As filed with the Securities and Exchange Commission on April 6, 2001
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
Ingersoll Rand Company Ingersoll-Rand Financing I
(Exact name of Registrants as specified in their charters)
New Jersey Delaware
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
13-5156640 13-5156640
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
200 Chestnut Ridge Road 200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07677 Woodcliff Lake, New Jersey 07677
(201) 573-0123 (201) 573-0123
(Addresses, including zip codes, and telephone numbers, including
area codes, of Registrants' principal executive offices)
Patricia Nachtigal, Esq.
Senior Vice President and General Counsel
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07677
(201) 573-0123
(Name, address, including zip code, and telephone number, including area
code, of Registrants' agent for service)
Copy to:
John B. Tehan, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans please check
the following box. /_/
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. /_/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective
registration statement for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. /_/
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount to be Proposed Maximum Proposed Amount of
Securities to be Registered Registered Offering Price Maximum Registration
Per Unit(c) Aggregate Fee
Offering
Price<FN3>
Capital Securities . . . . . . . . . 16,100,000 100.5% $404,512,500 $101,129
Debt Securities<FN1> . . . . . . . .
Guarantees<FN2> . . . . . . . . . . .
<FN>
<FN1> No separate consideration will be received by Ingersoll-Rand
Company. Pursuant to Rule 457(n) under the Securities Act of
1933, as amended, no registration fee is required.
<FN2> No separate consideration will be received by Ingersoll-Rand
Company. Pursuant to Rule 457(n) under the Securities Act of
1933, as amended, no registration fee is required.
<FN3> Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
The Registrants hereby amend this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrants shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it seek an
offer to buy these securities in any jurisdiction where the offer or sale
is not permitted.
Subject to Completion. Dated April 4, 2001
_______ __% Capital Securities
(Liquidation Amount $25 per Capital Security)
Ingersoll-Rand Financing I
Fully and Unconditionally Guaranteed
to the Extent Set Forth Herein by
[IR LOGO]
Ingersoll-Rand Company
The Capital Securities:
- - The capital securities represent undivided preferred beneficial
ownership interests in the assets of a trust called Ingersoll-Rand
Financing I. The sole assets of the trust are the debentures, equal
in amount to the aggregate liquidation amount of the capital and
common securities, issued by Ingersoll-Rand.
- - Ingersoll-Rand has guaranteed the capital securities to the extent
described in this prospectus.
- - Anticipated closing date: , 2001.
Distributions on the Capital Securities:
- - Each capital security pays a quarterly distribution at an annual
rate of ___% per capital security, if Ingersoll-Rand pays interest
on the debentures.
- - The capital securities will mature on May 16, 2003.
- - Ingersoll-Rand may defer interest payments on the debentures on one
or more occasions until maturity of the debentures on May 16, 2003.
If Ingersoll-Rand does defer interest payments, the trust will also
defer payment of distributions on the capital securities. Deferred
distributions will accumulate at an annual rate of ____%.
- - If Ingersoll-Rand redeems the debentures held by the trust, the
trust will redeem the capital securities. The prices and
circumstances under which the debentures can be redeemed by
Ingersoll-Rand and the amount you will receive upon redemption of
your capital securities are described in this prospectus.
- - If the trust is liquidated, you will generally receive $25 principal
amount of debentures for each capital security you own rather than
cash.
Per Capital Total
Security
Public offering price . . . . . . . . . . . . . . . . . . . $ $
Agent's commissions to be paid by Ingersoll-Rand . . . . . $ $
The capital securities are being offered through Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as agent, pursuant to an agreement with
Ingersoll-Rand. Neither Ingersoll-Rand nor the trust will receive any
proceeds from this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The capital securities will be ready for delivery in book-entry form
through The Depository Trust Company on or about _______, 2001.
Merrill Lynch & Co.
The date of this prospectus supplement is __________, 2001
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . 9
Description of the Capital Securities . . . . . . . . . . . . . . . . .10
Description of the Guarantee . . . . . . . . . . . . . . . . . . . . 26
Description of Debentures . . . . . . . . . . . . . . . . . . . . . . 31
Effect of Obligations Under the Debentures and the Guarantee . . . . 44
United States Federal Income Tax Consequences . . . . . . . . . . . . 46
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 54
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 57
Incorporation of Certain Documents by Reference . . . . . . . . . . . 58
You should rely only on the information contained in this
document or to which this document refers you. We have not, and the
agent has not, authorized anyone to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. This document may only be used
where it is legal to sell these securities. The information in this
document may only be accurate as of the date of this document. Our
business, financial condition, results of operations and prospects may
have changed since that date.
PROSPECTUS SUMMARY
In this prospectus, the words "Ingersoll-Rand," "Company," "we,"
"our" and "us" refer to Ingersoll-Rand Company, a New Jersey corporation,
and its subsidiaries and do not refer to the trust.
The following summary contains basic information about this
offering. It may not contain all the information that is important to
you. The "Description of the Capital Securities", "Description of the
Debentures", "Description of the Guarantee" and "Effect of Obligations
under the Debentures and the Guarantee" sections of the prospectus
contain more detailed information regarding the terms and condition of
the capital securities. The following summary is qualified in its
entirety by reference to the detailed information appearing elsewhere in
this prospectus.
The Trust
Ingersoll-Rand Financing I is a Delaware business trust. It has
sold 1,610,000 capital securities to the public. _________ of these
securities are being offered pursuant to this prospectus. It has also
sold common securities, which represent approximately 3% of the trust's
capital, to Ingersoll-Rand.
The trust exists for the exclusive purposes of:
- issuing the common securities and capital securities, which
we refer to collectively as the trust securities,
representing undivided beneficial ownership interests in the
assets of the trust,
- investing the proceeds of the trust securities in the
debentures, and
- engaging in only those other activities necessary or
incidental thereto.
The number of trustees of the trust is presently five. Three of
the trustees, whom we refer to as regular trustees, are persons who are
employees or officers of or who are affiliated with Ingersoll-Rand. The
fourth trustee is Bank One, National Association, a financial institution
that is unaffiliated with Ingersoll-Rand, which trustee serves as
institutional trustee under the declaration of trust and as indenture
trustee for the purposes of compliance with the provisions of the Trust
Indenture Act of 1940. The fifth trustee, Bank One Delaware Inc., a
corporation that is unaffiliated with Ingersoll-Rand, serves as the
Delaware trustee.
-1-
The institutional trustee holds the debentures for the holders
of the trust securities and the institutional trustee has the power to
exercise all rights, powers and privileges under the indenture as the
holder of the debentures. Ingersoll-Rand, as the holder of all the common
securities, has the right to appoint, remove or replace any trustee.
Ingersoll-Rand pays all fees and expenses related to the trust and the
offering of the trust securities.
The principal place of business of the trust is c/o Ingersoll-
Rand Company, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677
and its telephone number is (201) 573-0123.
Ingersoll-Rand
Ingersoll-Rand is a leading provider of security and safety,
climate control, industrial productivity and infrastructure products. In
each of these markets Ingersoll-Rand offers a diverse product portfolio
that includes well-recognized industrial and commercial brands.
Security and Safety--Ingersoll-Rand markets architectural
hardware and access-control products and services for residential,
commercial and institutional buildings. Led by the familiar Schlage
brand, products include locks and locksets, door closers, exit devices,
steel doors and frames, power-operated doors, architectural columns and
biometric and electronic access control technologies.
Climate Control--Ingersoll-Rand offers a range of temperature-
control products for protecting food and other perishables. Products
include: Thermo King transport temperature control units for truck
trailers, small trucks, seagoing containers and air conditioning for
buses; and Hussmann refrigerated display cases for supermarkets,
delicatessens and other commercial and institutional refrigeration
applications.
Industrial Productivity--Ingersoll-Rand has a diverse group of
businesses offering products and services to enhance industrial
efficiency. These products and services include: Ingersoll-Rand air
compressors and components for compressed-air systems, tools and material
handling equipment, and fluid handling products; Club Car golf cars and
utility vehicles; and Torrington bearings, components and motion-control
technologies.
Infrastructure--Ingersoll-Rand is a major supplier of products
and services for all types of construction projects and industrial and
commercial development, including Bobcat compact equipment and Ingersoll-
Rand road pavers, compactors, portable-power products and drilling
equipment.
Ingersoll-Rand has approximately 100 manufacturing locations,
roughly half of which are outside North America. Approximately 34% of
Ingersoll-Rand's revenues are derived from outside the United States and
due to our diverse businesses, no end market represents more than 15% of
our revenues.
-2-
Over the past five years Ingersoll-Rand has pursued an
aggressive acquisition and divestiture program focused on: building and
maintaining leadership in our four major global markets; enhancing
revenue growth and profitability; and reducing the effect of economic
cycles on our financial performance. In 2000, Ingersoll-Rand sold
businesses that had $1.2 billion in sales and acquired businesses with
sales of $1.6 billion.
Ingersoll-Rand's principal executive offices are at 200 Chestnut
Ridge Road, Woodcliff Lake, New Jersey 07677 (telephone 201-573-0123).
The Offering
Securities of the Trust
The trust was created by Ingersoll-Rand to make an offering of
1,610,000 Capital Securities on March 23, 1998. __________ capital
securities are being offered on behalf of their existing holders by
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agent. Neither
Ingersoll-Rand nor the trust will receive any proceeds from this
offering.
Ingersoll-Rand owns all of the common securities of the trust.
