11 EXHIBIT 2 Amendment No. 1 To Rights Agreement AMENDMENT No. 1, dated as of December 7, 1994, to the Rights Agreement between Ingersoll-Rand Company, a New Jersey corporation (the "Company"), and the Bank of New York (the "Rights Agent"), dated as of December 7, 1988 (the "Rights Agreement"). The Company and the Rights Agent have heretofore executed and entered into the Rights Agreement. Pursuant to Section 26 of the Rights Agreement, the Company and the Rights Agent may from time to time supplement or amend the Rights Agreement in accordance with the provisions of Section 26 thereof. All acts and things necessary to make this Amendment a valid agreement, enforceable according to its terms have been done and performed, and the execution and delivery of this Amendment by the Company and the Rights Agent have been in all respects duly authorized by the Company and the Rights Agent. In consideration of the foregoing and mutual agreements set forth herein, the parties hereto agree as follows: 1. Section 1(a) of the Rights Agreement is hereby modified and amended in its entirety to read as follows: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates (as such term is hereinafter defined) and Associates (as such term is hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the outstanding Common Stock; provided, however, that an Acquiring Person shall not include an Exempt Person (as such term is hereinafter defined). Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as a result of an acquisition of shares of Common Stock by the Company which, by reducing the number of such shares then outstanding, increases the proportionate number of shares beneficially owned by such person to 15% or more of the outstanding Common Stock; provided that if a Person (other than an Exempt Person) becomes the Beneficial Owner of 15% or more of the outstanding Common Stock by reason of share purchases by the Company and, after such share purchases by the Company, becomes the Beneficial Owner of any additional shares of Common Stock, such Person shall be deemed to be an "Acquiring Person." The word "outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then issued and outstanding which such Person would be deemed to own beneficially hereunder. 12 Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person", as defined pursuant to the foregoing provisions of this Section 1(a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an "Acquiring Person", as defined pursuant to the foregoing provisions of this Section 1(a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. 2. The Rights Agreement is hereby further modified and amended by inserting the following new Section 1(c) to the Rights Agreement and renumbering existing Sections 1(c) through 1(u) of the Rights Agreement (and cross references thereto in the Rights Agreement) as Sections 1(d) through 1(v) respectively: (c) "Adverse Person" shall mean any Person declared to be an Adverse Person by the Board of Directors upon a determination of the Board of Directors that the criteria set forth in Section 11(a)(ii)(B) apply to such Person. 3. Section 1(v) of the Rights Agreement (prior to taking into account the renumbering referred to in Section 2 hereof) is hereby deleted in its entirety. 4. Section 3(a) of the Rights Agreement is hereby modified and amended by deleting the numeral "20" in the ninth line thereof and substituting therefor the numeral "15". 5. Section 3(a) of the Rights Agreement is hereby further modified and amended by inserting the following new clause immediately after the parenthetical clause in the thirteenth line thereof: or (iii) the determination by the Board of Directors of the Company, pursuant to the criteria set forth in Section 11(a)(ii)(B) hereof that a Person is an Adverse Person. 6. Section 3(d) of the Rights Agreement is hereby modified and amended by inserting the words "and as amended from time to time" after the words, "December 7, 1988" in the fifth line of the legend contained therein. 7. Section 3(d) of the Rights Agreement is hereby further modified and amended by inserting the words ", Adverse Persons" immediately after the words "Acquiring Persons" in the eighteenth line of the legend contained therein. 13 8. Section 4(b) of the Rights Agreement is hereby modified and amended by inserting the words "or Adverse Person" after each occurrence of the words "Acquiring Person". 9. Section 11(a)(ii)(A) of the Rights Agreement is hereby modified and amended by deleting the phrase, ", other than pursuant to a Permitted Tender Offer" from the third and fourth lines thereof. 10. The Rights Agreement is hereby further modified and amended by inserting the following new Section 11(a)(ii)(B) to the Rights Agreement and renumbering Sections 11(a)(ii)(B) and 11(a)(ii)(C) (and cross references thereto in the Rights Agreement) to Sections 11(a)(ii)(C) and 11(a)(ii)(D): (B) the Board of Directors of the Company, by majority vote, shall declare any Person to be an Adverse Person, after (x) a determination that such Person, alone or together with its Affiliates and Associates, has become the Beneficial Owner of 10% or more of the outstanding shares of Common Stock and (y) a determination by the Board of Directors, after reasonable inquiry and investigation, including such consultation, if any, with such Persons as the Board of Directors shall deem appropriate, that (a) such Beneficial Ownership by such Person is intended to cause, is reasonably likely to cause or will cause the Company to repurchase the Common Stock beneficially owned by such Person or to cause pressure on the Company to take action or enter into a transaction or series of transactions which would provide such Person with short-term financial gain under circumstances where the Board of Directors determines that the best long-term interests of the Company and its shareholders, but for the actions and possible actions of such Person, would not be served by taking such action or entering into such transactions or series of transactions at that time or (b) such Beneficial Ownership is causing or reasonably likely to cause a material adverse impact (including, but not limited to, impairment of relationships with customers or impairment of the Company's ability to maintain its competitive position) on the business or prospects of the Company; provided, however, that the Board of Directors of the Company may not declare a Person to be an Adverse Person if, prior to the time that such Person acquired 10% or more of the shares of Common Stock then outstanding, such Person provided to the Board of Directors in writing a statement of such Person's purpose and intentions in connection with the proposed acquisition of Common Stock, together with any other information reasonably requested of such Person by the Board of Directors, and the Board of Directors, based on such statement and reasonable inquiry and investigation, including such consultation, if any, with such Person as the Board of Directors shall deem appropriate, determines to notify and notifies such Person 14 in writing that it will not declare