Exhibit 10 (iii) (u)
Ingersoll-Rand Company
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07675
December 5, 1997
Mr. David W. Devonshire
3659 Corey Road
Toledo, OH 43616
Dear Dave:
On the basis of our discussions and your recent interviews
with members of our management team, I am pleased to extend
this written confirmation of our offer to become Senior Vice
President and Chief Financial Officer of Ingersoll-Rand
Company, reporting to me as Chairman and Chief Executive
Officer. The following confirms the terms and conditions of
our offer.
1. Your starting base salary will be at an annual rate of
$450,000, paid monthly.
2. You will participate in the Company's annual incentive
plan. You are eligible commencing with 1998, for awards
targeted at 75% of salary depending on both corporate and
individual performance. All bonus payments are made at the
discretion of the Chairman and the Board. For 1998, your
minimum bonus will be 50% of your base salary; i.e.,
$225,000.
3. If, in joining Ingersoll-Rand, you forego your 1997 bonus
from Owens Corning, Ingersoll-Rand will provide an award of
$300,000 to replace your 1997 bonus.
4. Upon joining the Company, you will receive an initial
award of non-qualified stock options of 90,000 shares
under our 1995 Incentive Stock Plan, at the exercise
prices and vesting schedule listed below:
Option Exercise Vesting
Share Volume Price Schedule
30,000 Market Price on hire date One Year
30,000 Market Price + $5.00 Two Years
30,000 Market Price + $10.00 Three Years
Our thinking on this matter is that 30,000 of these shares
are your 1998 award normally issued in May of each year.
In effect, you are getting these in advance, assuming you
join us near the first of the year. The remaining 60,000
shares are to replace your current Owens Corning shares
that are either not vested or "underwater", 67,000 shares.
Regarding the 20,000 shares that are vested and currently
"in the money" and which you may be forced to forfeit due
to "insider window restrictions", we will replace those
shares with Ingersoll-Rand shares at the respective prices
as of your first day of work with Ingersoll-Rand, if in
fact you are forced to forfeit them.
This will be done by calculating the actual value of these
Owens Corning options at your strike price and the market
price on that day and then providing you with that amount
in the form of Ingersoll-Rand options using their Black-
Scholes value on that day. For example, if the actual
value of your 20,000 options is $100,000 on that day and
our stock is at $42 (current Black-Scholes value is .24),
then you would receive $100,000/10.08=10,000 options
(rounded up to the nearest 100).
This award is subject to the usual terms and conditions of
awards under the Plan. You will be considered a full
participant and be eligible to receive further awards in
future years at the current targeted rate of 30,000 shares
per year.
5. Ingersoll-Rand will provide you with an initial award of
8,000 shares of restricted stock which will be issued on
January 15, 1998, and which will carry a one year vesting
provision.
6. Ingersoll-Rand will provide you with a Restricted Stock
Award of 18,000 shares, also administered under the terms
of our 1995 Incentive Stock Plan. These awards vest in
three annual installments (5,400 shares, 6,300 shares,
6,300 shares, respectively) beginning in January, 1999,
depending upon the achievement of a predetermined
performance target and your continued employment. You will
receive an award agreement which explains vesting
requirements and other terms and conditions of your award.
Our stock awards also provide participants with dividend
equivalents and represent an attractive additional equity
interest in our company. You can be considered for a
larger award at any time based on your own and the
Company's performance.
7. In addition, you will be eligible for a pension of 50% of
your final eligible compensation at age 62, normal
retirement age for executives, assuming you retire from the
Company at that time. If you retire or leave the company
prior to age 62, your benefit would be subject to the
terms and conditions of the company's qualified retirement
plan. For purposes of retirement benefits, eligible
compensation is your final salary, plus the average of your
five highest of your six most recent bonuses. Your 50%
benefit will be calculated taking into account all sources
including our qualified and non-qualified Pension Plan and
Retirement Accounts, the employer portion of Ingersoll-
Rand's 401(k) Plan contributions, your Social Security
benefit and all other vested retirement benefits from Owens
Corning. If you are asked to continue beyond age 62, you
will accrue replacement income at the rate of three
percentage points per year of service, such that at age 65
you will have earned a 59% replacement benefit from all
sources.
8. You will receive a benefit under the Executive
Supplementary Retirement Agreement in an amount of $65,000
per year for ten years commencing with retirement at age 62
or later and subject to the provisions of this plan.
9. We will relocate you, your family and household goods to
this area. Your relocation expenses, including shipment of
household goods, real estate commissions and mortgage
points will be reimbursed according to our policy.
Ingersoll-Rand's relocation policy also provides for equity
advances, at company discretion, to facilitate home
purchases prior to sale of your existing residence. And,
our program also includes the possibility of home purchase
should that be necessary to effect a smooth transition. In
addition, Ingersoll-Rand will provide a $100,000 relocation
benefit (not tax protected) to facilitate transitional
difficulties and domestic changes brought about by the move
to the Northern New Jersey area. This payment will be made
when you establish permanent residency in the Northern New
Jersey area.
10.Your medical and life insurance coverage with
Ingersoll-Rand will commence on the first day of the
month following 30 days of employment. Therefore, you may
want to continue your coverage with your current employer
under COBRA to avoid any gap in coverage.
11.In the unlikely event that you are involuntarily
terminated by the company within two years of your start
date, other than for cause (i.e.; violation of law or
serious breach of ethics), we will provide you with a
severance payment equal to two years of salary plus your
last annual bonus. After two years of employment, this
severance benefit will be equal to one year of cash
compensation, i.e., your then current salary plus your
previous annual bonus.
12.You will be eligible for a company-paid executive
automobile similar to a Cadillac Sedan DeVille.
13.You will be eligible for company-paid financial
advisory services from AYCO.
14.You will have access to a luncheon club in
Manhattan, to be used primarily for business purposes.
15.Our offer is conditioned upon satisfactorily
completing a physical examination, which includes drug
testing, and fulfilling the requirements of the
Immigration Reform and Control Act of 1986.
I am pleased to know that you have accepted this offer of
employment and will start with us on January 12, 1998.
Dave, I am personally looking forward to your joining
Ingersoll-Rand Company. This is a time of challenge and
opportunity for our Company. I am confident your experience
and leadership will help us reach our goals and create a
mutually rewarding long-term relationship between us.
Sincerely,
/S/ James E. Perrella
James E. Perrella
Chairman, President and CEO
Accepted:
/S/ David W. Devonshire
Date:
December 9, 1997