The liquidation amount of all the trust common securities is equal to
approximately 3% of the total capital of the trust. The trust common
securities generally rank equally with the capital securities. However,
in the case of specific defaults and upon liquidation or redemption, the
trust common securities rank junior to the capital securities with
respect to distributions, redemption and liquidation. Except in limited
circumstances specified in the trust agreement, Ingersoll-Rand as the
holder of the trust common securities has sole voting power with respect
to matters to be voted upon by the trust's security holders.
The capital securities are represented by global securities that
are registered in the name of the nominee of The Depository Trust
Company, New York, New York (DTC). This means that you will not receive
a certificate for your capital securities but, instead, will hold your
interest through DTC's system.
Distributions
If you purchase the capital securities, you will be entitled to
receive cumulative cash distributions at an annual rate of ____% of the
liquidation amount of $25 or $___ per capital security. Distributions
are paid quarterly in arrears on February 16, May 16, August 16 and
November 16 of each year.
Extension of Payment Periods
The ability of the trust to pay distributions on the capital
securities is solely dependent on the receipt of interest payments from
Ingersoll-Rand on the debentures. Ingersoll-Rand has the right at any
time to defer the interest payments due on the debentures for successive
-3-
extension periods limited, in the aggregate, to a period not extending
beyond the maturity date of the debentures (which deferred interest
payments would accumulate at the rate of __% per annum compounded
quarterly). The corresponding quarterly distributions on the capital
securities would be deferred by the trust (but would continue to
accumulate quarterly and would accrue interest, compounded quarterly, at
the rate of ____% per annum) until the end of any extension period. If a
deferral of an interest payment occurs, the holders of the capital
securities will be required to accrue interest income for United States
federal income tax purposes in advance of the receipt of any
corresponding cash distribution with respect to the deferred interest
payment.
Distribution of Debentures
In certain circumstances involving an investment company event,
as described in this prospectus, the trust may be dissolved, with the
result that, after satisfaction of liabilities to creditors of the trust,
if any, debentures with an aggregate principal amount equal to the
aggregate stated liquidation amount of the capital securities will be
distributed to the holders of the capital securities.
Tax Event Redemption
The debentures (and, thus, the trust securities) are redeemable,
at the option of Ingersoll-Rand, on not less than 30 days or more than 60
days prior written notice in whole but not in part upon the occurrence
and continuation of a tax event, as described in this prospectus, at a
redemption price equal to, for each debenture, the redemption amount, as
described in this prospectus, together with accrued and unpaid
distributions (including deferred distributions). If Ingersoll-Rand
redeems all of the debentures, the trust must redeem all of the trust
securities and pay in cash the redemption price to the holders of such
trust securities.
Other than in the event of a tax event redemption, Ingersoll-
Rand will not have the ability to redeem the debentures prior to their
stated maturity date.
Guarantee
Ingersoll-Rand has irrevocably and unconditionally guaranteed on
a senior unsecured basis, the payment in full of:
- distributions on the capital securities to the extent the
trust has available funds for distribution; and
- generally, the liquidation amount of the capital securities
or the redemption price upon a tax event redemption, to the
extent the trust has assets available for distribution to
holders of capital securities.
-4-
No Listing of Capital Securities
The trust does not intend to apply for the listing of the
capital securities on any national securities exchange or for quotation
of the capital securities on any automated dealer quotation system.
Merrill Lynch has advised us that they currently intend to make
a market in the capital securities after the completion of this offering.
However, they are under no obligation to do so and may discontinue market
making activities at any time without notice.
-5-
RISK FACTORS
Before purchasing any capital securities, you should carefully
read this prospectus and pay special attention to the following risk
factors.
Ingersoll-Rand's Ability to Defer Distributions Has Tax Consequences for
You and May Affect the Trading Price of the Capital Securities
As long as the debentures are not in default, Ingersoll-Rand
can, on one or more occasions, defer interest payments on the debentures
to the maturity date of the debentures. Because interest payments on the
debentures fund the distributions on the capital securities, each such
deferral would result in a corresponding deferral of distributions on the
capital securities.
Ingersoll-Rand does not currently intend to defer interest
payments on the debentures. However, if it does so in the future, the
capital securities may trade at a price that does not fully reflect the
value of the accrued but unpaid distributions.
If you sell capital securities during a deferral period, you may
not receive the same return on your investment as someone who continues
to hold the capital securities. In addition, Ingersoll-Rand's right to
defer interest payments on the debentures could mean that the market
price for the capital securities may be more volatile than that of other
securities without interest deferral rights.
At the end of any deferral period, Ingersoll-Rand must pay all
of the accrued interest on the debentures. Ingersoll-Rand must also pay
interest on the deferred interest payments at an annual rate of %,
compounded quarterly. If Ingersoll-Rand pays these amounts, it may elect
to begin a new deferral period. There is no other limitation on the
number of times that Ingersoll-Rand may elect to begin a new deferral
period except that no deferral period may extend beyond the maturity date
of the debentures.
If Ingersoll-Rand does defer interest payments on the
debentures, you will be required to accrue interest income for United
States federal income tax purposes in respect of your proportionate share
of the debentures held by the trust even if you normally report income
when received. As a result, you must include the accrued interest in
your gross income for United States federal income tax purposes prior to
your receiving any cash distribution.
The Capital Securities May Be Redeemed At Any Time if a Tax Event Occurs
If a tax event occurs, Ingersoll-Rand can redeem all of the
debentures. If such a redemption happens, the trust must use the
redemption price it receives to redeem the capital securities.
-6-
Exchange of Capital Securities for Debentures
Ingersoll-Rand has the right to terminate the trust and, after
paying all of the trust's debts, if any, to cause the trust to distribute
debentures in exchange for all of the outstanding trust securities.
Assuming, as expected, that the trust will not be taxable as a
corporation under current United States federal income tax law, this
exchange would not be a taxable event to holders of the capital
securities. However, if the trust becomes subject to United States
federal income tax with respect to income received or accrued on the
debentures, a distribution of the debentures by the trust could be a
taxable event to the trust and the holders of the capital securities.
Rights Under the Guarantee; Direct Action
Ingersoll-Rand guarantees the following payments on the capital
securities, but only to the extent that the trust has funds available to
make such payments:
- any accumulated and unpaid distributions required to be
paid on the capital securities;
- the redemption price with respect to any securities
called for redemption; and
- upon a voluntary or involuntary dissolution, winding up
or liquidation of the trust (other than in connection with the
distribution of debentures to the holders of the capital
securities), the lesser of (a) the aggregate liquidation amount of
the capital securities and accrued and unpaid distributions thereon
to the date of payment and (b) the amount of assets of the trust
remaining available for distribution to the holders of capital
securities.
If Ingersoll-Rand defaults on the debentures, the trust will lack
funds for the payments on the capital securities. If this happens,
holders of capital securities will not be able to rely upon the guarantee
for payment of such amounts. Instead, if Ingersoll-Rand does not pay any
amounts on the debentures when due, a holder of capital securities may
proceed directly against Ingersoll-Rand for payment of any amounts due on
the capital securities of such holder.
Limited Voting Rights
You will only have limited voting rights. In particular, only
Ingersoll-Rand can elect and remove trustees, except under certain
limited circumstances.
-7-
USE OF PROCEEDS
Neither Ingersoll-Rand nor the trust will receive any proceeds
from this offering of the capital securities. The portion of the
proceeds from this offering equal to the aggregate stated liquidation
amount of the capital securities will be automatically applied to satisfy
in full the obligations of specified Income PRIDES holders to purchase
common stock under their related purchase contracts. In addition, after
deducting as the placement fee an amount not exceeding 25 basis points
(.25%) of the aggregate stated liquidation amount of the securities from
any amount of such proceeds in excess of the aggregate stated liquidation
amount of the capital securities offered hereby plus any accrued and
unpaid distributions (including any deferred distributions), Merrill
Lynch will remit the remaining portion of the proceeds, if any, for the
benefit of such holder.
-8-
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth Ingersoll-Rand's ratio of
earnings to fixed charges for each of the years in the five year period
ended December 31, 2000. Ingersoll-Rand does not presently have any
preference stock outstanding. For the purpose of computing the ratios of
earnings to fixed charges, earnings consist of earnings from continuing
operations before income taxes and fixed charges, excluding Ingersoll-
Rand's proportionate share in the undistributed earnings (losses) of less
than fifty-percent-owned affiliates (accounted for using the equity
method), minority interests and capitalized interest. Fixed charges
consist of interest (including capitalized interest), amortization of
debt discount and expense and that portion (one-third) of rental expense
deemed to be representative of an interest factor included therein.
Year Ended December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Ratio of earnings to fixed charges . . . . . 3.44 4.28 3.59 4.44 4.79
-9-
DESCRIPTION OF THE CAPITAL SECURITIES
General
The capital securities have been issued pursuant to the terms of
the declaration of trust. Bank One, National Association, as
institutional trustee, acts as indenture trustee for the capital
securities under the declaration of trust for purposes of compliance with
the provisions of the Trust Indenture Act of 1939. The declaration of
trust authorized the regular trustees to issue, on behalf of the trust,
the trust securities, which represent undivided beneficial ownership
interests in the assets of the trust. All of the common securities are
owned, directly or indirectly, by Ingersoll-Rand.
