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INGERSOLL-RAND COMPANY
ELECTED OFFICERS
SUPPLEMENTAL PROGRAM
Introduction
Ingersoll-Rand Company (the "Company") desires to adopt the
Ingersoll-Rand Company Elected Officers Supplemental Program (the
"Program") 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.
It is intended that this Program 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.
This Program shall be effective as of June 30, 1995.
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INGERSOLL-RAND
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1 - DEFINITIONS
1.1 Actuarial Equivalent . . . . . . . . . . . . . . 4
1.2 Board . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Change of Control . . . . . . . . . . . . . . . . 4
1.4 Company . . . . . . . . . . . . . . . . . . . . . 4
1.5 Committee . . . . . . . . . . . . . . . . . . . . 4
1.6 Elected Officer . . . . . . . . . . . . . . . . . 4
1.7 Employee . . . . . . . . . . . . . . . . . . . . 4
1.8 Final Average Salary . . . . . . . . . . . . . . 4
1.9 Pension Plan . . . . . . . . . . . . . . . . . . 5
1.10 Program . . . . . . . . . . . . . . . . . . . . . 5
1.11 Year of Service . . . . . . . . . . . . . . . . . 5
SECTION 2 - PARTICIPATION
2.1 Commencement of Participation . . . . . . . . . . 5
2.2 Duration of Participation . . . . . . . . . . . . 5
SECTION 3 - AMOUNT OF BENEFIT
3.1 Amount of Benefit . . . . . . . . . . . . . . . . 6
SECTION 4 - VESTING
4.1 Vesting . . . . . . . . . . . . . . . . . . . . . 6
4.2 Forfeiture for Cause . . . . . . . . . . . . . . 6-7
SECTION 5 - DISTRIBUTIONS
5.1 Retirement . . . . . . . . . . . . . . . . . . . 7-8
5.2 Form of Distribution . . . . . . . . . . . . . . 8-9
5.3 Disability . . . . . . . . . . . . . . . . . . . 9
5.4 Death . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Payment of Benefits . . . . . . . . . . . . . . . 10
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INGERSOLL-RAND
TABLE OF CONTENTS (cont.)
Page
SECTION 6 - FUNDING
6.1 Funding . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Company Obligation . . . . . . . . . . . . . . . . 11
SECTION 7 - CHANGE OF CONTROL
7.1 Contributions to Trust . . . . . . . . . . . . . . 11
7.2 Amendments . . . . . . . . . . . . . . . . . . . . 11
SECTION 8 - MISCELLANEOUS
8.1 Amendment and Termination . . . . . . . . . . . . .11-12
8.2 No Contract of Employment . . . . . . . . . . . . . 12
8.3 Withholding . . . . . . . . . . . . . . . . . . . . 12
8.4 Loans . . . . . . . . . . . . . . . . . . . . . . . 12
8.5 Compensation and Nominating Committee . . . . . . .12-13
8.6 Entire Agreement; Successors . . . . . . . . . . . 13
8.7 Severability . . . . . . . . . . . . . . . . . . . 13
8.8 Governing Law . . . . . . . . . . . . . . . . . . . 13
8.9 Participant as General Creditor . . . . . . . . . . 13
8.10 Nonassignability . . . . . . . . . . . . . . . . . 14
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . .14-17
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SECTION 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 of Control" shall have the same meaning as a
"change of control of the Company" (as set forth in the
Company's Incentive Stock Plan of 1995), unless a different
definition is used for purposes of any severance of
employment agreement between an Employer and an Employee,
in which event 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 "Elected Officer" means an individual elected by the Board
as an officer of the Company.
1.7 "Employee" means an individual eligible to participate in
the Program as provided in Section 2.1
1.8 "Final Average Salary" means the sum of the following:
(a) the average of each of the five highest bonus
payments made during the six most recent calendar
years including the year during which the Employee's
retirement, death, or disability occurs or a Change
of Control occurs, and
(b) the Employee's annualized base rate of pay in effect
immediately prior to the date of determination.
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1.9 "Pension Plan" means the Ingersoll-Rand Pension Plan Number
One as in effect on June 30, 1995 and as amended from time
to time.
1.10 "Program" means the Ingersoll-Rand Company Elected Officers
Supplemental Program as stated herein and as may be amended
from time to time.
1.11 "Year of Service" shall be determined in accordance with
the terms of the Pension Plan used to determine Years of
Vesting Service, provided that 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.
SECTION 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.
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SECTION 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) below:
(a) 65% of his Final Average Salary, multiplied by a
fraction, the numerator of which is his Years of
Service (up to a maximum of 30), and the denominator
of which is 30, minus
(b) the amount set forth in Appendix A attached hereto.
SECTION 4
VESTING
4.1 Vesting
An Employee shall become vested in the benefit provided
under this 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 of
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 of
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
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(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.
SECTION 5
DISTRIBUTIONS
5.1 Retirement
Employee retirement distribution 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 this
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 .3% for each month that
the benefit commences prior to age 65,
(ii) the benefit offset amount derived from
defined contribution account balances, 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,
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(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 used will be
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 this 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
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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 this 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
In the event that an Employee becomes disabled, he shall
continue to earn benefits under the Program as if he
continued to be employed by the Company at his same
annualized base rate of pay as of the date he became
disabled. Such Employee shall receive an immediate lump
sum payment determined under Section 5.2 of the Program as
of the Employee's 65th birthday. For purposes of
determining his Final Average Salary, the average of each
of the five highest bonus payments made out of the last six
most recent bonuses received by the Employee prior to the
date he became disabled shall be used. If an Employee is
no longer disabled and he does not return to the employ of
the Company or an affiliated company, he shall not be
entitled to continued accrual under this Section for his
period of disability. If an employee is no longer disabled
and he returns to the employ of the Company, he will be
entitled to continued accrual under this Section for 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.
