Exhibit 10 (iii)(u)
COMPOSITE EMPLOYMENT AGREEMENT
WITH CHIEF EXECUTIVE OFFICER
Mr. Herbert L. Henkel
4 Spinney Lane
North Kingstown, RI 02852
Dear Herb:
On behalf of Chairman Jim Perrella and Ingersoll-Rand's
Board of Directors, I am pleased to confirm our
invitation to you to become Chief Operating Officer,
Chief Executive Officer-designate and a member of our
Board of Directors. (Note: Your formal election will
be May 4, 1999 at our next Board meeting.) Our Board
is delighted you will join Ingersoll-Rand and looks
forward to your leadership as we continue to grow our
company for the benefit of customers, employees and
shareholders.
The following confirms the terms and conditions of our
offer:
Salary
Your starting salary as Chief Operating Officer will be
at an annual rate of $750,000 paid monthly. When you
are promoted to Chief Executive Officer on October 1,
1999, your salary will be increased to $850,000.
Annual Incentive
Your minimum annual incentive bonus for 1999 will be
$725,000. Annual bonuses are typically paid in
February following Board approval. Ingersoll-Rand does
not have a "target" incentive plan for its COO, CEO or
Chairman. Rather, the Board considers individual
contributions to operating results achieved. Recent
awards, based on achievement of the company's earnings
goal, have been in the range of 100% of salary and
higher.
Stock Options
You will be granted a special 200,000 share initial
stock option award which will be priced on the trading
day immediately preceding the public announcement of
your appointment. This special award will vest 100% on
January 1, 2004. In all other respects, the terms of
the company's incentive stock plan will apply. (See
Attachment A - Stock Option Award)
Your first regular award under the company's incentive
stock plan will be 100,000 shares priced in the same
fashion as described above for the special initial
stock option award. You will receive a subsequent
award of 50,000 shares on October 1, 1999. These two
awards vest one-third per year over three years.
Thereafter, additional awards could be made in February
(or our normal option time) or at the point of further
promotion.
Stock Grants
You will receive an initial grant of 43,000 shares of
restricted stock under the company's long term
incentive plan. Of this grant, 18,000 pertain to
company performance in 1999 and 25,000 pertain to
company performance in 2000. Under the plan, the
company must achieve annual earnings per share growth
over the period 1998 through 2000 of 12% per year
compounded. If the company achieves $3.16 earnings per
share in 1999, you will receive 18,000 shares of stock
in February 2000. You will be eligible for an
additional 25,000 shares for 2000 based on the company
achieving either 12% earnings per share growth in 2000,
or a total of 12% per year compounded over the 1998-
2000 period. Thereafter, a new three-year long-term
incentive plan will be adopted subject to approval of
our Board of Directors. (See Attachment B - Stock
Grant Agreement - Sample)
Issues Relating to Non-Vested Textron Options and
Restricted Stock
Options
You will receive 6,300 shares of restricted
stock, 3,000 of which will vest in July 1999 and
3,300 of which will vest in June 2000. These
shares are intended to reflect the value of
Textron options which will not be vested during
Textron employment.
Retention Grant
You will receive a grant of 60,000 shares of
restricted stock effective on your employment as
replacement for 30,000 shares of Textron stock
which required you to remain with Textron until
2002. This new grant will vest on January 1,
2003.
Pension Plan
You will participate in the company's Qualified Defined
Pension Plan (See Attachment C) and the Elected
Officers' Supplemental Program (See Attachment D).
Your benefit under these plans, assuming retirement at
age 62 the normal retirement age for officers, will be
65% of your base salary, plus the average of your five
highest out of your last six annual incentive bonuses.
Your Textron service and vested terminated Textron
pension benefit will be taken into account in
determining the value of your pension.
Your pension benefit accrual will be as follows:
Retirement
Replacement
Points
o 1.90 points per year for each year of
Textron service 22.8 pt. (12x1.90)
o 5.78 points per year for each of the
first five years with Ingersoll-Rand 28.9 pt. (5x5.78)
o 1.90 points per year for each of the
subsequent years of service with
Ingersoll-Rand, up to age 62 13.3 pt. (7x1.90)
Totaling 65% at age 62 65.0 pt.
If you work past age 62, you will get an additional
1.9 points per year of service.
Ten Year Annuity
An important part of retirement income for Ingersoll-
Rand officers is the company's ten-year annuity
program. In your case this benefit, commencing at age
62, is $125,000 per year for the ten-year period. In
the event of your death, the benefit is payable to your
beneficiary to the extent not already paid. You will
be enrolled in this program upon your completion of
enrollment procedures, including a physical
examination, the sole purpose of which is to establish
the cost of the underlying insurance product associated
with this benefit.