The common securities rank equally with, and payments will be
made thereon on a pro rata basis, with the capital securities, except
that upon the occurrence and during the continuance of an indenture event
of default, the rights of the holders of the common securities to receive
payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the
holders of the capital securities. The declaration of trust does not
permit the issuance by the trust of any securities other than the trust
securities or the incurrence of any indebtedness by the trust. Pursuant
to the declaration of trust, the institutional trustee owns the
debentures purchased by the trust for the benefit of the holders of the
trust securities. The payment of distributions out of money held by the
trust, and payments upon redemption of the capital securities or
liquidation of the trust, are guaranteed by Ingersoll-Rand to the extent
described under "Description of the Guarantee." The guarantee, when taken
together with Ingersoll-Rand's obligations under the debentures and the
indenture and its obligations under the declaration of trust, including
the obligations to pay costs, expenses, debts and liabilities of the
trust (other than with respect to the capital securities), provides a
full and unconditional guarantee of amounts due on the capital
securities. The guarantee is held by Bank One, National Association, the
guarantee trustee, for the benefit of the holders of the capital
securities. The guarantee does not cover payment of distributions when
the trust does not have sufficient available funds to pay such
distributions. In such event, the remedy of a holder of capital
securities is to vote to direct the institutional trustee to enforce the
institutional trustee's rights under the debentures (except in the
limited circumstances in which the holder may take direct action).
Distributions
Distributions on the capital securities will be fixed initially
at a rate per annum of % of the stated liquidation amount of $25 per
capital security. Distributions in arrears for more than one quarter will
-10-
accumulate at the rate of % per annum through and including May 15,
2003, compounded quarterly. The term "distribution" as used herein
includes any such accumulated distributions unless otherwise stated. The
amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.
Distributions on the capital securities offered hereby will be
cumulative and will accrue from May 16, 2001 and will be payable
quarterly in arrears on February 16, May 16, August 16, and November 16
of each year, commencing August 16, 2001, when, as and if funds are
available for payment. Distributions will be made by the institutional
trustee, except as otherwise described below.
Ingersoll-Rand has the right under the indenture to defer
payments of interest on the debentures by extending the interest payment
period from time to time on the debentures, which right, if exercised,
would defer quarterly distributions on the capital securities (though
such distributions would continue to accrue with interest at the rate of
% per annum) during any such extended interest payment period. Such
right to extend the interest payment period for the debentures is limited
to a period, in the aggregate, not extending beyond the maturity date of
the debentures. In the event that Ingersoll-Rand exercises this right,
then
- Ingersoll-Rand may not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any
of its capital stock other than
- purchases or acquisitions of capital stock of Ingersoll-
Rand in connection with the satisfaction by Ingersoll-
Rand of its obligations under any employee benefit plans
or the satisfaction by Ingersoll-Rand of its obligations
pursuant to any contract or security outstanding on the
date of such event requiring Ingersoll-Rand to purchase
capital stock of Ingersoll-Rand,
- as a result of a reclassification of Ingersoll-Rand's
capital stock or the exchange or conversion of one class
or series of Ingersoll-Rand's capital stock for another
class or series of Ingersoll-Rand's capital stock,
- the purchase of fractional interests in shares of
Ingersoll-Rand's capital stock pursuant to the
conversion or exchange provisions of such capital stock
or the security being converted or exchanged,
- dividends or distributions in capital stock of
Ingersoll-Rand (or rights to acquire capital stock) or
-11-
repurchases or redemptions of capital stock solely from
the issuance or exchange of capital stock, or
- redemptions or repurchases of any rights outstanding
under a shareholder rights plan or the declaration
thereunder of a dividend of rights in the future,
- Ingersoll-Rand may not make any payment of interest,
principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by Ingersoll-Rand that
rank junior to such debentures, and
- Ingersoll-Rand may not make any guarantee payments with
respect to the foregoing other than pursuant to the
guarantee.
Prior to the termination of any extension period, Ingersoll-Rand
may further extend the interest payment period as long as the extension
period, together with all such previous and further extensions thereof,
may not extend beyond the maturity date of the debentures. If
distributions are deferred, the deferred distributions and accrued
interest will be paid to holders of record of the capital securities as
they appear on the books and records of the trust on the record date next
following the termination of an extension period.
Distributions on the capital securities will be paid to the
extent that the trust has funds available for the payment of the
distributions. The trust's funds available for distribution to the
holders of the capital securities will be limited to payments received
from Ingersoll-Rand on the debentures. The payment of distributions out
of monies held by the trust is guaranteed by Ingersoll-Rand to the extent
set forth under "Description of the Guarantee." Distributions on the
capital securities will be payable to the holders, as they appear on the
books and records of the trust on the relevant record dates, which, as
long as the capital securities remain in book-entry only form, will be
one business day prior to the relevant payments dates. In the event that
any date on which distributions are to be made on the capital securities
is not a business day, then payment of the distributions payable on such
date will be made on the next succeeding day which is a business day (and
without any interest or other payment in respect of any such delay),
except that, if such business day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding business
day, in each case with the same force and effect as if made on such
record date.
Optional Redemption
The debentures are redeemable at the option of Ingersoll-Rand,
in whole but not in part, on not less than 30 days nor more than 60 days
notice, upon the occurrence and continuation of a tax event under the
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circumstances described under "Description of the Debentures Tax Event
Redemption." If Ingersoll-Rand redeems the debentures upon the occurrence
and continuation of a tax event, the proceeds from the repayment shall
simultaneously be applied on a pro rata basis to redeem capital
securities having an aggregate stated liquidation amount equal to the
aggregate principal amount of the debentures so redeemed at a redemption
price, per capital security, equal to the redemption amount plus accrued
and unpaid interest thereon to the date of such redemption. The
definition of redemption amount is described under "Description of
Debentures--Tax Event Redemption." The proceeds will be payable in cash
to the holders of such capital securities.
Redemption Procedures
If the trust gives a notice of redemption (which notice will be
irrevocable) in respect of the capital securities, then, by 12:00 noon,
New York City time, on the redemption date, provided that Ingersoll-Rand
has paid to the institutional trustee sufficient amount of cash in
connection with the related redemption or maturity of the debentures, the
trust will irrevocably deposit with the depositary, funds sufficient to
pay the applicable redemption price and will give the depositary
irrevocable instructions and authority to pay the redemption price to the
holders of the capital securities so called for redemption. If notice of
redemption shall have been given and funds deposited as required, then,
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such
capital securities so called for redemption will cease, except the right
of the holders of such capital securities to receive the redemption price
but without interest on the redemption price. In the event that any date
fixed for redemption of capital securities is not a business day, then
payment of the redemption price payable on such date will be made on the
next succeeding day that is a business day (without any interest or other
payment in respect of any such delay), except that, if such business day
falls in the next calendar year, such payment will be made on the
immediately preceding business day.
Distribution of the Debentures
If, at any time, an investment company event shall occur and be
continuing, the trust will be dissolved, with the result that debentures
with an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued
and unpaid distributions on, the trust securities, would be distributed
to the holders of the trust securities in liquidation of such holders'
interests in the trust on a pro rata basis within 90 days following the
occurrence of such investment company event. The dissolution and
distribution will, however, be conditioned on Ingersoll-Rand being unable
to avoid such investment company event within the 90-day period by taking
some ministerial action or pursuing some other similar reasonable measure
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that will have no adverse effect on the trust, Ingersoll-Rand or the
holders of the trust securities and will involve no material cost.
Ingersoll-Rand will have the right at any time to dissolve the
trust and, after satisfaction of liabilities of creditors of the trust as
provided by applicable law, cause the debentures to be distributed to the
holders of the trust securities. As of the date of any distribution of
debentures upon dissolution of the trust:
- the capital securities will no longer be deemed to be
outstanding,
- the depositary or its nominee, as the record holder of the
capital securities, will receive a registered global
certificate or certificates representing the debentures to
be delivered upon such distribution, and
- any certificates representing capital securities not held by
the depositary or its nominee will be deemed to represent
debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and
unpaid interest equal and unpaid distributions on, such
capital securities until such certificates are presented to
Ingersoll-Rand or its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the
capital securities or the debentures that may be distributed in exchange
for the capital securities if a dissolution of the trust were to occur.
Accordingly, the capital securities or such debentures that an investor
may receive if a dissolution of the trust were to occur may trade at a
discount to the price that the investor paid to purchase the capital
securities.
"Investment company event" means that the regular trustees have
received an opinion from independent counsel experienced in practice
under the Investment Company Act of 1940 to the effect that, as a result
of the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in
1940 Act Law"), which Change in 1940 Act Law becomes effective on or
after the date of this prospectus, there is more than an insubstantial
risk that the trust is or will be considered an "investment company"
which is required to be registered under the Investment Company Act.
Subordination of Common Securities
Payment of distributions (including additional amounts, if
applicable) on, and the redemption price of, the capital securities and
common securities will be made pro rata based on the liquidation amount
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of the capital securities and common securities, if, however, on any
distribution date, or redemption date an indenture event of default shall
have occurred and be continuing, no payment of any distribution
(including additional amounts, if applicable) on, or redemption price of
any of the trust's common securities, and no other payment on account of
the redemption, liquidation or other acquisition of such common
securities, shall be made unless payment in full in cash of accumulated
and unpaid distributions (including additional amounts, if applicable) on
all of the trusts outstanding capital securities for all distribution
periods terminating on or prior thereto, or in the case of payment of the
redemption price the full amount of such redemption price on all of the
trust's outstanding capital securities then called for redemption, shall
have been made or provided for, and all funds available to the
institutional trustee shall first be applied to the payment in full in
cash of all distributions (including additional amounts, if applicable)
on, or redemption price of, the trust's capital securities then due and
payable.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary dissolution of the
trust (unless a tax event redemption has occurred), the then holders of
the capital securities will be entitled to receive out of the assets of
the trust, after satisfaction of liabilities to creditors, debentures in
an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of,
and accrued and unpaid interest equal to accrued and unpaid distributions
on, the capital securities on a pro rata basis in exchange for such
capital securities.
