10.8 million and $16.2 million at December 31, 1998 and 1997, respectively. Inventories: Inventories are generally stated at cost, which is not in excess of market. Domestically manufactured inventories of standard products are valued on the last-in, first-out (LIFO) method and all other inventories are valued using the first-in, first-out (FIFO) method. Property and Depreciation: The company principally uses accelerated depreciation methods for assets placed in service prior to December 31, 1994, and the straight-line method for assets acquired subsequent to that date. Intangible Assets: Intangible assets primarily represent the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Such excess costs are being amortized on a straight-line basis generally over 40 years. Goodwill at December 31, 1998 and 1997, was $3.7 billion and $3.8 billion, respectively. Intangible assets are evaluated for impairment whenever circumstances indicate that the carrying amounts may not be recoverable. Intangible assets also represent costs allocated to patents, tradenames and other specifically identifiable assets arising from business acquisitions. These assets are amortized on a straight-line basis over their estimated useful lives. Accumulated amortization at December 31, 1998 and 1997, was $248.2 million and $137.7 million, respectively. Amortization of intangible assets was $110.5 million, $54.7 million and $38.0 million in 1998, 1997 and 1996, respectively. Income Taxes: Deferred taxes are provided on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. A valuation allowance is established for deferred tax assets for which realization is not likely. Environmental Costs: Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not contribute to current or future revenues, are expensed. Costs to prepare environmental site evaluations and feasibility studies are accrued when the company commits to perform them. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the company's commitment to a plan of action. The assessment of this liability is calculated based on existing technology, does not reflect any offset for possible recoveries from insurance companies and is not discounted. There were no material changes in the liability for all periods presented. Revenue Recognition: Sales of products are recorded for financial reporting purposes generally when the products are shipped. Research, Engineering and Development Costs: Research and development expenditures, including engineering costs, are expensed when incurred and amounted to $258.6 million in 1998, $215.5 million in 1997 and $209.3 million in 1996. Comprehensive Income: As of January 1, 1998, the company adopted Statement of Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive Income." The statement establishes new rules for the reporting and display of comprehensive income and its components. Comprehensive income includes net income, and currently in the case of the company, only foreign currency translation adjustments. The amounts shown as reclassification adjustments relate to the accumulated foreign currency translation adjustment of entities that had been sold, and thus included in net earnings of the current period. Prior year financial statements have been reclassified to conform with the requirements of SFAS 130. These disclosure requirements had no impact on financial position or results of operations. Foreign Currency: Assets and liabilities of foreign entities, where the local currency is the functional currency, have been translated at year-end exchange rates, and income and expenses have been translated using weighted average-for-the-year exchange rates. Adjustments resulting from translation have been recorded in accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying foreign investment. For foreign entities where the U.S. dollar is the functional currency, inventory and property balances and related income statement accounts have been translated using historical exchange rates, and resulting gains and losses have been credited or charged to net earnings. Foreign currency transactions and translations recorded in the income statement decreased net earnings by $8.8 million, $0.5 million and $3.5 million in 1998, 1997 and 1996, respectively. Accumulated other comprehensive income was increased in 1998 by $3.3 million, and decreased in 1997 and 1996 by $80.6 million and $16.5 million, respectively, due to foreign currency equity adjustments related to translation and dispositions. The company hedges certain foreign currency transactions and firm foreign currency commitments by entering into forward exchange contracts (forward contracts). Gains and losses associated with currency rate changes on forward contracts hedging foreign currency transactions are recorded currently in income. Gains and losses on forward contracts hedging firm foreign currency commitments are deferred off-balance sheet and included as a component of the related transaction, when recorded; however, a loss is not deferred if deferral would lead to the recognition of a loss in future periods. Cash flows resulting from forward contracts accounted for as hedges of identifiable transactions or events are classified in the same category as the cash flows from the items being hedged. During 1998, the company also purchased forward contracts to mitigate the exposure of forecasted future cash flows of foreign subsidiaries. These contracts range in duration from one to 12 months. Gains and losses associated with the change in fair market value of these contracts are recorded in other income. Earnings Per Share: Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding as well as dilutive potential common shares, which in the company's case comprise shares issuable under stock benefit plans. The weighted average number of common shares outstanding for basic earnings per share calculations were 163,669,777, 163,206,932 and 161,238,547 for 1998, 1997 and 1996, respectively. For diluted earnings per share purposes, these balances increased by 1,812,035, 1,617,803 and 1,031,137 shares for 1998, 1997 and 1996, respectively, due to the effect of common equivalent shares which were issuable under the company's stock benefit plans. Stock-based Compensation: SFAS No. 123, "Accounting for Stock- Based Compensation," requires companies to measure employee stock compensation plans based on the fair value method of accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to Employees," and provide pro forma footnote disclosures under the fair value method in SFAS No. 123. The company continues to apply the principles of APB No. 25 and has provided pro forma fair value disclosures in Note 13. New Accounting Standard: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement will become effective beginning January 1, 2000. The company is currently evaluating the impact of adopting the standard and will comply as required. NOTE 2 - ACQUISITIONS OF BUSINESSES: In the first quarter of 1998, the company acquired for approximately $15.4 million in cash, substantially all the assets of Johnstone Pump Company (Johnstone). Johnstone manufactures industrial piston pumps, automated dispensing systems and related products for use primarily in the automotive industry. Also in the first quarter of 1998, the company acquired for approximately $18 million in cash, the door hardware technology and intellectual property relating to residential door locksets from the Master Lock unit of Fortune Brands, Inc. The Master Lock transaction covers patents and certain manufacturing assets used to produce residential locks, excluding padlocks. In the third quarter of 1998, the company acquired full ownership of GHH-RAND Schraubenkompressoren GmbH & Co. KG (GHH-RAND), a manufacturer of air ends for air compressors. The company previously owned 50 percent of GHH-RAND Schraubenkompressoren GmbH & Co. KG (GHH-RAND). In addition, during 1998, the company purchased several smaller businesses. Pro forma results, assuming the acquisitions had occurred at the beginning of the year, would not have been significantly different than those reported. On October 31, 1997, the company acquired Thermo King Corporation (Thermo King), from Westinghouse Electric Corporation, for approximately $2.56 billion in cash. Thermo King is the world leader in the transport temperature-control business for trailers, truck bodies, seagoing containers, buses and light-rail cars. The following unaudited pro forma consolidated results of operations for the years ended December 31, 1997 and 1996, reflect the acquisition as though it occurred at the beginning of the periods after adjustments for the impact of interest on acquisition debt, depreciation and amortization of assets, including goodwill, to reflect the purchase price allocation: (Unaudited) In millions except per share amounts 1997 1996 Sales $7,965.4 $7,698.4 Net earnings 390.1 342.2 Basic earnings per share $2.39 $2.12 Diluted earnings per share 2.37 2.11 The above pro forma results are not necessarily indicative of what the actual results would have been had the acquisition occurred at the beginning of the period. Further, the pro forma results are not intended to be a projection of future results of the combined companies. On April 3, 1997, the company completed the acquisition of Newman Tonks Group PLC (Newman Tonks), a producer of architectural hardware, for approximately $370 million. Newman Tonks is a leading manufacturer, specifier and supplier of branded architectural hardware products. On August 27, 1996, the company acquired for $34.3 million in cash and the assumption of certain liabilities, substantially all of the assets of Zimmerman International Corporation (Zimmerman). Zimmerman manufactures equipment and systems that assist in handling or lifting tools, components and materials for a variety of industrial operations. On January 31, 1996, the company acquired for $95.4 million in cash and the assumption of certain liabilities, the Steelcraft Division of MascoTech, Inc. Steelcraft manufactures a wide range of cold-rolled and galvanized steel doors for use primarily in nonresidential construction. These transactions have been accounted for as purchases and accordingly, each purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values. The company has classified as intangible assets the costs in excess of the fair value of the net assets of companies acquired. The results of all acquired operations have been included in the consolidated financial statements from their respective acquisition dates. NOTE 3 - DISPOSITIONS AND RESTRUCTURE OF OPERATIONS: In the first quarter of 1998, the company completed the sale of Ing. G. Klemm Bohrtechnik GmbH. Also, during 1998, the company sold certain assets of Ingersoll-Rand Architectural Hardware Group Limited (formerly Newman Tonks Group PLC). Sale proceeds approximated the book value of these assets. In the third quarter of 1998, the company sold the Spra-Coupe product line, which was reported as part of the Specialty Vehicles Segment. The sale price of approximately $35 million resulted in a $9 million gain. On February 14, 1997, the company sold the Clark-Hurth Components Group (Clark-Hurth) to Dana Corporation for approximately $241.5 million of net cash. This group's 1997 results, inclusive of the sale transaction, produced operating income for the first quarter of approximately $2.7 million, but on an after-tax basis, reduced net earnings by approximately $3.6 million. In the fourth quarter of 1997, the company's 51-percent owned joint venture, Ingersoll-Dresser Pump Company (IDP), recorded a restructuring charge of $24 million. The charge included the costs of personnel reductions in administrative and sales support and the consolidation of repair and service operations. An additional charge of $14.7 million was recorded in 1997 for the writedown of assets held for sale by the Specialty Vehicles Segment. During 1996, the company sold the assets of the Pulp Machinery Division (the largest unit in the Process Systems Group) for approximately $122.3 million for a pretax gain of $45 million. Also, the company sold the remaining assets of the Process Systems Group. The sale was completed during the fourth quarter of 1996 at a price of approximately $58 million in cash for a pretax gain of approximately $10 million. In the first and fourth quarters of 1996, the company accrued for the realignment of its foreign operations, principally in Europe. These accruals were primarily for severance payments and pension benefits associated with work force reductions. Also in the first quarter of 1996, accruals were established for the exit or abandonment of selected European product lines and the closing of a steel foundry. These accruals totalled $42.4 million and were charged to operating income. NOTE 4 - INVENTORIES: At December 31, inventories were as follows: In millions 1998 1997 Raw materials and supplies $ 186.2 $ 174.1 Work-in-process 246.5 218.6 Finished goods 653.5 613.8 1,086.2 1,006.5 Less-LIFO reserve 145.4 151.7 Total $ 940.8 $ 854.8 Work-in-process inventories are stated after deducting customer progress payments of $17.8 million in both 1998 and 1997. At December 31, 1998 and 1997, LIFO inventories comprised approximately 43 percent and 40 percent, respectively, of consolidated inventories. During the current year, there were no liquidations of LIFO layers. However, during 1997 and 1996 certain inventory quantities were reduced, resulting in partial liquidations of LIFO layers. This decreased cost of goods sold by $4.1 million in 1997 and $4.8 million in 1996. These liquidations increased net earnings in 1997 and 1996 by approximately $2.5 million and $2.9 million, respectively. NOTE 5 - INVESTMENTS IN PARTIALLY-OWNED EQUITY AFFILIATES: The company has numerous investments, ranging from 20 percent to 50 percent, in companies that operate in similar lines of business. The company's investments in and amounts due to partially-owned equity affiliates amounted to $380.9 million and $36.2 million, respectively, at December 31, 1998, and $354.2 million and $26.2 million, respectively, at December 31, 1997. The company's equity in the net earnings of its partially-owned equity affiliates was $46.8 million, $28.8 million and $42.4 million in 1998, 1997 and 1996, respectively. The company's 1997 earnings were reduced by $13.9 million due to a restructuring charge at one of its partially- owned equity affiliates. The company received dividends based on its equity interests in these companies of $8.5 million, $8.7 million and $6.8 million in 1998, 1997 and 1996, respectively. Summarized financial information for these partially-owned equity affiliates at December 31, and for the years then ended: In millions 1998 1997 Current assets $ 985.1 $ 959.6 Property, plant and equipment, net 490.5 506.7 Other assets 57.7 73.7 Total assets $1,533.3 $1,540.0 Current liabilities $ 526.5 $ 610.8 Long-term debt 65.9 75.3 Other liabilities 170.0 227.1 Total shareholders' equity 770.9 626.8 Total liabilities and equity $1,533.3 $1,540.0 In millions 1998 1997 1996 Net sales $1,996.2 $2,048.4 $2,070.4 Gross profit 353.6 382.4 391.7 Net earnings 90.6 59.4 89.5 NOTE 6 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and accruals at December 31, were: In millions 1998 1997 Accounts payable $ 470.2 $ 411.1 Accrued: Payrolls and benefits 272.2 253.1 Taxes other than income 48.2 41.4 Insurance and claims 111.0 114.5 Postemployment benefits 