EXHIBIT
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INSURANCE AGREEMENT
This INSURANCE AGREEMENT entered into as of the _______ day
of __________, 1988 by and between INGERSOLL-RAND COMPANY, a New
Jersey corporation ("I-R"), with executive offices at 200
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675 and
_________________, residing at _______ (the "Executive").
WHEREAS, the Executive is employed by I-R in a senior
executive position; and
WHEREAS, I-R and the Executive desire to participate jointly
in providing certain benefits to be payable upon the death of the
Executive and to make provision for the allocation or the
benefits provided by a life insurance Policy being purchased in
connection therewith; and
WHEREAS, I-R desires to commit to supplement under certain
circumstances the benefits to be provided the Executive by the
insurance policy being purchased pursuant hereto;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, it is hereby agreed as follows:
1. Policy. I-R and the Executive will take all reasonable
steps to cause the issuance by the insurance company named on
Exhibit 1 hereto (the "Insurance Company") of the policy referred
to on Exhibit 1 (the "Policy"). Except as otherwise contemplated
hereby, the parties will cooperate to ensure that the Policy
remains in full force and effect.
2. Ownership of Policy. I-R shall be the sole owner of
the Policy and it may exercise all the rights of ownership with
respect thereto, except as otherwise provided herein.
3. Executive's Policy Death Benefit and Supplemental Death
Benefit.
(a) The proceeds of the Policy payable upon the death of
the Executive (the "Policy Death Benefit") shall be divided
between I-R and the beneficiaries designated by the Executive.
In this connection, the Executive shall have the right to
designate or change the direct and contingent beneficiaries of
the Policy Death Benefit to the extent of a variable amount
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determined on the basis set forth on Exhibit 1 hereto (the
"Executive's Policy Death Benefit").
(b) The beneficiaries named by the Executive under Section
3(a) may also be entitled to an amount in excess of the
Executive's Policy Death Benefit, which amount shall be payable
directly from I-R (and not from the proceeds of the Policy) to
said beneficiaries upon the death of the Executive (the
"Executive Supplemental Death Benefit"). The Executive
Supplemental Death Benefit, if any, shall be a variable amount
determined on the basis as set forth in Exhibit 1.
4. I-R's Policy Death Benefit. I-R shall be the
beneficiary of the Policy Death Benefit which is in excess of the
Executive's Policy Death Benefit (the "I-R Policy Death
Benefit"). Neither the Executive nor the Executive's
beneficiaries shall have any right to the I-R Policy Death
benefit whether or not an Executive Supplemental Death Benefit is
payable to the Executive's beneficiaries.
5. Cash Value; Borrowings. All cash value accruing on the
Policy shall be owned by I-R, which shall have exclusive access
in its discretion to such cash value through loans from the
Insurance Company secured by the Policy. In the event any such
loans are outstanding on the date of death of the Executive, the
reduction in the Policy Death Benefit caused by the existence of
such loans will only reduce the I-R Policy Death Benefit. No
reduction in the Executive's Policy Death Benefit will be caused
by the existence of Policy loans and the aggregate principal
amount of the loans at any time outstanding shall not cause the
Policy Death Benefit to be reduced to an amount below the
Executive's Policy Death Benefit.
6. Dividends. Policy dividends shall be used to purchase
paid-up additions, unless I-R, in its discretion, elects to
exercise another option. Any additional paid-up insurance shall
be considered as part of the Policy for purposes of this
Agreement.
7. Additional Insurance. In the event that I-R determines
to purchase additional insurance on the life of the Executive for
purposes of meeting its obligations hereunder, the Executive
agrees to cooperate with I-R in connection with applying for, and
obtaining, the issuance of an additional policy or policies.
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8. Premiums.
(a) The Executive shall contribute to the cost of providing
Executive's Policy Death Benefit at the rate of $.50 per month
multiplied by a fraction, the numerator of which shall equal his
Annual Earnings (as hereinafter defined) and the denominator of
which shall be $1,000. Such contribution shall be made to I-R on
a monthly or other basis satisfactory to I-R.
(b) I-R shall be responsible for remitting the premiums
(including the Executive's contribution) to the Insurance Company
as required by terms of the Policy. In this connection, I-R may
elect to utilize the dividends payable under the Policy as a
reduction in the premium to be paid to the Insurance Company or
may elect any other option available under the Policy to reduce
the premiums required to be paid. The Executive's contribution
shall not be affected, however, by any such election.