The holders of the common securities will be entitled to receive
distributions upon any such dissolution pro rata with the holders of the
capital securities, except that if a declaration of trust event of
default has occurred and is continuing, the capital securities shall have
a preference over the common securities with regard to such
distributions.
Pursuant to the declaration, the trust shall dissolve
- on March 23, 2004, the expiration of the term of the trust,
- upon the bankruptcy of Ingersoll-Rand or the holder of the
common securities,
- upon the filing of a certificate of dissolution or its
equivalent with respect to Ingersoll-Rand or the revocation
of the charter of Ingersoll-Rand and the expiration of 90
days after the date of revocation without a reinstatement
thereof,
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- after the receipt by the institutional trustee of written
direction from Ingersoll-Rand to dissolve the trust,
- upon the distribution of debentures,
- upon the occurrence and continuation of a tax event
redemption (as described under "Description of the
Debentures--Tax Event Redemption"),
- upon the entry of a decree of a judicial dissolution of the
holder of the common securities, Ingersoll-Rand or the
trust.
Declaration Events of Default
An event of default under the indenture constitutes an event of
default under the declaration of trust with respect to the trust
securities. In addition, the following are events of default under the
declaration of trust:
- default by the trust in the payment of any distribution when
it becomes due and payable, and continuation of such default
for a period of 30 days, or
- default by the trust in the payment of any redemption price
of any trust security when it becomes due and payable, or
- default in the performance, or breach, in any material
respect, of any covenant or warranty of the trustees in the
declaration of trust (other than a covenant or warranty a
default in the performance of which or the breach of which
is dealt with in the two previous clauses), and continuation
of such default or breach for a period of 90 days after
written notice has been given to the defaulting trustee or
trustees by the holders of at least 25% in aggregate
liquidation amount of the outstanding capital securities,
which notice shall specify such default or breach and
require it to be remedied and shall state that such notice
is a "Notice of Default" under the declaration of trust, or
- the occurrence of certain events of bankruptcy or insolvency
with respect to the institutional trustee and the failure by
Ingersoll-Rand to appoint a successor institutional trustee
within 60 days thereof.
Within five business days after the occurrence of any event of
default actually known to the institutional trustee, the institutional
trustee will transmit notice of such event of default to the holders of
the capital securities, the regular trustees and Ingersoll-Rand unless
such event of default shall have been cured or waived. Upon the
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occurrence of a declaration of trust event of default, the institutional
trustee as the sole holder of the debentures will have the right under
the indenture to declare the principal of and interest on the debentures
to be immediately due and payable. Ingersoll-Rand and the regular
trustees are required to file annually with the institutional trustee a
certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the declaration of
trust.
The holder of the common securities will be deemed to have
waived any declaration of trust event of default with respect to the
common securities until all declaration of trust events of default with
respect to the capital securities have been cured, waived, or otherwise
eliminated.
Until such declaration of trust events of default with respect
to the capital securities have been so cured, waived or otherwise
eliminated, the institutional trustee will be deemed to be acting solely
on behalf of the holders of the capital securities and only the holders
of the capital securities will have the right to direct the institutional
trustee with respect to certain matters under the declaration of trust
and, therefore, the indenture. If a declaration of trust event of
default with respect to the capital securities is waived by holders of
capital securities, such waiver will also constitute the waiver of such
declaration of trust event of default with respect to the common
securities without any further act, vote or consent of the holders of the
common securities. If the institutional trustee fails to enforce its
rights under the debentures in respect of an indenture event of default
after a holder of record of capital securities has made a written
request, such holder of record of capital securities may, to the fullest
extent permitted by applicable law, institute a legal proceeding against
Ingersoll-Rand to enforce the institutional trustee's rights under the
debentures without first proceeding against the institutional trustee or
any other person or entity. Notwithstanding the foregoing, if a
declaration event of default has occurred and is continuing and such
event is attributable to the failure of Ingersoll-Rand to pay interest or
principal on the debentures on the date such interest or principal is
otherwise payable (after giving effect to any right of deferral), then a
holder of capital securities may institute a direct action for the
principal of or interest on the debentures having a principal amount
equal to the aggregate liquidation amount of the capital securities of
such holder. The holders of capital securities will not be able to
exercise directly any other remedy available to the holders of the
debentures.
Voting Rights
Except as described herein, under Delaware law and the Trust
Indenture Act of 1940 and as otherwise required by law and the
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declaration of trust, the holders of the capital securities will have no
voting rights.
Subject to the requirement of the institutional trustee
obtaining a tax opinion in certain circumstances set forth in the last
sentence of this paragraph, the holders of a majority in aggregate stated
liquidation amount of the capital securities have the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the institutional trustee, or direct the exercise of any
trust or power conferred upon the institutional trustee under the
declaration of trust, including the right to direct the institutional
trustee, as holder of the debentures, to:
(a) exercise the remedies available under the indenture with respect
to the debentures,
(b) waive any past indenture event of default that is waivable under
the indenture,
(c) exercise any right to rescind or annul a declaration that the
principal of all the debentures shall be due and payable, or
(d) consent to any amendment, modification or termination of the
indenture or the debentures where such consent shall be
required. Where a consent or action under the indenture would
require the consent or act of holders of more than a majority in
principal amount of the debentures affected thereby, however,
only the holders of at least such super-majority in aggregate
stated liquidation amount of the capital securities may direct
the institutional trustee to give such consent or take such
action. The institutional trustee shall notify all holders of
the capital securities of any notice of default received from
the debenture trustee. Such notice shall state that such
indenture event of default also constitutes a declaration event
of default. Except with respect to directing the time, method
and place of conducting a proceeding for a remedy, the
institutional trustee shall not take any of the actions
described in clauses (a), (b) or (c) above unless the
institutional trustee has obtained an opinion of tax counsel
experienced in such matters to the effect that, as a result of
such action, the trust will not fail to be classified as a
grantor trust for federal income tax purposes.
In the event the consent of the institutional trustee, as the
holder of the debentures, is required under the indenture with respect to
any amendment, modification or termination of the indenture or the
debentures, the institutional trustee shall request the direction of the
holders of the capital securities and the common securities with respect
to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a
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majority in stated liquidation amount of the capital securities and the
common securities voting together as a single class. Where a consent
under the indenture would require the consent of a super-majority, the
institutional trustee may only give such consent at the direction of the
holders of at least the proportion in stated liquidation amount of the
capital securities and the common securities which the relevant super-
majority represents of the aggregate principal amount of the debentures
outstanding. The institutional trustee shall not take any such action in
accordance with the directions of the holders of the capital securities
and the common securities unless the institutional trustee has obtained
an opinion of tax counsel experienced in such matters to the effect that,
as a result of such action, the trust will not fail to be classified as a
grantor trust for United States federal income tax purposes.
A waiver of an indenture event of default will constitute a
waiver of the corresponding declaration of trust event of default.
Any required approval or direction of holders of capital
securities may be given at a separate meeting of holders of capital
securities convened for such purpose, at a meeting of all of the holders
of trust securities or pursuant to written consent. The regular trustees
will cause a notice of any meeting at which holders of capital securities
are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be mailed to each holder of
record of capital securities. Each such notice will include a statement
setting forth the following information:
- the date of such meeting or the date by which such action is
to be taken,
- a description of any resolution proposed for adoption at
such meeting on which such holders are entitled to vote or
of such matter upon which written consent is sought, and
- instructions for the delivery of proxies or consents.
No vote or consent of the holders of capital securities will be
required for the trust to cancel capital securities or distribute
debentures in accordance with the declaration of trust.
Notwithstanding that holders of capital securities are entitled
to vote or consent under any of the circumstances described above, any of
the capital securities that are owned at such time by Ingersoll-Rand or
any entity directly or indirectly controlling or controlled by, or under
direct or indirect common control with, Ingersoll-Rand, shall not be
entitled to vote or consent and shall, for purpose of such vote or
consent, be treated as if such capital securities were not outstanding.
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The procedures by which holders of capital securities may
exercise their voting rights are described below. See "--Book-Entry Only
Issuance--The Depository Trust Company."
Modification of the Declaration
The declaration of trust may be modified and amended if approved
by the regular trustees (and in certain circumstances the institutional
trustee or the Delaware trustee), provided, that if any proposed
amendment provides for, or the regular trustees otherwise propose to
effect:
(a) any action that would adversely affect the powers,
preferences or special rights of the trust securities,
whether by way of amendment to the declaration or
otherwise or
(b) the dissolution of the trust other than pursuant to the
terms of the declaration,
then the holders of the trust securities voting together as a single
class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of
at least a majority in such stated liquidation amount of the trust
securities affected thereby. If any amendment or proposal referred to in
clause (a) above would adversely affect only the capital securities or
the common securities, then only the affected class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall
not be effective except with the approval of a majority in stated
liquidation amount of such class of securities. In addition, the
declaration of trust may be amended without the consent of the holders of
the trust securities to, among other things, cause the trust to continue
to be classified for United States federal income tax purposes as a
grantor trust.
Notwithstanding the foregoing, no amendment or modification may
be made to the Declaration if such amendment or modification would:
- cause the trust to be classified as other than a grantor
trust for purposes of United States federal income taxation,
- reduce or otherwise adversely affect the power of the
institutional trustee, or
- cause the trust to be deemed an "investment company" which
is required to be registered under the Investment Company
Act.