70.2 68.7 Warranties 80.7 76.2 Interest 48.6 41.5 Other accruals 387.5 364.0 $1,488.6 $1,370.5 NOTE 7 - FINANCIAL INSTRUMENTS: The company, as a large multinational company, maintains significant operations in foreign countries. As a result of these global activities, the company is exposed to changes in foreign currency exchange rates, which affect the results of operations and financial condition. The company manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through the use of financial instruments. Generally, the only financial instruments the company utilizes are forward exchange contracts. The purpose of the company's hedging activities is to mitigate the impact of changes in foreign currency exchange rates. The company attempts to hedge transaction exposures through natural offsets. To the extent that this is not practicable, major exposure areas considered for hedging include foreign currency denominated receivables and payables, intercompany loans, firm committed transactions, anticipated sales and purchases, and dividends relating to foreign subsidiaries. The following table summarizes by major currency the contractual amounts of the company's forward contracts in U.S. dollars. Foreign currency amounts are translated at year-end rates at the respective reporting date. The "buy" amounts represent the U.S. equivalent of commitments to purchase foreign currencies, and the "sell" amounts represent the U.S. equivalent of commitments to sell foreign currencies. Some of the forward contracts involve the exchange of two foreign currencies according to local needs in foreign subsidiaries. At December 31, the contractual amounts were: In millions 1998 1997 Buy Sell Buy Sell Australian dollars $ 2.4 $ 11.5 $ 19.5 $ 0.5 Brazilian reais - 13.8 - - British pounds 26.3 163.0 37.0 113.7 Canadian dollars 2.0 42.9 20.3 12.4 Czech koruna - 10.9 - 16.2 Danish krona 5.9 5.9 - - Deutsche marks 17.6 216.4 27.1 194.0 Dutch guilders 1.0 10.3 - 0.8 French francs 7.8 64.9 2.7 64.0 Irish punts 7.6 0.2 71.7 - Italian lire 68.6 33.9 47.0 32.9 Japanese yen 2.8 20.5 20.4 4.9 New Zealand dollars 3.0 6.4 - - Singapore dollars - 12.0 4.3 - Spanish pesetas 10.3 20.2 5.5 18.9 Other 6.0 9.1 6.0 7.5 Total $161.3 $641.9 $261.5 $465.8 Forward contracts utilized by the company have maturities of one to 12 months. The company's forward contracts that hedge transactions or firm commitments do not subject the company to risk due to foreign exchange rate movement, since gains and losses on these contracts generally offset losses and gains on the assets, liabilities or other transactions being hedged. Contracts purchased to mitigate the variability of future cash flows of foreign subsidiaries bear market risk to the extent actual transacted amounts vary from the forecasted amounts. All gains and losses on these contracts have been included in earnings. The counterparties to the company's forward contracts consist of a number of major international financial institutions. The credit ratings and concentration of risk of these financial institutions are monitored on a continuing basis and present no significant credit risk to the company. The carrying value of cash and cash equivalents, marketable securities, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. The following table summarizes the estimated fair value of the company's remaining financial instruments at December 31: In millions 1998 1997 Long-term debt: Carrying value $2,166.0 $2,528.0 Estimated fair value 2,299.7 2,587.4 Forward contracts: Contract (notional) amounts: Buy contracts $ 161.3 $ 261.5 Sell contracts 641.9 465.8 Fair (market) values: Buy contracts 164.2 260.9 Sell contracts 649.8 461.6 Fair value of long-term debt was determined by reference to the December 31, 1998 and 1997, market values of comparably rated debt instruments. Fair values of forward contracts are based on dealer quotes at the respective reporting dates. NOTE 8 - LONG-TERM DEBT AND CREDIT FACILITIES: At December 31, long-term debt consisted of: In millions 1998 1997 6 7/8% Notes Due 2003 $100.0 $ 100.0 6.255% Notes Due 2001 400.0 400.0 9% Debentures Due 2021 125.0 125.0 7.20% Debentures Due 2025 150.0 150.0 6.48% Debentures Due 2025 150.0 150.0 6.391% Debentures Due 2027 200.0 200.0 6.443% Debentures Due 2027 200.0 200.0 Medium-term Notes Due 2000-2028, at an average rate of 6.45% 679.9 1,039.9 9.75% Clark Debentures Due 2001 100.0 100.0 Clark Medium-term Notes Due 2023, at an average rate of 8.22% 50.2 50.2 Other domestic and foreign loans and notes, at end- of-year average interest rates of 6.278% in 1998 and 7.321% in 1997, maturing in various amounts to 2013 10.9 12.9 $2,166.0 $2,528.0 Debt retirements for the next five years are as follows: $251.8 million in 1999, $71.7 million in 2000, $734.8 million in 2001, $82.4 million in 2002 and $196.5 million in 2003. In December 1998, the company repurchased $110.0 million of its medium-term notes for $116.9 million including accrued interest. The average coupon of the notes repurchased was 6.53% with maturities ranging from 2000 to 2005. In November 1997, the company issued $400.0 million of notes at 6.255% per annum due 2001. In addition, the company issued two series of debentures for $200.0 million each at 6.391% per annum and 6.443% per annum, respectively, due in 2027. The 6.391% debentures and the 6.443% debentures may be repaid at the option of the holder on November 15, 2004 and November 15, 2007, respectively, and each November 15 thereafter. During November and December 1997, the company also issued medium-term notes totalling $706.4 million at an average annual rate of 6.30% with maturities ranging from 1999 to 2028. Some of the medium-term notes may be repaid at the option of the holder prior to the stated maturity. The proceeds from these financings were used to refinance short- term borrowings related to the acquisition of Thermo King. At December 31, 1998, the company had a 364-day and a five-year committed revolving credit line totalling $1.0 billion, both of which were unused. These lines provide support for commercial paper and indirectly provide support for other financing instruments, such as letters of credit and comfort letters, as required in the normal course of business. The company compensates banks for these lines with fees equal to a weighted average of 0.065% per annum. Available foreign lines of credit were $454.2 million, of which $395.8 million were unused at December 31, 1998. No major cash balances were subject to withdrawal restrictions. At December 31, 1998, the average rate of interest for loans payable, excluding the current portion of long-term debt, was 8.306%. Capitalized interest on construction and other capital projects amounted to $4.0 million, $3.2 million and $4.6 million in 1998, 1997 and 1996, respectively. Interest income, included in other income (expense), net, was $11.8 million, $14.9 million and $10.3 million in 1998, 1997 and 1996, respectively. NOTE 9 - COMMITMENTS AND CONTINGENCIES: The company is involved in various litigations, claims and administrative proceedings, including environmental matters, arising in the normal course of business. In assessing its potential environmental liability, the company bases its estimates on current technologies and does not discount its liability or assume any insurance recoveries. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that recovery or liability with respect to these matters would not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. During 1997, the company established two wholly-owned special purpose subsidiaries to purchase accounts and notes receivable at a discount from the company on a continuous basis. These special purpose subsidiaries simultaneously sell an undivided interest in these accounts and notes receivable to a financial institution up to a maximum of $170 million. The agreements between the special purpose corporations and the financial institution will expire in one-year periods. These agreements will be renewed with either the current or another financial institution. The company is retained as the servicer of the pooled receivables. Prior to 1997, the company had sold an undivided interest in the accounts and notes receivable directly to financial institutions. During 1998, 1997 and 1996, such sales of receivables amounted to $723.7 million, $614.0 million and $593.7 million, respectively. At December 31, 1998 and 1997, $170 million and $150 million, respectively, of such sold receivables remained uncollected. Receivables, excluding the designated pool of accounts and notes receivable, sold during 1998, 1997 and 1996 with recourse, amounted to $63.2 million, $56.9 million and $147.4 million, respectively. At December 31, 1998 and 1997, $13.1 million and $13.3 million, respectively, of such receivables sold remained uncollected. As of December 31, 1998, the company had no significant concentrations of credit risk in trade receivables due to the large number of customers which comprised its receivables base and their dispersion across different industries and countries. In the normal course of business, the company has issued several direct and indirect guarantees, including performance letters of credit, totalling approximately $91.7 million at December 31, 1998. The company has also guaranteed the residual value of leased product in the aggregate amount of $28.9 million. Upon the termination of a dealer, a newly selected dealer generally acquires the assets of the prior dealer and assumes any related financial obligation. Accordingly, the risk of loss to the company is minimal, and historically, only immaterial losses have been incurred relating to these arrangements. Management believes these guarantees will not adversely affect the consolidated financial statements. Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased. Total rental expense was $75.0 million in 1998, $76.2 million in 1997 and $66.9 million in 1996. Minimum lease payments required under noncancellable operating leases with terms in excess of one year for the next five years and thereafter, are as follows: $42.9 million in 1999, $31.1 million in 2000, $19.0 million in 2001, $11.8 million in 2002, $8.6 million in 2003 and $6.6 million thereafter. NOTE 10 - EQUITY-LINKED SECURITIES: In March 1998, the company, together with Ingersoll Financing I, a Delaware statutory business trust of the company (Finance Trust), issued an aggregate of (a) 16,100,000 equity-linked securities, and (b) 1,610,000 Finance Trust 6.22% capital securities, each with a $25 stated liquidation amount (the capital securities). The equity-linked securities consisted of (a) 14,490,000 income equity-linked securities (income securities), and (b) 1,610,000 growth equity-linked securities (growth securities). Each equity-linked security consists of a unit comprised of (a) a contract to purchase from the company no later than May 16, 2001, a number of shares of the company's common stock determined in accordance with a specified formula and to receive an annual contract adjustment payment until May 15, 2001 of 0.53%, (in the case of an income security), or 0.78% (in the case of a growth security), and (b) either beneficial ownership of a capital security (in the case of an income security), or a 1/40 undivided beneficial interest in a zero coupon U.S. Treasury Security maturing May 15, 2001 (in the case of a growth security). Under the terms of the stock purchase contracts, the company will issue between 6.9 million and 8.3 million common shares by May 16, 2001. The capital securities associated with the income securities and the U.S. Treasury Securities associated with the growth securities have been pledged as collateral to secure the holders' obligations in respect of the common stock purchase contracts. The capital securities were issued by the Finance Trust and are entitled to a distribution rate of 6.22% per annum of their $25 stated liquidation amount. The Finance Trust utilized the proceeds from the issuance of the equity-linked and capital securities to purchase $402.5 million of the company's 6.22% Debentures due May 16, 2003. The Debentures are the sole asset of the Finance Trust. The interest rate on the 6.22% Debentures and the distribution rate on the capital securities and common securities of the Finance Trust are to be reset, subject to certain limitations, effective May 16, 2001. The company has recorded the present value of the contract adjustment payments, totalling $6.4 million, as a liability and a reduction of shareholders' equity. The liability will be reduced as the contract adjustment payments are made. The company has the right to defer the contract adjustment payments and the payment of interest on the 6.22% Debentures, but any such election will subject the company to restrictions on the payment of dividends on, and redemption of, its outstanding shares of common stock, and on the payment of interest on, or redemption of, debt securities of the company junior in rank to the 6.22% Debentures. The company paid costs of approximately $12.9 million in connection with the issuance of the equity-linked securities and the capital securities. The portion of such costs which relate to the issuance of the stock purchase contracts has been recorded as a reduction of shareholders' equity. NOTE 11 - COMMON STOCK: In May 1997, the board of directors authorized the repurchase of up to 15.0 million shares of the company's common stock at management's discretion. Shares repurchased will be used to replenish the company's treasury shares, which were substantially depleted by a transfer of shares to the Leveraged Employee Stock Ownership Plan, and for general corporate purposes. The number of treasury shares at December 31, 1998, and December 31, 1997, were 4,494,930 and 2,001,432, respectively. In August 1997, the board of directors declared a three-for-two stock split of the company's common stock. The stock split was made in the form of a stock dividend, and was paid on September 2, 1997, to shareholders of record on August 19, 1997. All prior year per share amounts have been restated to reflect the stock split. In November 1998, the company adopted a new shareholder rights plan to replace the plan which expired on December 22, 1998. Under the new plan, one right was distributed for each share of Ingersoll- Rand common stock outstanding at the close of business on December 22, 1998. Initially, the rights are attached to the common stock and are not exercisable. The rights become exercisable and will trade separately from the common stock 10 days following the first public announcement that any person or group has acquired at least 15 percent of the company's outstanding common stock, or on the 10th day following the commencement or the announcement of an intention to commence a tender offer, which would result in that person or group acquiring beneficial ownership of att least 15 percent of the outstanding shares of common stock. Each right would entitle the holder to purchase one-thousandth of a share of Series A Preference Stock at an exercise price of $200. If any person or group acquires 15 percent or more of the company's common stock, the rights not held by the 15-percent shareholder would become exercisable to purchase the company's common stock at a 50-percent discount. The plan provides that, at any time after a person or group becomes an acquiring person and prior to the acquisition by that person or group of 50 percent