Employee Benefits
The enclosed summaries describe many of our benefit
programs. Please note that medical and dental coverage
commences on the first day of the month following 30
days of employment. Therefore, you may wish to
temporarily maintain your Textron coverage in force
through COBRA to assure full continuity of coverage.
(See Attachment E - Connect to Select 99)
Life Insurance
You will be entitled to purchase supplemental life
insurance of up to 4x your annual earnings. This four
times limit may be provided through Northwestern Mutual
Life (up to 1x pay) and CIGNA (the additional 3x pay).
If you enroll for at least 1x annual earnings (the
Northwestern Mutual piece), you will be able to carry
1x final annual earnings into retirement. The cost at
your age is from 42 to 50 cents per thousand.
Long Term Disability Insurance
The company offers a special LTD plan to its officers.
The plan is employee-paid and the benefit tax-free).
Your benefit would be $20,000 per month maximum with
offsets for income from other company-funded sources
including Social Security and Workers' Compensation.
The cost is about $1.20 per $100 of covered
compensation.
Relocation
You will receive the full benefits of the company's
relocation program for transferring homeowners. A
complete description of this plan is in the attached
document. (See Attachment F) In connection with your
relocation, Cendant, our relocation service supplier,
will purchase your home for $870,000. You will receive
$150,000 for expense reimbursement in excess of that
normally provided under our regular policy. You may
also engage interim housing for up to one year for you
and your family in the process of relocating to
Northern New Jersey.
Vacation
You will be entitled to paid vacation in accordance
with company policy but in no event less than four
weeks per calendar year.
Personal Use of Company Aircraft
You will be entitled to use time on the company's
aircraft lease contract for your personal travel. Such
use will incur imputed income to the extent required
under Internal Revenue Service regulation and company
policy. Generally, this means you will be charged
first class airfare for yourself and accompanying
dependents for personal use of company aircraft.
Country Club
You will have corporate membership in your name or that
of the company in country clubs required for business.
As we indicated, Ingersoll-Rand does not provide a
personal country club membership for any of its
officers.
Automobile
You will have the use of a company-provided automobile
under the terms of the company's executive automobile
program. Broadly, this means you can select from any
US-made sedan or a Jaguar.
Tax, Estate and Financial Planning
You are eligible for the company's Tax, Estate and
Financial Planning service provided by the Ayco
Corporation to officers.
Severance
In the unlikely event you are involuntarily terminated
by the Company without cause or you terminate because
you are not made CEO or Chairman, you will receive
severance pay equal to two times your annual base
salary plus your last (or committed) bonus, i.e.,
2(salary+bonus). In addition, under these
circumstances, you will receive the stock grants
related to your non-vested Textron options and
retention shares, i.e., 6,300 shares and 60,000
respectively, totaling 66,300 shares of Ingersoll-Rand
common stock
Change in Control
Ingersoll-Rand's change-in-control as described on Page
16 of the 1998 proxy applies to you. (See Attachment G
- - 1998 Proxy Statement) Severance and Change-in-
control are non-duplicative benefits.
Official Company Plan Documents
Descriptions of compensation and benefit plans in this
letter are necessarily summaries. In case of conflict,
the official company plan documents are the final
authority.
Drug Test
Our offer is contingent upon satisfactorily passing a
drug test and fulfilling the requirements of the
Immigration Reform and Control Act of 1986.
Herb, I know I speak for Jim Perrella and our entire
Board of Directors when I say we are extremely pleased
you will join our company and we will enjoy an
important and mutually rewarding long-term
relationship.
Please confirm your acceptance of our offer with your
signature on a return copy to me.
Best regards,
/S/Donald H. Rice
Donald H. Rice
Vice President
ACCEPTED:
/S/Herbert L. Henkel
Herbert L. Henkel
Attachments
A. 10 (iii) (t) 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.
B. 10 (iii) (t) 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.
C. Pension Plan Number One
D. 10 (iii)(h) 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.
E. Connect to Select 99 - Basic Employee Benefits
F. Ingersoll-Rand Transferred Homeowner Relocation
Policy
G. 10 (iii)(f) Amended and Restated Form of Change of
Control Agreement as of March 1, 1999 with Chief
Executive Officer of Ingersoll-Rand Company.
Incorporated by reference to Form 10-K of Ingersoll-
Rand Company for the year ended December 31, 1998,
filed March 30, 1999.