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Mergers, Consolidations or Amalgamations
The trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as described in "-Liquidation Distribution Upon
Dissolution." The trust may, with the consent of the regular trustees and
without the consent of the holders of the trust securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as
such under the laws of any State; provided, that:
- if the trust is not the surviving entity, such successor
entity either
- expressly assumes all of the obligations of the trust
under the trust securities or
- substitutes for the trust securities other securities
having substantially the same terms as the trust
securities, so long as the successor securities rank the
same as the trust securities with respect to
distributions and payments upon liquidation, redemption
and otherwise,
- Ingersoll-Rand expressly acknowledges a trustee of such
successor entity possessing the same powers and duties as
the institutional trustee as the holder of the debentures,
- if the capital securities are listed, any successor
securities will be listed upon notification of issuance, on
any national securities exchange or with another
organization on which the capital securities are then listed
or quoted,
- such merger, consolidation, amalgamation or replacement does
not cause the capital securities (including any successor
securities) to be downgraded by any nationally recognized
statistical rating organization,
- such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges
of the holders of the trust securities (including any
successor securities) in any material respect (other than
with respect to any dilution of the holders' interest in the
new entity),
- such successor entity has a purpose substantially identical
to that of the trust,
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- prior to such merger, consolidation, amalgamation or
replacement, Ingersoll-Rand has received an opinion of a
nationally recognized independent counsel to the trust
experienced in such matters to the effect, that,
- such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and
privileges of the holders of the trust securities
(including any successor securities) in any material
respect (other than with respect to any dilution of the
holders' interest in the new entity),
- following such merger, consolidation, amalgamation or
replacement, neither the trust nor such successor entity
will be required to register as an investment company
under the Investment Company Act, and
- following such merger, consolidation, amalgamation or
replacement, the trust (or the successor entity) will
continue to be classified as a grantor trust for federal
income tax purposes, and
- Ingersoll-Rand guarantees the obligations of such successor
entity under the successor securities at least to the extent
provided by the guarantee and the common securities
guarantee (as defined herein).
Notwithstanding the foregoing the trust shall not, except with
the consent of holders of 100% in stated liquidation amount of the trust
securities, consolidate, amalgamate, merge with or into, or be replaced
by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the trust or the
successor entity to be classified as other than a grantor trust for
federal income tax purposes.
Book-Entry Only Issuance--The Depository Trust Company
The capital securities will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). However,
under certain circumstances, the regular trustees with the consent of
Ingersoll-Rand may decide not to use the system of book-entry transfers
through the DTC with respect to the capital securities. In that event,
certificates of the capital securities will be printed and delivered to
the holders.
The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of securities in definitive form.
Such laws may impair the ability to transfer beneficial interests in the
global capital securities as represented by a global certificate.
-22-
Purchases of capital securities within the DTC's system must be
made by or through direct participants, which will receive a credit for
the capital securities on the DTC's records. The ownership interest of
each actual purchaser of each capital security is in turn to be recorded
on the direct and indirect participants' records. Beneficial owners will
not receive written confirmation from the DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the direct or indirect participants through which the
beneficial owners purchased capital securities. Transfers of ownership
interests in the capital securities are to be accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their
ownership interests in the capital securities, except in the event that
use of the book-entry system for the capital securities is discontinued.
To facilitate subsequent transfers, all the capital securities
deposited by participants with the DTC will be registered in the name of
the DTC's nominee, Cede & Co. The deposit of capital securities with DTC
and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the capital securities. DTC's records reflect only the identity
of the direct participants to whose accounts such capital securities are
credited, which may or may not be the beneficial owners. The participants
will remain responsible for keeping account of their holdings on behalf
of their customers.
So long as DTC or its nominee is the registered owner or holder
of a global certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the capital securities represented
thereby for all purposes under the declaration of trust and the capital
securities. No beneficial owner of an interest in a global certificate
will be able to transfer that interest except in accordance with DTC
applicable procedures, in addition to those provided for under the
declaration of trust.
DTC has advised Ingersoll-Rand that it will take any action
permitted to be taken by a holder of capital securities (including the
presentation of capital securities for exchange as described below) only
at the direction of one or more participants to whose account DTC's
interests in the global certificates are credited and only in respect of
such portion of the stated liquidation amount of capital securities as to
which such participant or participants has or have given such directions.
However, if there is a declaration of trust event of default under the
capital securities, DTC will exchange the global certificates for
certificated securities, which it will distribute to its participants.
Conveyance of notices and other communications by DTC to direct
participants and indirect participants and by direct participants and
indirect participants to beneficial owners will be governed by
-23-
arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Although voting with respect to the capital securities is
limited, in those cases where a vote is required, neither DTC nor Cede &
Co. will itself consent or vote with respect to capital securities.
Under its usual procedures, DTC would mail an omnibus proxy to the trust
as soon as possible after the record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the capital securities are credited on the record date
(identified in a listing attached to the omnibus proxy). Ingersoll-Rand
and the trust believe that the arrangements among DTC, direct and
indirect participants, and beneficial owners will enable the beneficial
owners to exercise rights equivalent in substance to the rights that can
be directly exercised by a record holder of a beneficial interest in the
trust.
Distribution payments on the capital securities issued in the
form of one or more global certificates will be made to DTC in
immediately available funds. DTC's practice is to credit direct
participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless the depositary
has reason to believe that it will not receive payments on such payment
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered
in "street name," and such payments will be the responsibility of such
participant and not of DTC, the trust or Ingersoll-Rand, subject to any
statutory or regulatory requirements to the contrary that may be in
effect from time to time. Payment of distributions to DTC is the
responsibility of the trust, disbursement of such payments to direct
participants is the responsibility of DTC, and disbursement of such
payments to the beneficial owners is the responsibility of direct and
indirect participants.
Except as provided herein, a beneficial owner in a global
capital security certificate will not be entitled to receive physical
delivery of capital securities. Accordingly, each beneficial owner must
rely on the procedures of DTC to exercise any rights under the capital
securities.
Although DTC has agreed to the foregoing procedure in order to
facilitate transfer of interests in the global certificates among
participants, DTC is under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any
time. None of Ingersoll-Rand, the trust or any trustee will have any
responsibility for the performance by DTC or its direct participants or
indirect participants under the rules and procedures governing the DTC.
DTC may discontinue providing its services as securities depositary with
respect to the capital securities at any time by giving reasonable notice
-24-
to the trust. Under such circumstances, in the event that a successor
securities depositary is not obtained, capital securities certificates
are required to be printed and delivered to holders. Additionally, the
regular trustees (with the consent of Ingersoll-Rand) may decide to
discontinue use of the system of book-entry transfers through DTC (or any
successor depositary) with respect to the capital securities. In that
event, certificates for the capital securities will be printed and
delivered to holders. In each of the above circumstances, Ingersoll-Rand
will appoint a paying agent with respect to the capital securities.
The information in this section concerning DTC and DTC's book-
entry system has been obtained from sources that Ingersoll-Rand and the
trust believe to be reliable, but neither Ingersoll-Rand nor the trust
takes responsibility for the accuracy hereof.
Registrar, Transfer Agent and Paying Agent
Payments in respect of the capital securities represented by the
global certificates shall be made to DTC, which shall credit the relevant
accounts at DTC on the applicable distribution dates, or, in the case of
certificated securities, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear
on the register. The paying agent shall be permitted to resign as paying
agent upon 30 days' written notice to the trustees.
Bank One, National Association will act as registrar, transfer
agent and paying agent for the capital securities. In the event that Bank
One, National Association shall no longer be agent, the regular trustees
shall appoint a successor to act as paying agent (which shall be a bank
or trust company).
Registration of transfers of capital securities will be effected
without charge by or on behalf of the trust, but upon payment (and the
giving of such indemnity as the trust or Ingersoll-Rand may require) in
respect of any tax or other government charge which may be imposed in
relation to it.
Information Concerning the Institutional Trustee
The institutional trustee prior to the occurrence of a default
with respect to the trust securities and after the curing and or waiver
of any defaults that may have occurred, undertakes to perform only such
duties as are specifically set forth in the declaration of trust and,
after default, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the institutional trustee is under no
obligation to exercise any of the powers vested in it by the declaration
at the request of any holder of capital securities, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The holders of capital
-25-
securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the institutional
trustee to take any action it is empowered to take under the declaration
of trust following a declaration event of default. The institutional
trustee also serves as trustee under the guarantee.
The institutional trustee maintains commercial banking
relationships with Ingersoll-Rand.
Governing Law
The declaration of trust and the capital securities will be
governed by, and construed in accordance with, the internal laws of the
State of Delaware.
Miscellaneous
The regular trustees are authorized and directed to operate the
trust in such a way so that the trust will not be required to register as
an "investment company" under the Investment Company Act or be
characterized as other than a grantor trust for federal income tax
purposes. Ingersoll-Rand is authorized and directed to conduct its
affairs so that the debentures will be treated as indebtedness of
Ingersoll-Rand for federal income tax purposes. In this connection,
Ingersoll-Rand and the regular trustees are authorized to take any action
not inconsistent with applicable law, the declaration of trust, the
certificate of trust of the trust or the certificate of incorporation of
Ingersoll-Rand, that each of Ingersoll-Rand and the regular trustees
determines in its discretion to be necessary or desirable to achieve such
end, as long as such action does not adversely affect the interests of
the holders of the capital securities or vary the term thereof.
Holders of the capital securities have no preemptive or similar
rights.