or more of the outstanding common stock, the board may exchange the rights (other than the rights held by the acquiring person, which will have become void), at an exchange ratio of one share of common stock per right. The new rights will expire on December 22, 2008, unless earlier redeemed or exchanged by the company, as provided in the rights plan. The company may elect to redeem the rights at $0.01 per right. NOTE 12 - LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN: The company's sponsors a Leveraged Employee Stock Ownership Plan (LESOP) for eligible employees. The LESOP is used to fund certain employee benefit plans. At December 31, 1998, and December 31, 1997, the LESOP held approximately 1.1 million and 1.7 million shares, respectively, which are unallocated. The carrying value0 offor the unallocated shares was $27.0 million and $41.4 million at December 31, 1998, and December 31, 1997, respectively, and is classified as a reduction of shareholders' equity pending allocation to participants. At December 31, 1998, the LESOP owed the company $15.6 million payable in monthly installments through 2001. Company contributions to the LESOP and dividends on unallocated shares are used to make loan principal and interest payments. With each principal and interest payment, the LESOP allocates a portion of the common stock to participating employees. NOTE 13 - INCENTIVE STOCK PLANS: Under the company's Incentive Stock Plans, key employees have been granted options to purchase common shares at prices not less than the fair market value at the date of the grant. Options become exercisable one year after the date of the grant and expire at the end of ten years. The plans, approved in 1985, 1990, 1995 and 1998, also authorize stock appreciation rights (SARs) and stock awards. As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the company continues to account for its stock plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. Accordingly, compensation expense has been recognized for SARs (which were generally settled for cash) and for stock awards. Under SFAS No. 123, compensation cost for the applicable provisions of the company's incentive stock plans would be determined based upon the fair value at the grant date for awards issued since 1996. Applying this methodology would have reduced net earnings and diluted earnings per share by approximately $14.7 million and nine cents per share for 1998; $10.0 million and six cents per share for 1997 and $6.7 million and four cents per share for 1996. On December 15, 1996, the company cancelled SARs which were previously attached to 2,758,500 stock options. Included in the SFAS No. 123 expense figures for 1997 and 1996 were approximately $1.5 million (or one cent per share) and $2.9 million (or two cents per share), respectively, for the cost of this revocation. The average fair values of the options granted during 1998, 1997 and 1996, were estimated at $8.06, $8.55 and $7.31, respectively, on the date of grant, using the Black-Scholes option-pricing model, which included the following assumptions: 1998 1997 1996 Dividend yield 1.42% 1.61% 1.86% Volatility 25.76% 22.59% 22.52% Risk-free interest rate 5.39% 6.52% 6.17% Forfeiture rate -- -- -- Expected life 4 years 4 years 4 years Changes in options outstanding under the plans were as follows: Shares subject Option price to option range per share January 1, 1997 5,955,150 $13.83-31.13 Granted 2,031,000 30.33-41.28 Exercised (1,905,250) 13.83-28.54 Cancelled (37,500) 26.21-26.63 December 31, 1997 6,043,400 $13.83-41.28 Granted 2,280,250 37.03-47.03 Exercised (1,419,525) 13.83-40.47 Cancelled (69,600) 24.08-41.28 December 31, 1998 6,834,525 $13.83-47.03 At December 31, 1998, there were 387,800 SARs outstanding with no stock options attached. The company has reserved 13,320,672 shares for future awards at December 31, 1998. In addition, 554,875 654,875 shares of common stock were reserved for future issue, contingent upon attainment of certain performance goals and future service. The following table summarizes information concerning currently outstanding and exercisable options: Options Options outstanding exercisable Weighted Weighted Weighted Number average average Number average Range of outstanding remaining exercise exercisable exercise exercise price at 12/31/98 life price at 12/31/98 price $14.77-$15.00 15,750 0.4 $14.77 15,750 $14.77 15.01- 20.00 166,275 2.3 16.32 166,275 16.32 20.01- 25.00 1,749,700 5.2 22.91 1,749,700 22.91 25.01- 30.00 982,500 7.3 26.31 982,500 26.31 30.01- 35.00 1,515,800 8.3 33.62 1,515,800 33.62 35.01- 40.00 30,000 9.0 37.03 - - 40.01- 45.00 2,264,100 9.1 42.23 131,000 40.51 45.01- 47.03 110,400 9.4 46.18 - - $14.77-$47.03 6,834,525 4,561,025 The company also maintains a shareholder-approved Management Incentive Unit Award Plan. Under the plan, qualifying executives are awarded incentive units. When dividends are paid on common stock, dividends are awarded to unit holders, one-half of which is paid in cash, the remaining half of which is credited to the participant's account in the form of so-called common stock equivalents. The fair value of accumulated common stock equivalents is paid in cash upon the participant's retirement. The number of common stock equivalents credited to participants' accounts at December 31, 1998 and 1997, are 513,470 and 552,828 respectively. NOTE 14 - INCOME TAXES: Earnings before income taxes for the years ended December 31, were taxed within the following jurisdictions: In millions 1998 1997 1996 United States $593.8 $463.2 $467.3 Foreign 195.4 150.5 101.0 Total $789.2 $613.7 $568.3 The provision for income taxes was as follows: In millions 1998 1997 1996 Current tax expense: United States $194.0 $179.2 $186.6 Foreign 78.2 66.3 49.5 Total current 272.2 245.5 236.1 Deferred tax expense: United States 13.1 (0.9) (16.4) Foreign (5.2) (11.4) (9.4) Total deferred 7.9 (12.3) (25.8) Total provision for income taxes $280.1 $233.2 $210.3 The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory income tax rate to pretax income, as a result of the following differences: Percent of pretax income 1998 1997 1996 Statutory U.S. rates 35.0% 35.0% 35.0% Increase (decrease) in rates resulting from: Amortization of goodwill 2.2 2.0 1.7 Foreign operations 0.6 0.4 0.8 Foreign sales corporation (1.8) (0.9) (0.8) Earnings/losses of equity companies (0.7) (0.5) (0.8) State and local income taxes, net of U.S. tax 2.0 1.3 1.5 Puerto Rico - Sec 936 Credit (2.0) (0.5) -- Other (0.2) 1.2 (0.4) Effective tax rate 35.5% 38.0% 37.0% A summary of the deferred tax accounts at December 31, follows: In millions 1998 1997 1996 Current deferred assets and (liabilities): Differences between book and tax bases of inventories and receivables $ 37.8 $ 35.7 $ 37.9 Differences between book and tax expense for other employee related benefits and allowances 57.0 44.2 39.3 Provisions for restructure of operations and plant closings not yet deductible for tax purposes - 12.5 11.1 Other reserves and valuation allowances in excess of tax deductions 38.9 60.4 61.6 Other differences between tax and financial statement values 9.7 8.0 12.5 Gross current deferred net tax assets 143.4 160.8 162.4 Noncurrent deferred tax assets and (liabilities): Tax items associated with equity companies 13.0 10.9 10.7 Postretirement and postemployment benefits other than pensions in excess of tax deductions 267.0 266.1 246.7 Other reserves in excess of tax expense 106.3 112.2 80.5 Tax depreciation in excess of book depreciation (67.2) (66.8) (60.2) Pension contributions in excess of book expense (35.8) (36.9) (52.0) Taxes provided for unrepatriated foreign earnings (22.5) (28.5) (28.5) Gross noncurrent deferred net tax assets 260.8 257.0 197.2 