(c) For all purposes of this Agreement, including Exhibit
1, the term "Annual Earnings" shall refer to the greater of (i)
the meaning as such term has in I-R's Group Life Insurance
Program as in effect on the date hereof or (ii) the meaning as
such term has in I-R's Group Life Insurance Program as in effect
on the date the Executive's Annual Earnings are being determined.
9. Participation in I-R Group Life Insurance Program. The
Executive shall continue to participate in the I-R Group Life
Insurance Program to the extent, and at the level set forth on
Exhibit 1 hereto. The Executive shall not alter such
participation without the written consent of I-R.
10. Termination of Agreement. This Agreement shall
terminate on the first to occur of any of the following events:
(a) termination upon the mutual written consent of the
parties;
(b) termination of the employment of the Executive for any
reason other than (i) Disability (as hereinafter defined) or (ii)
retirement under the provisions of I-R's Pension Plan Number One;
(c) at the election of the Executive, in the event of the
bankruptcy, receivership or dissolution of I-R; or
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(d) the election of the aggrieved party if either I-R or
the Executive fails for any reason to make the premium payments
or perform any other obligation required to be performed by this
Agreement.
11. Disposition of Policy on Termination of Agreement.
(a) Upon termination of this Agreement, I-R shall be
entitled to continue to own the Policy, subject to Section 11(b)
below. As owner, I-R may elect to continue to make the premium
payments or may elect to surrender or convert the Policy into a
paid-up policy, or exercise any other right to which it is
entitled as the sole owner of the Policy.
(b) Notwithstanding the provisions of Section 11(a), the
Executive shall have the right, for a period of thirty days after
termination of this Agreement, to acquire that portion of the
Policy which has a death benefit equal to the Executive's then
current Annual Earnings by paying to I-R an amount equal to (i)
the greater of (A) the sum of the aggregate premiums paid by I-R
to the date of such termination in respect of the portion of the
Policy to be transferred, or (B) the then current cash surrender
value of the portion of the Policy to be transferred, less (ii)
the amount of any outstanding loan on the portion of the Policy
to be transferred.
12. Disability. In the event the Executive's employment is
terminated due to Disability, this Agreement shall remain in
effect, provided that the Executive continues to fulfill his
obligations hereunder, including, without limitation, the payment
of premiums as provided in Section 8. For purposes of this
Agreement, the term "Disability" shall have the same meaning as
such term has under I-R's Long Term Disability Plan.
13. Amendment. This Agreement shall not be modified or
amended except by the written agreement of both parties. This
Agreement shall be binding upon the heirs, administrators or
executors and the successors and assigns of each party to this
Agreement.
14. Insurance Company Not a Party.
(a) The Insurance Company shall not be deemed to be a party
to this Agreement for any purpose nor in any way responsible for
its validity.
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(b) The Insurance Company shall be fully discharged from
any and all liability under the terms of the Policy upon payment
or other performance of its obligations in accordance with the
terms of the Policy.
15. Effect on Other Agreements. The benefits payable under
this Agreement shall be independent of, and in addition to, any
benefits payable under any other agreement that may exist from
time to time between the parties hereto, or any compensation
payable by I-R to the Executive, whether as salary, bonus or
otherwise.
This Agreement shall not be deemed to constitute a contract
of employment between the parties hereto, nor shall any provision
hereto restrict the right of I-R to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
16. Notices. Any notice required or permitted under this
Agreement shall be deemed sufficiently given if delivered or
mailed postpaid by certified first class mail, return receipt
requested, at the address of the party to whom such notice is
being given set forth above, or at such other address provided by
said party to the other.
17. Applicable Law. This Agreement shall be subject to and
shall be construed under the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
INGERSOLL-RAND COMPANY
By: ________________________
________________________
Executive
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EXHIBIT 1
POLICY: Northwestern Mutual Life Insurance Company
Policy No. ____________________
A. Executive's Death Benefits
(1) Executive's Policy Death Benefit
The Executive's Policy Death Benefit, as of any date,
shall equal the lesser of:
(a) the Executive's Annual Earnings, as of such date;
(b) the amount determined by multiplying the
Executive's Annual Earnings (as of such date) by a
fraction:
(i) the numerator of which is $6.00, and
(ii) the denominator of which is the lesser of
(A) the Insurance Company's premium charge per
$l,000 of death benefit for a one-year term
policy based on the Executive's age, or (B)
the minimum cost per $l,000 of death benefit
under the provisions of Internal Revenue
Service Revenue Ruling 55-247, 1955-2 CB 228
(i.e. P.S. 58), taking the Executive's age
into account; or
(c) the Policy Death Benefit less the aggregate amount
of premiums paid through such date by I-R (not
including premium contributions by the Executive).