DESCRIPTION OF THE GUARANTEE
General
Pursuant to the guarantee, Ingersoll-Rand irrevocably and
unconditionally agrees, to the extent set forth therein, to pay in full
on a senior unsecured basis, to the holders of the trust securities
issued by the trust, the guarantee payments (as defined in the next
sentence), as and when due, regardless of any defense, right of set-off
or counterclaim which the trust may have or assert. The following
payments or distributions with respect to trust securities issued by the
trust to the extent not paid by or on behalf of the trust (which we refer
to as the "guarantee payments"), will be subject to the guarantee
thereon:
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- any accrued and unpaid distributions which are required to
be paid on the trust securities, to the extent the trust
shall have funds available therefor,
- the redemption price, including all accumulated and unpaid
distributions to the date of redemption, of trust securities
in respect of which the related debentures have been
redeemed by Ingersoll-Rand upon the occurrence of a tax
event redemption, to the extent the trust has funds
available therefor, and
- upon a voluntary or involuntary dissolution of the trust
(other than in connection with the distribution of
debentures to the holders of trust securities), the lesser
of
- the aggregate of the stated liquidation amount and all
accrued and unpaid distributions on such trust
securities to the date of payment, to the extent the
trust has funds available therefor, and
- the amount of assets of the trust remaining available
for distribution to holders of the trust securities in
liquidation of the trust.
Ingersoll-Rand's obligation to make a guarantee payment may be
satisfied by direct payment of the required amounts by Ingersoll-Rand to
the holders of trust securities or by causing the trust to pay such
amounts to such holders.
The guarantee is a full and unconditional guarantee on a senior
unsecured basis with respect to the trust securities issued by the trust,
but does not apply to any payment of distributions except to the extent
the trust shall have funds available therefor. If Ingersoll-Rand does not
make interest payments on the debentures purchased by the trust, the
trust will not pay distributions on the trust securities and will not
have funds available to make distributions.
The guarantee, when taken together with Ingersoll-Rand's
obligations under the debentures, the indenture, and the declaration of
trust, has the effect of providing a full and unconditional guarantee on
a senior unsecured basis by Ingersoll-Rand of payments due on the trust
securities.
The guarantee is for the benefit of all the holders of the trust
securities (including the holders of the common securities), provided,
however, that upon an indenture event of default, holders of capital
securities shall have priority over holders of common securities with
respect to distributions and payments on liquidation, redemption or
otherwise.
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Bank One, National Association acts as the guarantee trustee for
the purposes of compliance with the provisions of the Trust Indenture
Act.
Certain Covenants of Ingersoll-Rand
In the guarantee, Ingersoll-Rand covenants that, so long as any
trust securities issued by the trust remain outstanding, if there shall
have occurred any event that would constitute an event of default under
the guarantee or the declaration of trust, then
- Ingersoll-Rand shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any
of its capital stock other than
- purchases or acquisitions of capital stock of Ingersoll-
Rand in connection with the satisfaction by Ingersoll-
Rand of its obligations under any employee or agent
benefit plans or the satisfaction by Ingersoll-Rand of
its obligations pursuant to any contract or security
outstanding on the date of such event requiring
Ingersoll-Rand to purchase capital stock of Ingersoll-
Rand,
- as a result of a reclassification of Ingersoll-Rand's
capital stock or the exchange or conversion of one class
or series of Ingersoll-Rand's capital stock for another
class or series of Ingersoll-Rand's capital stock,
- the purchase of fractional interests in shares of
Ingersoll-Rand's capital stock pursuant to the
conversion or exchange provisions of such capital stock
or the security being converted or exchanged,
- dividends or distributions in capital stock of
Ingersoll-Rand (or rights to acquire capital stock) or
repurchases or redemptions of capital stock solely from
the issuance or exchange of capital stock, or
- redemptions or repurchases of any rights outstanding
under a shareholder rights plan (or the declaration
thereunder of a dividend of rights in the future),
- Ingersoll-Rand shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by Ingersoll-Rand which
rank junior to the debentures, and
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- Ingersoll-Rand shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to
the guarantee).
Modification of the Guarantee; Assignment
Except with respect to any changes which do not adversely affect
the rights of holders of trust securities (in which case no vote will be
required), the guarantee may be amended only with the prior approval of
the holders of not less than a majority in stated liquidation amount of
the outstanding trust securities issued by the trust. All guarantees and
agreements contained in the guarantee shall bind the successors, assigns,
receivers, trustees and representatives of Ingersoll-Rand and shall inure
to the benefit of the holders of the trust securities then outstanding.
Termination
The guarantee will terminate:
- upon distribution of the debentures held by the trust to the
holders of the trust securities,
- upon full payment of the redemption price of all the trust
securities in the event that all of the debentures are
repurchased by Ingersoll-Rand upon the occurrence of a tax
event redemption, or
- upon full payment of the amounts payable in accordance with
the declaration of trust upon liquidation of the trust. The
guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of
trust securities must return payment of any sums paid under
the trust securities or the guarantee.
Events of Default
An event of default under the guarantee will occur upon the
failure of Ingersoll-Rand to perform any of its payment or other
obligations thereunder.
The holders of a majority in stated liquidation amount of the
trust securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee
trustee in respect of the guarantee or to direct the exercise of any
trust or power conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce such guarantee, any holder of
trust securities may institute a legal proceeding directly against
Ingersoll-Rand to enforce such holder's rights under the guarantee,
without first instituting a legal proceeding against the trust, the
guarantee trustee or any other person or entity. Ingersoll-Rand waives
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any right or remedy to require that any action be brought first against
the trust or any other person or entity before proceeding directly
against Ingersoll-Rand.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of
Ingersoll-Rand and will rank on a parity with all of Ingersoll-Rand's
other senior unsecured obligations.
Information Concerning the Guarantee Trustee
The guarantee trustee, prior to the occurrence of a default with
respect to the guarantee, undertakes to perform only such duties as are
specifically set forth in the guarantee and, after default, shall
exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provisions,
the guarantee trustee is under no obligation to exercise any of the
powers vested in it by the guarantee at the request of any holder of
capital securities, unless offered reasonable indemnity against the
costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the guarantee trustee, upon the occurrence of
an event of default under the guarantee, from exercising the rights and
powers vested in it by the guarantee.
The guarantee trustee maintains commercial banking relationships
with Ingersoll-Rand.
Governing Law
The guarantee will be governed by and construed in accordance
with the internal laws of the State of New York.
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DESCRIPTION OF DEBENTURES
General
The debentures were issued as senior unsecured debt under an
Indenture between Ingersoll-Rand and The Bank of New York as debt trustee
and rank on a parity in right of payment with all of the Ingersoll-Rand's
other senior unsecured debt obligations. The debentures are limited in
aggregate principal amount to $414.9 million.
The debentures are not subject to a sinking fund provision.
Unless a tax event redemption has occurred, the entire principal amount
of the debentures will mature and become due and payable, together with
any accrued and unpaid interest thereon including compound interest (as
defined herein) and expenses and taxes of the trust, if any, on May 16,
2003.
Ingersoll-Rand has the right at any time to dissolve the trust
and cause the debentures to be distributed to the holders of the trust
securities. If debentures are distributed to holders of trust securities
in liquidation of such holders' interests in the trust, the debentures
will initially be issued as a global security. Under certain limited
circumstances, debentures may be issued in certificated form in exchange
for a global security. In the event that debentures are issued in
certificated form, the debentures will be in denominations of $25 and
integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on debentures issued as a global
security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a paying agent for the debentures. In the
event debentures are issued in certificated form, principal and interest
will be payable, the transfer of the debentures will be registrable and
debentures will be exchangeable for debentures of other denominations of
a like aggregate principal amount, at the corporate trust office or
agency of the debt trustee, New York, New York, provided, that at the
option of Ingersoll-Rand, payment of interest may be made by check mailed
to the address of the holder entitled thereto or by wire transfer to an
account appropriately designated by the holder entitled thereto.
Notwithstanding the foregoing, so long as the holder of any debentures is
the institutional trustee, the payment of principal and interest on the
debentures held by the institutional trustee will be made at such place
and to such account as may be designated by the institutional trustee.
The indenture does not contain provisions that afford holders of
the debentures protection in the event of a highly leveraged transaction
or other similar transaction involving Ingersoll-Rand that may adversely
affect such holders.
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Interest
Each debenture bears interest at the rate of ___% per annum,
payable quarterly in arrears on February 16, May 16, August 16 and
November 16 of each year, to the person in whose name such debenture is
registered, subject to certain exceptions, at the close of business on
the business day next preceding such interest payment date. In the event
the debentures shall not continue to remain in book-entry only form,
Ingersoll-Rand shall have the right to select record dates, which shall
be more than fifteen business days but less than 60 business days prior
to the interest payment date. The amount of interest payable for any
period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. The amount of interest payable for any period
shorter than a full quarterly period for which interest is computed will
be computed on the basis of the actual number of days elapsed in such
90-day period. In the event that any date on which interest is payable
on the debentures is not a business day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
business day (and without any interest or other payment in respect of any
such delay), except that, if such business day is in the next succeeding
calendar year, then such payment shall be made on the immediately
preceding business day, in each case with the same force and effect as if
made on such date.
Tax Event Redemption
If a tax event shall occur and be continuing, Ingersoll-Rand
may, at its option, redeem debentures in whole (but not in part) at any
time at a redemption price equal to, for each debenture, the redemption
amount plus accrued and unpaid interest thereon, including compound
interest and expenses and taxes of the trust, if any, to the date of
redemption. If, following the occurrence of a tax event, Ingersoll-Rand
exercises its option to redeem the debentures, then the proceeds of such
redemption will be applied to redeem trust securities having a
liquidation amount equal to the principal amount of debentures to be paid
in accordance with their terms, at the redemption price. The redemption
price will be payable in cash to the holders of such trust securities.