Less: deferred tax valuation allowances (24.9) (42.1) (34.6) Total net deferred tax assets $379.3 $375.7 $325.0 A total of $22.5 million of deferred taxes have been provided for a portion of the undistributed earnings of subsidiaries operating outside of the United States. As to the remainder, these earnings have been, and under current plans, will continue to be reinvested. Therefore, it is not practicable to estimate the amount of additional taxes which may be payable upon repatriation. NOTE 15 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The company sponsors several postretirement plans that cover most domestic employees. These plans provide for health care benefits and in some instances, life insurance benefits. Postretirement health plans are contributory and are adjusted annually. Life insurance plans are noncontributory. When full-time employees retire from the company between age 55 and 65, most are eligible to receive, at a cost to the retiree, certain health care benefits identical to those available to active employees. After attaining age 65, an eligible retiree's health care benefit coverage becomes coordinated with Medicare. The company funds the benefit costs principally on a pay-as-you-go basis. The following disclosure is provided in accordance with SFAS No. 132 "Employers Disclosure about Pensions and other Postretirement Benefits", which was adopted January 1, 1998. Summary information on the company's plans at December 31, was as follows: In millions 1998 1997 Change in benefit obligations: Benefit obligation at beginning of year $ 597.5 $ 588.3 Service cost 10.4 7.9 Interest cost 41.4 38.3 Plan participants' contributions 3.4 2.8 Acquisitions - 30.0 Actuarial losses/(gains) 36.2 (21.3) Benefits paid (50.2) (49.0) Other 9.6 0.5 Benefit obligation at end of year $ 648.3 $ 597.5 Funded status: Plan assets less than benefit obligations $(648.3) $(597.5) Unrecognized: Prior service gains (66.7) (71.8) Plan net gains (25.6) (62.0) Accrued costs in the balance sheet $(740.6) $(731.3) Weighted-average assumptions: Discount rate 6.75% 7.00% Current year medical inflation 7.60% 8.30% Ultimate inflation rate (2003) 4.50% 4.50% The components of net periodic postretirement benefits cost for the years ended December 31, were as follows: In millions 1998 1997 1996 Service cost $10.4 $ 7.9 $ 6.4 Interest cost 41.4 38.3 40.6 Net amortization of unrecognized: Prior service gains (5.1) (5.1) (5.3) Plan net gains (0.2) (1.6) (0.4) Net periodic postretirement benefits cost $46.5 $39.5 $41.3 A 1% change in the medical trend rate assumed for postretirement benefits would have the following effects at December 31, 1998: In millions 1% Increase 1% Decrease Effect on total of service and interest cost components $ 3.8 $ (3.5) Effect on postretirement benefit obligation 49.8 (46.7) NOTE 16 - PENSION PLANS: The company has noncontributory pension plans covering substantially all domestic employees. In addition, certain employees in other countries are covered by pension plans. The company's domestic salaried plans principally provide benefits based on a career average earnings formula. The company's hourly pension plans provide benefits under flat benefit formulas. Foreign plans provide benefits based on earnings and years of service. Most of the foreign plans require employee contributions based on the employee's earnings. In addition, the company maintains other supplemental benefit plans for officers and other key employees. The company's policy is to fund an amount which could be in excess of the pension cost expensed, subject to the limitations imposed by current statutes or tax regulations. Information regarding the company's pension plans in accordance with SFAS No. 132 is as follows: In millions 1998 1997 Change in benefit obligations: Benefit obligation at beginning of year $1,929.3 $1,633.7 Service cost 44.3 39.7 Interest cost 136.3 123.1 Employee contributions 6.3 4.9 Amendments 20.2 3.8 Acquisitions 5.6 215.6 Expenses paid (2.9) (5.0) Actuarial losses 89.5 50.2 Benefits paid (147.4) (128.9) Foreign exchange impact (3.4) (8.0) Other 0.5 0.2 Benefit obligation at end of year $2,078.3 $1,929.3 In millions 1998 1997 Change in plan assets: Fair value at beginning of year $2,031.5 $1,689.4 Actual return on assets 285.8 316.0 Company contributions 30.1 21.0 Employee contributions 6.3 4.9 Acquisitions 0.8 132.7 Expenses paid (2.9) (5.0) Benefits paid (143.0) (125.9) Foreign exchange impact (7.3) (1.6) Fair value of assets at end of year $2,201.3 $2,031.5 Funded status: Plan assets in excess of benefit obligations $ 123.0 $ 102.2 Unrecognized: Net transition asset 11.8 12.7 Prior service costs 62.9 47.4 Plan net gains (194.3) (170.6) Net amount recognized $ 3.4 $ (8.3) Prepaid/(accrued) costs included in the balance sheet: Prepaid benefit cost $ 92.8 $ 64.4 Accrued benefit liability (91.0) (75.1) Intangible asset 1.6 2.4 Net amount recognized $ 3.4 $ (8.3) Weighted-average assumptions: Discount rate: U.S. plans 6.75% 7.00% International plans 6.75% 8.00% Rate of compensation increase: U.S. plans 4.50% 4.75% International plans 4.50% 5.50% Expected return on plan assets: U.S. plans 9.00% 9.00% International plans 8.00% 8.75% The components of the company's pension costs for the years ended December 31, include the following: In millions 1998 1997 1996 Service cost $ 44.3 $ 39.7 $ 38.7 Interest cost 136.3 123.1 113.5 Expected return on plan assets (175.4) (152.2) (134.3) Net amortization of unrecognized: Prior service costs 4.8 4.6 3.5 Transition amount 1.4 1.4 1.4 Plan net losses 2.1 0.8 1.5 Net pension cost $ 13.5 $ 17.4 $ 24.3 The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations more than plan assets were $239.2 million, $196.7 million and $101.0 million, respectively, as of December 31, 1998, and $286.3 million, $234.7 million and $105.5 million, respectively, as of December 31, 1997. Plan investment assets of domestic plans are balanced between equity securities and cash equivalents or debt securities. Assets of foreign plans are invested principally in equity securities. Most of the company's domestic employees are covered by savings and other defined contribution plans. Employer contributions and costs are determined based on criteria specific to the individual plans and amounted to approximately $32.4 million, $28.3 million and $27.4 million in 1998, 1997, and 1996, respectively. The company's costs relating to foreign defined contribution plans, insured plans and other foreign benefit plans were $7.8 million, $11.0 million and $8.2 million in 1998, 1997 and 1996, respectively. NOTE 17 - BUSINESS SEGMENT INFORMATION: Effective January 1, 1998, the company adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 requires disclosure of certain financial and descriptive information about operating segments. In addition, SFAS No. 131 requires disclosures about products and services, and geographic areas. Operating segments are defined as components of a company engaging in business activities for which separate financial information is available and evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that the operating segments results are prepared on a management basis that is consistent with the manner in which the company disaggregates financial information for internal review and decision making. The company evaluates performance based on operating income contribution rates. Intercompany sales transactions are entirely contained within each segment and are eliminated at the segment level. Segment information from previous years has been restated to conform to the current year presentation. A description of the company's reportable segments and operations by reportable segment and geographic area for the three