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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 this 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 this 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 this 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.
SECTION 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 this Program.
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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 this Program.
Nothing in this Program or any trust agreement shall
relieve the Company of its liabilities to pay benefits
under this Program except to the extent that such
liabilities are met by the distribution of trust assets.
SECTION 7
CHANGE OF CONTROL
7.1 Contributions to Trust
In the event that a Change of 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 this Program
(assuming immediate benefit commencement) as of the last
day of the calendar month immediately preceding the date
the Board of Directors determines that a Change of 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 of Control of the Company, any amendment
modifying or terminating this Program shall have no force
or effect.
SECTION 8
MISCELLANEOUS
8.1 Amendment and Termination
Except as provided in Section 7.2 hereof, this 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 of Directors of the Company, or (b) in the case
of amendments which do not materially modify the provisions
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hereof, the Committee or such other committee appointed by
the Board of Directors of the Company; provided, however,
that no such amendment or termination shall reduce any
benefits accrued under the terms of this Program prior to
the date of termination or amendment.
8.2 No Contract of Employment
The establishment of this 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 this 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 this
Program.
8.5 Compensation and Nominating Committee
This Program shall be administered by the Committee (or any
successor committee) of the Board of Directors of the
Company. 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 this
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
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Employee or beneficiary whose claim for benefits has been
denied for a review of the decision denying this claim.
8.6 Entire Agreement; Successors
This Program, including any subsequently adopted
amendments, shall constitute the entire agreement or
contract between the Company and any Employee regarding
this 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.
This 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 this Program shall, to any extent, be
invalid or unenforceable, the remainder of this Program
shall not be affected thereby, and each provision of this
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 this
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 this Program
shall have any interest in such investment or reserve. To
the extent that any person acquires a right to receive
benefits under this Program, such rights shall be no
greater than the right of any unsecured general creditor of
the Company.
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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 qualified retirement
plans and associated supplemental plans sponsored by
the Company, Ingersoll-Dresser Pump Company and
Dresser Industries, Inc., provided that the
Employee's intervening employment between Dresser
Industries, Inc. and the Company is solely with
Ingersoll-Dresser Pump Company;
For purposes of determining the benefit under
Section 3.1 of the Program, the following shall
apply:
(1) The Employee's benefit under the Pension Plan,
Ingersoll-Dresser Pump Company Pension Plan,
Ingersoll-Rand Company Supplemental Pension Plan,
and the Ingersoll-Dresser Pump Company
Supplemental Plan, shall be determined as a life
annuity at the date of determination.
(2) The Employee's account balance as of the date of
determination under the Ingersoll-Rand Company
Retirement Account Plan (provided that an
appropriate adjustment shall be made for
grandfathered Employees under such Plan),
Ingersoll-Dresser Pump Company Retirement Account
Plan (provided that an appropriate adjustment
shall be made for grandfathered employees under
such plan), Ingersoll-Rand Company Supplemental
Retirement Account Plan, and the Ingersoll-
Dresser Pump Company Supplemental Retirement
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Account Plan shall be determined as a life
annuity based on the Actuarial Equivalent as of
the date of determination.
(3) The portion of the Employee's account balance
derived from employer matching contributions
under the Ingersoll-Rand Company Savings and
Stock Incentive Plan, the Ingersoll-Dresser Pump
Company Savings Plan, the Ingersoll-Rand Company
Supplemental Savings and Stock Investment Plan,
the Ingersoll-Dresser Pump Company Supplemental
Savings Plan, and any other qualified defined
contribution plan sponsored by the Company or an
affiliated employer shall be determined as a life
annuity based on the Actuarial Equivalent of such
account balance as of the date of determination.
An Employee's account balance shall be the sum of
the following, whichever are applicable:
(A) the Employee's account balance under such
plan as of the date he commenced
participation in this Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
including appreciation (depreciation) and
dividends, such amount would have earned
until the date of determination,
(B) the benefit the Employee would have derived
from Employer matching contributions had he
contributed the maximum amount permissible
under such plan after the date he commenced
participation in the Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
until the date of determination, including
appreciation (depreciation) and dividends,
such amount would have earned until the
date of determination, and
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(C) if the Employee has not contributed the
maximum amount permissible under such plan
during the year that the Employee becomes
eligible for the Program, the Ingersoll-
Rand Company Key Management Supplemental
Program or the Ingersoll-Dresser Pump
Company Key Management Supplemental
Program, whichever is earlier, and the five
calendar years prior to participation in
this Program, the benefit he would have
derived from Employer matching
contributions had he contributed the
maximum amount permissible under such plan
minus the actual amount of Employer
matching contributions allocated to his
account during such period, including
appreciation (depreciation), but excluding
dividends that such amount would have
earned until the date of determination, and
(D) the amount of any withdrawal of Employer
matching contributions from such plan for
the five-year period immediately prior to
participation in the Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
including appreciation (depreciation), but
excluding dividends that such amount would
have earned until 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 30), and the
denominator of which is 30.
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.
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(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 than
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.
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