"Tax event" means the receipt by the trust of an opinion of a
nationally recognized independent tax counsel experienced in such matters
to the effect that, as a result of (a) any amendment to, change in, or
announced proposed change in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority
thereof or therein affecting taxation, (b) any amendment to or change in
an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority or
(c) any interpretation or pronouncement that provides for a position with
respect to such laws or regulations that differs from the generally
accepted position on the date the trust securities are issued, which
amendment, change or proposed change is effective or which interpretation
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or pronouncement is announced on or after the date of issuance of the
trust securities under the declaration of trust, there is more than an
insubstantial risk that (i) interest payable by Ingersoll-Rand on the
debentures would not be deductible, in whole or in part, by Ingersoll-
Rand for United States federal income tax purposes or (ii) the income of
the trust would be subject to United States federal income tax or the
trust would be subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Treasury portfolio" means, with respect to the applicable
principal amount of debentures, a portfolio of zero-coupon U.S. Treasury
securities consisting of (a) principal or interest strips of U.S.
Treasury securities which mature on or prior to May 15, 2003 in an
aggregate amount equal to the applicable principal amount and (b) with
respect to each scheduled interest payment date on the debentures that
occurs after the tax event redemption date interest or principal strips
of such U.S. Treasury securities which mature on or prior to such date in
an aggregate amount equal to the aggregate interest payment that would be
due on the applicable principal amount of the debentures on such date.
"Applicable principal amount" means the aggregate principal
amount of the debentures corresponding to the aggregate stated
liquidation amount of the capital securities outstanding on such tax
event redemption date.
"Redemption Amount" means for each debenture, the product of
(a) the principal amount of such debenture and (b) a fraction whose
numerator is the Treasury portfolio purchase price and whose denominator
is the applicable principal amount.
"Treasury portfolio purchase price" means the lowest aggregate
price quoted by a primary U.S. government securities dealer in New York
City to the quotation agent on the third business day immediately
preceding the tax event redemption date for the purchase of the Treasury
portfolio for settlement on the tax event redemption date.
"Quotation agent" means (a) Merrill Lynch Government Securities,
Inc. and its respective successors, provided, however, that if the
foregoing shall cease to be a primary treasury dealer, Ingersoll-Rand
shall substitute therefor another primary treasury dealer, and (b) any
other primary treasury dealer selected by Ingersoll-Rand.
Notice of any redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each registered holder of
debentures to be prepaid at its registered address. Unless Ingersoll-Rand
defaults in payment of the redemption price, on and after the redemption
date interest shall cease to accrue on such debentures.
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Option to Extend Interest Payment Period
Ingersoll-Rand shall have the right at any time, and from time
to time, during the term of the debentures, to defer payments of interest
by extending the interest payment period for a period not extending
beyond the maturity date of the debentures, at the end of which extension
period, Ingersoll-Rand shall pay all interest then accrued and unpaid
(including any expenses and taxes of the trust, as herein defined)
together with interest thereon compounded quarterly at the rate of ___%
per annum, to the extent permitted by applicable law. During any
extension period:
- Ingersoll-Rand may not declare or pay dividends or make any
distribution with respect to, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of its
capital stock other than
- purchases or acquisitions of capital stock of Ingersoll-Rand
in connection with the satisfaction by Ingersoll-Rand of its
obligations under any employee or agent benefit plans or the
satisfaction by Ingersoll-Rand of its obligations pursuant
to any contract or security outstanding on the date of such
event requiring Ingersoll-Rand to purchase capital stock of
Ingersoll-Rand,
- as a result of a reclassification of Ingersoll-Rand's
capital stock or the exchange or conversion of one class or
series of Ingersoll-Rand's capital stock for another class
or series of Ingersoll-Rand capital stock,
- the purchase of fractional interests in shares of Ingersoll-
Rand's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
converted or exchanged,
- dividends or distributions in capital stock of Ingersoll-
Rand (or rights to acquire capital stock) or repurchases or
redemptions of capital stock solely from the issuance or
exchange of capital stock or
- redemptions or repurchases of any rights outstanding under a
shareholder rights plan or the declaration thereunder of a
dividend of rights in the future),
- Ingersoll-Rand shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by Ingersoll-Rand that
rank junior to the debentures, and
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- Ingersoll-Rand shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to
the guarantee).
Prior to the termination of any such extension period,
Ingersoll-Rand may further defer payments of interest by extending the
interest payment period. The extension period, including all such
previous and further extensions, may not extend, however, beyond the
maturity of the debentures. Upon the termination of any extension period
and the payment of all amounts then due, Ingersoll-Rand may commence a
new extension period, subject to the term set forth in this section. No
interest during an extension period, except at the end thereof, shall be
due and payable, but Ingersoll-Rand, at its option, may prepay on any
interest payment date all of the interest accrued during the then elapsed
portion of an extension period. Ingersoll-Rand has no present intention
of exercising its right to defer payments of interest by extending the
interest payment period on the debentures. If the institutional trustee
shall be the sole holder of the debentures, Ingersoll-Rand shall give the
regular trustees and the institutional trustee notice of its selection of
such extension period one business day prior to the earlier of (a) the
date distributions on the capital securities are payable or (b) the date
the regular trustees are required to give notice, if applicable, to the
NYSE (or other applicable self-regulatory organization) or to holders of
the capital securities of the record or payment date of such
distribution. The regular trustees shall give notice of Ingersoll-Rand's
selection of such extension period to the holders of the capital
securities. If the institutional trustee shall not be the sole holder of
the debentures, Ingersoll-Rand shall give the holders of the debentures
notice of its selection of such extension period ten business days prior
to the earlier of (a) the interest payment date or (b) the date upon
which Ingersoll-Rand is required to give notice, if applicable, to the
NYSE (or other applicable self-regulatory organization) or to holders of
the debentures of the record or payment date of such related interest
payment.
Certain Covenants of the Debt Securities
The debentures will include the following covenants:
Limitation on Liens. Ingersoll-Rand will not, and will not
permit any restricted subsidiary to, create, assume or guarantee any
indebtedness for money borrowed, secured by any mortgage, lien, pledge,
charge or other security interest or encumbrance of any kind (hereinafter
referred to as a "mortgage" or "mortgages") on any principal property of
Ingersoll-Rand or a restricted subsidiary or on any shares or funded
indebtedness of a restricted subsidiary (whether such principal property,
shares or funded indebtedness are now owned or hereafter acquired)
without, in any such case, effectively providing concurrently with the
creation, assumption or guaranteeing of such indebtedness that the
debentures (together, if Ingersoll-Rand shall so determine, with any
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other indebtedness then or thereafter existing, created, assumed or
guaranteed by Ingersoll-Rand or such restricted subsidiary ranking
equally with the debentures) shall be secured equally and ratably with or
prior to such indebtedness. The indenture excludes, however, from the
foregoing any indebtedness secured by a mortgage (including any
extension, renewal or replacement of any mortgage hereinafter specified
or any indebtedness secured thereby, without increase of the principal of
such indebtedness):
- on property, shares of funded indebtedness of any
corporation existing at the time such corporation becomes a
restricted subsidiary;
- on property existing at the time of acquisition of such
property, or to secure indebtedness incurred for the purpose
of financing the purchase price of such property or
improvements or construction thereon which indebtedness is
incurred prior to or within 180 days after the later of such
acquisition, completion of such construction or the
commencement of commercial operation of such property;
- on property, shares or funded indebtedness of a corporation
existing at the time such corporation is merged into or
consolidated with Ingersoll-Rand or a restricted subsidiary,
or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially
as an entirety to us or a restricted subsidiary;
- on property of a restricted subsidiary to secure
indebtedness of such restricted subsidiary to us or another
restricted subsidiary;
- on Ingersoll-Rand property or property of a restricted
subsidiary in favor of the United States or any State
thereof, or any department, agency or instrumentality or
political subdivision of the United States or any State
thereof, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure
any indebtedness incurred for the purpose of financing all
or any part of the purchase price or the cost of
constructing or improving the property subject to such
mortgage; or
- existing at the date of the indenture.
Limitation on Sale and Leaseback Transactions. Sale and
leaseback transactions (which are defined in the indenture to exclude
leases expiring within three years of making, leases between Ingersoll-
Rand and a restricted subsidiary or between restricted subsidiaries and
any lease of part of a principal property, which has been sold, for use
-36-
in connection with the winding up or termination of the business
conducted on such principal property) by Ingersoll-Rand or any restricted
subsidiary of any principal property are prohibited, unless (a)
Ingersoll-Rand would be entitled to incur indebtedness secured by a
mortgage on such principal property (see "Limitations on Liens" above) or
(b) an amount equal to the fair value of the principal property so leased
(as determined by our board of directors) is applied within 180 days to
the retirement (otherwise than by payment at maturity or pursuant to
mandatory sinking funds) of Ingersoll-Rand senior debt securities or
funded indebtedness of any restricted subsidiary on a parity with the
senior debt securities or to purchase, improve or construct principal
properties.
Exempted Indebtedness. Notwithstanding the limitation on
mortgages and sale and leaseback transactions described above, Ingersoll-
Rand or any restricted subsidiary may, in addition to amounts permitted
under such restrictions, create, assume or guarantee secured indebtedness
or enter into sale and leaseback transactions which would otherwise be
prohibited, provided that at the time of such event, and after giving
effect thereto, the sum of such outstanding secured indebtedness plus the
attributable debt in respect of such sale and leaseback transactions
(other than sale and leaseback transactions entered into prior to the
date of the senior indenture and sale and leaseback transactions entered
into prior to the date of the indenture and sale and leaseback
transactions whose proceeds have been applied in accordance with clause
(b) under "Limitation on Sale and Leaseback Transactions") does not
exceed 5% of Ingersoll-Rand and Ingersoll-Rand consolidated subsidiaries
shareholders' equity. "Attributable debt" means, as of any particular
time, the then present value of the total net amount of rent required to
be paid under such leases during the remaining terms thereof (excluding
any renewal terms unless the renewal is at the option of the lessor),
discounted at the actual interest factor included in such rent, or, if
such interest factor is not readily determinable, then at the rate of 8-
3/8% per annum.