years ended December 31, 1998, follows: Specialty Vehicles - The Specialty Vehicle Segment designs, manufactures and markets powered vehicles that play a niche role in such fields as infrastructure development, commercial construction and material movement. Specialty Vehicles includes Bobcat skid- steer loaders and compact hydraulic excavators; Club Car golf cars; Blaw-Knox pavers; and Ingersoll-Rand compactors, drilling equipment and rough-terrain material handlers. Air and Temperature Control The Air and Temperature Control Segment focuses on markets requiring air and refrigerant-gas compression technology and services to provide gas pressure for distribution to end users or to maintain a refrigeration cycle. Air and Temperature Control includes Thermo King transport temperature-control equipment and Ingersoll-Rand air compressors. Hardware and Tools The Hardware and Tools Segment concentrates on manufacturing, marketing, and managing the distribution channels required to reach end user customers seeking products that enhance productivity and security in the industrial, construction, and do-it-yourself markets. Hardware and Tools includes architectural hardware products, such as Schlage locks, Von Duprin exit devices, door- control hardware, steel doors, power-operated doors and architectural columns, and tools and related industrial-production equipment. Engineered Products The Engineered Products Segment is composed of highly engineered specific application products that are sold on a contract basis. Engineered Products includes Torrington and Fafnir bearings and components, and pumps used in industrial, commercial and municipal applications. Geographic sales by destination for the years ended December 31 were as follows: In millions 1998 1997 Sales United States $5,114.5 $4,295.6 Foreign 3,177.0 2,807.7 Total $8,291.5 $7,103.3 Prior to 1997, sales information by geographic area was maintained only on an origination basis, whereas management now reviews geographic sales on a destination basis. Foreign sales on an origination basis for 1998, 1997 and 1996 were $2,782.9 million, $2,483.9 million and $2,468.4 million, respectively. Long-lived asset information by geographic area as of December 31 was as follows: In millions 1998 1997 Long-lived assets United States $4,271.9 $4,252.0 Foreign 1,029.4 1,075.8 Total $5,301.3 $5,327.8 A summary of operation by reportable segments for the years ended December 31, was as follows: Dollar amounts in millions 1998 1997 1996 Specialty Vehicles Sales $2,180.4 $2,011.8 $1,883.7 Operating income 333.3 226.7 183.8 Operating income as % of sales 15.3% 11.3% 9.8% Depreciation and amortization 59.7 63.3 63.5 Air and Temperature Control Sales 2,236.0 1,256.6 1,042.3 Operating income 262.5 133.7 114.3 Operating income as % of sales 11.7% 10.6% 11.0% Depreciation and amortization 105.4 35.7 18.6 Hardware and Tools Sales 1,724.2 1,652.1 1,245.0 Operating income 288.3 254.8 189.4 Operating income as % of sales 16.7% 15.4% 15.2% Depreciation and amortization 44.8 39.7 28.6 Engineered Products Sales 2,150.9 2,182.8 2,531.9 Operating income 212.2 193.9 239.8 Operating income as % of sales 9.9% 8.9% 9.5% Depreciation and amortization 70.1 72.2 89.5 Total Sales $8,291.5 $7,103.3 $6,702.9 Operating income from reportable segments 1,096.3 809.1 727.3 Unallocated corporate expenses (51.9) (48.8) (43.8) Total operating income $1,044.4 $ 760.3 $ 683.5 Total operating income as % of sales 12.6% 10.7% 10.2% Depreciation and amortization from reportable segments 280.0 210.9 200.2 Unallocated depreciation and amortization 2.6 1.4 2.4 Total depreciation and amortization $ 282.6 $ 212.3 $ 202.6 Report of Management The accompanying consolidated financial statements have been prepared by the company. They conform with generally accepted accounting principles and reflect judgments and estimates as to the expected effects of incomplete transactions and events being accounted for currently. The company believes that the accounting systems and related controls that it maintains are sufficient to provide reasonable assurance that assets are safeguarded, transactions are appropriately authorized and recorded, and the financial records are reliable for preparing such financial statements. The concept of reasonable assurance is based on the recognition that the cost of a system of internal accounting controls must be related to the benefits derived. The company maintains an internal audit function that is responsible for evaluating the adequacy and application of financial and operating controls, and for testing compliance with company policies and procedures. The Audit Committee of the board of directors is comprised entirely of individuals who are not employees of the company. This committee meets periodically with the independent accountants, the internal auditors and management to consider audit results and to discuss significant internal accounting controls, auditing and financial reporting matters. The Audit Committee recommends the selection of the independent accountants, who are then appointed by the board of directors, subject to ratification by the shareholders. The independent accountants are engaged to perform an audit of the consolidated financial statements in accordance with generally accepted auditing standards. Their report follows. /S/ David W. Devonshire David W. Devonshire Senior Vice President and Chief Financial Officer Report of Independent Accountants PricewaterhouseCoopers LLP 400 Campus Drive Florham Park, NJ 07932 February 2, 1999 To the Board of Directors and Shareholders of Ingersoll-Rand Company: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Ingersoll-Rand Company and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP EX-21 17 EXHIBIT 21 LIST OF SUBSIDIARIES OF INGERSOLL-RAND COMPANY The following list represents the principal subsidiaries of the company all of which (except as otherwise indicated) are deemed to be 100% owned, directly or indirectly, and whose financial statements are included in the consolidated statements. The subsidiaries of Ingersoll-Dresser Pump Company (IDP), a general partnership owned 51% by the company, are deemed to be 100% owned by IDP directly or indirectly. The names of particular subsidiaries omitted, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. SUBSIDIARIES OF INGERSOLL-RAND COMPANY Aro de Venezuela, C.A. Venezuela Aro International Corporation Delaware Clark Equipment Company Delaware Bobcat Corporation Japan Blaw-Knox Construction Equipment Corporation Delaware Clark Industries Company Delaware Blaw-Knox Company England Clark Business Services Corporation Michigan Clark Distribution Services Inc. Michigan Clark Foreign Sales Corporation Barbados Clark-Hurth Components Marketing Company Delaware Checker Flag Parts, Inc. Minnesota Ingersoll-Rand Italiana S.p.A. Italy Ingersoll-Rand Services & Engineering Company Switzerland Ingersoll-Rand Acceptance Company S.A. Switzerland Ingersoll-Rand Construction Services Inc. Delaware Ingersoll-Rand Investment Company S.A. Switzerland Ingersoll-Rand Melroe Equipment Limited Canada Melroe Parts Trading GmbH Germany Club Car Inc. Delaware Club Car International Inc. Guam Club Car Limited New Zealand Compagnie Ingersoll-Rand France Ingersoll-Rand Equipements de Construction France Etablissements Montabert, S.A. France Montabert GmbH Germany Montabert Tramac, S.A. Belgium Ingersoll-Rand Equipements de Production, S.A. France S.A. Etablissements Charles Maire France Torrington France S.A.R.L. France Compressed Air Magazine Company New Jersey Crossgar Ireland Spanashview Ireland Thermo King Ireland Limited Ireland Thermo King Czech Republic Czech Republic Imperial Heights Realty Corporation New York Improved