such Person to be an Adverse Person; provided, further, that the Board of Directors may expressly condition in any manner a determination not to declare a Person an Adverse Person on such conditions as the Board of Directors may select, including without limitation, such Person's not acquiring more than a specified amount of stock and/or on such Person's not taking actions inconsistent with the purposes and intentions disclosed by such Person in the statement provided to the Board of Directors. No delay or failure by the Board of Directors to declare a Person to be an Adverse Person shall in any way waive or otherwise affect the power of the Board of Directors subsequently to declare a Person to be an Adverse Person. In the event that the Board of Directors should at any time determine, upon reasonable inquiry and investigation, including consultation with such Persons as the Board of Directors shall deem appropriate, that such Person has not met or complied with any condition specified by the Board of Directors, the Board of Directors may at any time thereafter declare such Person to be an Adverse Person pursuant to the provisions of this Section 11(a)(ii)(B); or 11. Sections 11(a)(ii)(B) and (C) of the Rights Agreement (prior to taking into account the renumbering referred to in Section 9 hereof) are hereby modified and amended by inserting the words "or Adverse Person" after each occurrence of the words "Acquiring Person". 12. Section 11(a)(ii) of the Rights Agreement is hereby modified and amended by (i) deleting the words "void to the extent permitted by applicable law" in the twentieth and twenty first lines of the last paragraph thereof and inserting in lieu thereof the words "null and void" and (ii) deleting the clause ",to the extent permitted by applicable law," from the twenty second and twenty third lines of the last paragraph thereof. 13. The Rights Agreement is hereby further modified and amended by inserting the following new Section 11(q) to the Rights Agreement: (q) The failure by the Board of Directors to declare a Person to be an Adverse Person following such Person becoming the Beneficial Owner of 10% or more of the outstanding Common Stock shall not imply that such Person is not an Adverse Person or limit the Board of Directors' right at any time in the future to declare such Person to be an Adverse Person. 15 14. Section 13(a) of the Rights Agreement is hereby modified and amended by inserting the words "earlier of the" in the second line thereof immediately prior to the words "Stock Acquisition Date" and inserting the words "or the declaration by the Board of Directors that a Person is an Adverse Person" immediately following the words "the Stock Acquisition Date" in the second line thereof. 15. Section 23(a) of the Rights Agreement is hereby modified and amended by deleting the words "or (ii)" in the fifth line thereof and inserting in lieu thereof the following: , (ii) the declaration by the Board of Directors that any Person is an Adverse Person or (iii) 16. Section 23(a) of the Rights Agreement is hereby further modified and amended by inserting the words "or Adverse Person" after each occurrence of the words "Acquiring Person". 17. The Rights Agreement is hereby further modified and amended by inserting the following new Section 24 to the Rights Agreement and renumbering existing Sections 24 through 32 of the Rights Agreement (and cross references thereto in the Rights Agreement) as Sections 25 through 33 respectively: Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person or an Adverse Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after December 7, 1988 (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than an Exempt Person), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or 16 any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company may, in its discretion, take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional shares of Common Stock, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preference Stock or fraction thereof such that the current per share market price of one share of Preference Stock multiplied by such number or fraction is equal to the current per share market price of one share of Common Stock as of the date of issuance of such shares of Preference Stock or fraction thereof. (d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. 17 18. Section 26 of the Rights Agreement (prior to taking into account the renumbering referred to in Section 17 hereof) is hereby modified and amended by inserting the words "or the declaration by the Board of Directors that a Person is an Adverse Person" immediately after the words "Stock Acquisition Date" in the second and third lines thereof. 19. The Form of Right Certificate attached as Exhibit B to the Rights Agreement is hereby modified and amended by inserting the phrase "and as amended from time to time" after the words "December 7, 1988" on the fifth line of the first paragraph of the first page thereof. 20. The Form of Right Certificate attached as Exhibit B to the Rights Agreement is hereby further modified and amended by inserting the words "or Adverse Person" after each occurrence of the words "Acquiring Person". 21. The Form of Right Certificate attached as Exhibit B to the Rights Agreement is hereby further modified and amended by deleting the words "and (ii)" from the seventh line of the fifth paragraph of the fourth page thereof and inserting in lieu thereof the following: , (ii) the declaration by the Board of Directors that any Person is an Adverse Person or (iii) 22. This Amendment to the Rights Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. 23. This Amendment to the Rights Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute one and the same instrument. Terms not defined herein shall, unless the context otherwise requires, have the meanings assigned to such terms in the Rights Agreement. 24. In all respects not inconsistent with the terms and provisions of this Amendment to the Rights Agreement, the Rights Agreement is hereby ratified, adopted, approved and confirmed. In executing and delivering this Amendment, the Rights Agent shall be entitled to all the privileges and immunities afforded to the Rights Agent under the terms and conditions of the Rights Agreement. 18 25. If any term, provision, covenant or restriction of this Amendment to the Rights Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment to the Rights Agreement, and of the Rights Agreement, shall remain in full force and effect and shall in no way be affected, impaired or invalidated. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and attested, all as of the date and year first above written. Attest: INGERSOLL-RAND COMPANY By: /S/ Ronald G. Heller By: /S/ Patricia Nachtigal Name: Ronald G. Heller Name: Patricia Nachtigal Title: Secretary and Title: Vice President and Assistant General General Counsel Counsel Attest: THE BANK OF NEW YORK, as Rights Agent By: /S/ Jeffrey Grosse By: /S/ John I. Sivertsen Name: Jeffrey Grosse Name: John I. Sivertsen Title: Assistant Vice Title: Vice President President