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(2) Executive Supplemental Death Benefit
There shall be an Executive Supplemental Death Benefit
only if the Executive's Policy Death Benefit is less
than his Annual Earnings and is therefore determined
under Section 1(b) or 1(c) above. In such event, the
amount of the Executive's Supplemental Death Benefit
shall equal (a) the amount by which the Executive's
Annual Earnings as of the date of his death less (b)
the Executive's Policy Death Benefit as of such date,
such amount to be divided by (c) .95 minus the Maximum
Tax Rate (as hereinafter defined). The term "Maximum
Tax Rate" means the highest rate (expressed as a
decimal) at which ordinary income is subject to
individual income tax pursuant to the United States
Internal Revenue Code, for the year in which the death
of the Executive occurs.
B. Executive's Participation in I-R Group Life Insurance
Program
The Executive agrees, to participate in the I-R Group Life
Insurance Program to the extent that he is entitled to a
death benefit under such Program equal to twice his Annual
Earnings.
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Name/address of executive
Re: Group Life Insurance Program
This will confirm the agreement by Ingersoll-Rand Company
(the "Company") to compensate you for certain additional costs to
be incurred by you as a result of modifications to the Company's
group life insurance program (the "Group Program") which became
effective January 1, 1987. Specifically, to the extent your
Annual Earnings (as defined below) as of the date of your
retirement exceeds your Annual Earnings as of December 31, 1986,
the Group Program now requires you to contribute for
post-retirement coverage at a rate in excess of the $.50 per
month per $1,000 rate previously required. In addition, as a
result of changes in federal tax law, you will now be subject to
imputed income to the extent of a portion of your post-retirement
insurance coverage.
In order to compensate you on an after-tax basis for the
additional costs to be incurred by you after retirement under the
Group Program as currently in effect, and for the costs to you of
the imputation of income referred to above, the Company hereby
agrees to reimburse you as outlined below:
1. For purposes of calculating the reimbursement for
additional premium contributions, the following terms
are defined as indicated:
(a) "Annual Earnings", as of any date, has the same
meaning as such term has under the Company's Group
Term Life Insurance Program as in effect on such
date.
(b) "Excess Cost" means, for any year, (i) the actual
amount contributed by you for post-retirement life
insurance coverage under the Group Program for
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such year, less (ii) an amount equal to (A) $.50
multiplied by the number of months during such
year that you contributed to post-retirement
coverage under the Group Program, such product to
be further multiplied by (B) a fraction, the
numerator of which shall be your Annual Earnings,
and the denominator of which shall be $1,000.
(c) "Imputed Income" means the amount determined by
multiplying (i) the Table I rate under the
provisions of Internal Revenue Service Regulation
Section 79-3(d)(2) by (ii) a fraction (A) the numerator
of which shall be your Annual Earnings as of
December 31, 1986 less $50,000, and (B) the
denominator of which shall be $1,000, and
subtracting from such amount the amount
contributed by you for post-retirement life
insurance coverage as referred to in paragraph
1(b)(i) above.
(d) "Maximum Tax Rate" means the highest rate
(expressed as a decimal) at which ordinary income
is subject to individual income tax by the United
States Federal government pursuant to the Internal
Revenue Code, for the year in which any
reimbursement is to be paid.
2. The amount of reimbursement to which you shall be
entitled with respect to the additional costs referred
to above for each year after your retirement, until and
including the year of your death, shall equal (a) the
Excess Cost for such year, divided by (b) .95 minus the
Maximum Tax Rate.
3. The amount of reimbursement to which you shall be
entitled for the imputation of income referred to above
shall equal (a) your Imputed Income multiplied by (b)
the Maximum Tax Rate, such product to be divided by (c)
.95 minus the Maximum Tax Rate.
Reimbursement payments shall be made on or before January 31
of each year following any year for which a reimbursement shall
be required.
Very truly yours,
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