Machinery, Inc. Delaware Industria e Comercio Aro do Brasil Ltda. Brazil Ingersoll-Rand AB Sweden Ingersoll-Rand Argentina S.A.I.C. Argentina Ingersoll-Rand Asia Pacific Inc. Delaware Ingersoll-Rand (Australia) Ltd. Australia Ingersoll-Rand South East Asia (Pte.) ltd. Singapore Ingersoll-Rand Benelux, N.V. Belgium Thermo King Belgium N.V. Belgium Ingersoll-Rand Beteiligungs GmbH Germany ABG Allgemeine Baumaschinen Gesellschaft mbh Germany ABG Verwaltungs GmbH Germany ABG France S.A.R.L. France ABG Iberica S.A. Spain I-R Beteiligungs und Grundstucksverwaltungs GmbH Germany Ingersoll-Rand GmbH Germany GHH-Rand Schraubenkompressoren GmbH & Co. KG Germany GHH-Rand Schraubenkompressoren Verwaltungs GmbH Germany Thermo King Deutschland GmbH Germany Ingersoll-Rand China Limited Delaware Ingersoll-Rand China Investment Company Limited China Ingersoll-Rand (Wuxi) Road Machinery Company Limited China (92% owned by the company) Thermo King-Dalian Transport China Refrigeration Company, Limited (70% owned by the company) Torrington-Wuxi Bearings Company China Limited (78% owned by the company) Shanghai Ingersoll-Rand Compressor China Limited (80& owned by the company) Ingersoll-Rand Company (Chile) y Cia Ltda. Chile Ingersoll-Rand Company of Peru S.A. Peru Ingersoll-Rand de Colombia S.A. Colombia Ingersoll-Rand de Puerto Rico, Inc. Puerto Rico Ingersoll-Rand Enhanced Recovery Company Delaware Ingersoll-Rand Europe France Ingersoll-Rand GesmbH Austria Ingersoll-Rand (India) Limited India (74% owned by the company) Ingersoll-Rand International Foreign Sales Corporation Guam Ingersoll-Rand International Holding Corporation New Jersey Ingersoll-Rand S.A. Switzerland Ingersoll-Rand Equipment & Consulting S.A.R.L. Switzerland Ingersoll-Rand Machinery & Services S.A.R.L. Switzerland Ingersoll-Rand Technical & Services S.A.R.L. Switzerland Ingersoll-Rand Trading S.A. Switzerland Ingersoll-Rand International, Inc. Delaware Ingersoll-Rand International Sales Inc. Delaware Ingersoll-Rand Japan Limited Japan Ingersoll-Rand Manufacturing Co. Delaware Ingersoll-Rand Nova Scotia Nova Scotia Ingersoll-Rand Canada Inc. Canada Torrington Beteiligungs GmbH Germany Torrington GmbH Germany Torrington Nadellager GmbH Germany Ingersoll-Rand (Barbados) Corporation Barbados Ingersoll-Rand World Trade (Ltd.) Bermuda Torrington Inc. Canada Ingersoll-Rand do Brasil Ltda. Brazil Ingersoll-Rand Philippines, Inc. Philippines Ingersoll-Rand S.A. de C.V. Mexico Ingersoll-Rand Sales Company Limited Delaware Ingersoll-Rand European Sales Ltd. England Ingersoll-Rand Holdings Limited England Ingersoll-Rand European Sales Limited England Ingersoll-Rand Company Limited England A/S Parts Limited England Ingersoll-Rand Company (Ireland) Limited Ireland Ingersoll-Rand (New Zealand) Limited New Zealand Ingersoll-Rand Company South Africa (Pty.) Limited South Africa Longrigg Engineering Limited England Roconeco Limited England The Aro Corporation (UK) Limited England The Torrington Company Limited England NT Acquisition Limited England Ingersoll-Rand Architectural Hardware Group Limited England Newman Tonks Management Services Limited England Newman Tonks (Overseas Holdings) Limited England NT Access Limited England NT Architectural Hardware Limited England NT Architectural Products Limited England NT Brassart Limited England NT Door and Window Fittings Limited England NT Door Controls Limited England NT Group Properties Limited England NT Laidlaw Limited England NT Legge Limited England NT Locking Systems Limited England NT Martin Roberts Limited England NT Partition Systems Limited England NT Projects Limited England NT Railing Systems Limited England NT Security Limited England NT Shapland & Petter Limited England NT Testing Services Limited England NT Worcester Parsons Limited England NT Yannedis Limited England Newman Tonks Investments, Inc. Delaware Newman Tonks Holdings, Inc. Delaware Monarch Hardware and Mfg.Co. Inc. Delaware MFP,Inc. Kentucky Newman Tonks, USA, Inc. Delaware Dixie Pacific Manufacturing Company, Inc. Alabama NT Falcon Lock, Inc. California ARMORO, Inc. California NT Dor-O-Matic Inc. Illinois NT Dor-O-Matic Limited England NT Dor-O-Matic Chicago Inc. Illinois NT Dor-O-Matic Detroit Inc. Michigan Dor-O-Matic of Mid Atlantic States, Inc. New Jersey NT USA FSC INC. Barbados NT Randi A/S Denmark NT South Africa South Africa Newman Tonks Brussels NV Belgium Newman Tonks Holdings GmbH Germany NT Normbau Beschlage and Ausstattungs GmbH Germany NT Normbau Iberica Spain Newman Tonks Europe GmbH Germany NT Asia (Hong Kong) Limited Hong Kong NT Asia (Singapore) Limited Singapore NT Dalco Pty Limited Australia Newman Tonks France SA France NT Mustad SA France Ingersoll-Rand Services Company Delaware Ingersoll-Rand Transportation Services Company Delaware Ingersoll-Rand Wadco Tools Ltd. India (74% owned by the company) Ingersoll-Rand Western Hemisphere Trade Corporation Delaware Ingersoll-Rand Worldwide, Inc. Delaware IR Receivables Funding I Corporation Delaware IR Receivables Funding II Corporation Delaware McCartney Manufacturing Company, Inc. Kansas Northern Research and Engineering Corporation Massachusetts Roconeco Corporation South Carolina S&S Corporation Virginia SBG Holding Corp. Delaware Schlage Lock Company California Ingersoll-Rand Architectural Hardware Limited New Zealand Touch-Plate International, Inc. California Von Duprin, Inc. Indiana Schlage de Mexico S.A. de C.V. Mexico Silver Holding Corp. Colorado Woodcliff Insurance Ltd. Bermuda Sonna B.V. Netherlands Sonna Rail B.V. Netherlands Steelcraft Holding Company Delaware Terry Corporation of Connecticut Connecticut The Torrington Company (Delaware) Delaware Industrias del Rodamiento, S.A. Spain Ingersoll-Rand Iberica S.L. Spain Reftrans, S.A.(85% owned by the company) Spain Ingersoll-Rand Liability Management Company Michigan Kilian Manufacturing Corp. Delaware Torrington Holdings, Inc. Delaware Torrington Sales Limited Switzerland Thermo King Corporation Delaware Thermo King Container-Denmark A/S Denmark Thermo King de Puerto Rico, Inc. Delaware Thermo King do Brasil, Ltda. Brazil (99.99% owned by the company) Thermo King SVC, Inc. Delaware Thermo King Trading Company Delaware Tokyo Ryuki Seizo Co. Ltd. Japan SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY Ingersoll-Dresser Pumps de Argentina, S.A. Argentina Ingersoll-Dresser Pumps (Australia) Pty., Ltd. Australia Ingersoll-Dresser Pumps GmbH Austria Ingersoll-Dresser Pumps do Brazil Brazil Industria e Comercio Ltda. Brazil Ingersoll-Dresser Pump Canada, Inc. Canada Ingersoll-Dresser Pumps de Colombia, S.A. Colombia Worthington Centroamericana Ltda. Costa Rica Ingersoll-Dresser Pompes France IDP Pleuger France IDP International France Deutsche Ingersoll-Dresser Pumpen GmbH Germany Ingersoll-Dresser Pump GmbH Germany Pleuger Worthington GmbH Germany Deutsche Worthington GmbH Germany Ingersoll-Dresser Pumps S.p.A. Italy Worthington S.p.A. Italy Ingersoll-Dresser Pump (Asia) Pte., Ltd. Singapore Ingersoll-Dresser Pump, S.A. Switzerland Ingersoll-Dresser Pump Services Sarl Switzerland ID Pump AG Switzerland Ingersoll-Dresser Pump Nederland B.V. Netherlands Ingersoll-Dresser Pumps (UK), Ltd. England Ingersoll-Dresser Pumps Newark, Ltd. England IDP Alternate Energy Company Delaware Pump Investments, Inc. Delaware Energy Hydro, Inc. Delaware Compania Ingersoll-Dresser Pump, S.A. Spain Ingersoll-Dresser Pumps (Thailand), Ltd. Thailand EX-27 18
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1998 FINANCIAL STATMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1998 DEC-31-1998 72 6 1,219 42 941 2,428 2,416 1,069 8,310 1,849 2,166 403 0 338 2,370 8,310 8,292 8,292 6,047 6,047 0 0 226 789 280 509 0 0 0 509 3.11 3.08
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