Restriction Upon Merger and Sales of Assets. Upon any
consolidation or merger of Ingersoll-Rand with or into any other
corporation or any sale, conveyance or lease of all or substantially all
of Ingersoll-Rand property to any other corporation, the corporation (if
other than Ingersoll-Rand) formed by such consolidation, or into which
Ingersoll-Rand shall have been merged, or the corporation which shall
have acquired or leased such property (which corporation shall be a
solvent corporation organized under the laws of the United States or a
State thereof or the District of Columbia) shall expressly assume the due
and punctual payment of the principal of and premium, if any, and
interest, if any, on all of the debentures. Ingersoll-Rand will not
consolidate or merge, or make any such sale, lease or other disposition,
and Ingersoll-Rand will not permit any other corporation to merge into
it, unless immediately after giving effect thereto, Ingersoll-Rand or
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such successor corporation, as the case may be, will not be in default
under the indenture.
If, upon any such consolidation, merger, sale, conveyance or
lease, or upon any consolidation or merger of any restricted subsidiary,
or upon the sale, conveyance or lease of all or substantially all the
property of any restricted subsidiary to any other corporation, any
principal property or any shares or funded indebtedness of any restricted
subsidiary would become subject to any mortgage, Ingersoll-Rand will
secure the due and punctual payment of the principal of, premium, if any,
and interest, if any, on the debentures (together with, if Ingersoll-Rand
shall so determine, any other indebtedness of or guarantee by us or such
restricted subsidiary ranking equally with the debentures) by a mortgage,
the lien of which will rank prior to the lien of such mortgage of such
other corporation on all assets owned by Ingersoll-Rand or such
restricted subsidiary.
Certain Definitions. The term "principal property" means any
manufacturing plant or other manufacturing facility of Ingersoll-Rand or
any restricted subsidiary, which plant or facility is located within the
United States, except any such plant or facility which the board of
directors by resolution declares is not of material importance to the
total business conducted by Ingersoll-Rand and Ingersoll-Rand restricted
subsidiaries. The term "funded indebtedness" means indebtedness created,
assumed or guaranteed by a person for money borrowed which matures by its
terms, or is renewable by the borrower to a date, more than one year
after the date of its original creation, assumption or guarantee. The
term "restricted subsidiary" means any subsidiary which owns a principal
property excluding, however, any corporation the greater part of the
operating assets of which are located or the principal business of which
is carried on outside the United States. The term "subsidiary" means any
corporation of which at least a majority of the outstanding stock having
voting power under ordinary circumstances to elect a majority of the
board of directors of the corporation shall at the time be owned by us or
by us and one or more subsidiaries or by one or more subsidiaries.
Expenses and Taxes of the Trust
In the indenture, Ingersoll-Rand , as borrower, has agreed to
pay all debts and other obligations (other than with respect to the trust
securities) and all costs and expenses of the trust (including the costs
and expenses relating to the organization of the trust, the fees and
expenses of the trustees and the costs and expenses relating to the
operation of the trust) and to pay any and all taxes and all costs and
expenses with respect thereto (other than United States withholding
taxes) to which the trust might become subject. Ingersoll-Rand also has
agreed in the indenture to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
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Indenture Events of Default
If any indenture event of default shall occur and be continuing,
the institutional trustee, as the holder of the debentures, will have the
right to declare the principal of and the interest on the debentures
(including any compound interest and expenses and taxes of the trust, if
any) and any other amounts payable under the indenture to be forthwith
due and payable and to enforce its other rights as a creditor with
respect to the debentures.
The following are events of default under the indenture with
respect to the debentures:
- failure to pay interest on the debentures when due,
continued for 30 days; provided, however, that if Ingersoll-
Rand is permitted by the terms of the debentures to defer
the payment in question, then the date on which such payment
is due and payable shall be the date on which Ingersoll-Rand
is required to make payment following such deferral, if such
deferral has been elected pursuant to the terms of the
debentures,
- failure to pay the principal of (or premium, if any, on) the
debentures when due and payable at the stated maturity date,
upon redemption or otherwise; provided, however, if
Ingersoll-Rand is permitted by the terms of the debentures
to defer the payment in question, the date on which such
payment is due and payable shall be the date on which
Ingersoll-Rand is required to make payment following such
deferral, if such deferral has been elected pursuant to the
terms of the debentures,
- failure to observe or perform in any material respect
certain other covenants contained in the indenture,
continued for a period of 90 days after written notice has
been given to Ingersoll-Rand by the debt trustee or holders
of at least 25% in aggregate principal amount of the
outstanding debentures, and
- certain events of bankruptcy, insolvency or reorganization
relating to Ingersoll-Rand.
The indenture provides that the debt trustee shall, within 90
days after the occurrence of any default or event of default with respect
to the debentures, give the holders of the debentures notice of all
uncured defaults or events of default known to it (the term "default"
includes any event which after notice or passage of time or both would be
an event of default); provided, however, that, except in the case of a
default in the payment of the principal of (or premium, if any, on) or
interest on the debentures, the debt trustee shall be protected in
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withholding such notice so long as the board of directors, the executive
committee or directors or responsible officers of the debt trustee in
good faith determine that the withholding of such notice is in the
interest of the holders of the debentures.
If an event of default with respect to the debentures occurs and
is continuing, the debt trustee or the holders of at least 25% in
aggregate principal amount of the outstanding debentures, by notice in
writing to Ingersoll-Rand (and to the debt trustee if given by the
holders of at least 25% in aggregate principal amount of the debentures),
may declare the unpaid principal of and accrued interest to the date of
acceleration on all the outstanding debentures to be due and payable
immediately and, upon any such declaration, the debentures shall become
immediately due and payable.
In addition, in the case of the debentures held by the trust, if
an event of default has occurred and is continuing and such event is
attributable to the failure of Ingersoll-Rand to pay interest or
principal, then a holder of capital securities may directly institute a
proceeding against Ingersoll-Rand for payment.
Any such declaration with respect to the debentures may be
annulled and past events of default and defaults (except, unless
theretofore cured, an event of default or a default in payment of
principal of or interest on the debentures) may be waived by the holders
of a majority of the principal amount of the outstanding debentures, upon
the conditions provided in the indenture.
An indenture event of default also constitutes a declaration
event of default. The holders of capital securities in certain
circumstances have the right to direct the institutional trustee to
exercise its rights as the holder of the debentures. Notwithstanding the
foregoing, if an event of default has occurred and is continuing and such
event is attributable to the failure of Ingersoll-Rand to pay interest or
principal on the debentures on the date such interest or principal is
otherwise payable, Ingersoll-Rand acknowledges that a holder of capital
securities may directly institute a proceeding for enforcement of payment
to such holder directly of the principal of and interest on the
debentures having a principal amount equal to the aggregate stated
liquidation amount of the capital securities of such holder after the
respective due date specified in the debentures. In connection with such
action, Ingersoll-Rand shall have the right under the indenture to
set-off any payment made to such holder by Ingersoll-Rand. The holders
of capital securities will not be able to exercise directly any other
remedy available to the holders of the debentures.
From time to time, the indenture may be modified by Ingersoll-
Rand and the debt trustee without the consent of any holders of the
debentures with respect to certain matters, including:
-40-
- to cure any ambiguity, defect or inconsistency or to correct
or supplement any provision which may be inconsistent with
any other provision of the indenture,
- to qualify, or maintain the qualification of, the indenture
under the Trust Indenture Act, and
- to make any change that does not materially adversely affect
the interests of any holder of debentures. In addition,
under the indenture, certain rights and obligations of
Ingersoll-Rand and the rights of holders of the debentures
may be modified by Ingersoll-Rand and the debt trustee with
the written consent of the holders of at least a majority in
aggregate principal amount of the outstanding debentures;
but no extension of the maturity of debentures, reduction
in the interest rate or extension of the time for payment of
interest, change in the optional redemption or repurchase
provisions in a manner adverse to any holder of debentures,
other modification in the terms of payment of the principal
of, or interest on, the debentures, or reduction of the
percentage required for modification, will be effective
against any holder of any outstanding debentures without the
holder's consent.
Satisfaction and Discharge
The indenture provides that when, among other things, all
debentures not previously delivered to the debt trustee for cancellation
(a) have become due and payable or (b) will become due and payable at
their stated maturity within one year, and Ingersoll-Rand deposits or
causes to be deposited with the debt trustee, as trust funds in trust for
the purpose, an amount sufficient to pay and discharge the entire
indebtedness on the debentures not previously delivered to the debt
trustee for cancellation, for the principal (and premium, if any) and,
interest to the date of the deposit or to the stated maturity, as the
case may be, then the indenture will cease to be of further effect
(except as to the Ingersoll-Rand's obligations to pay all other sums due
pursuant to the indenture and to provide the officer certificates and
opinions of counsel described therein), and the Ingersoll-Rand will be
deemed to have satisfied and discharged the indenture.
Book-Entry and Settlement
If distributed to holders of capital securities in connection
with the involuntary or voluntary dissolution of the trust, the
debentures will be issued in the form of one or more global certificates
registered in the name of DTC or its nominee. Except under the limited
circumstances described below, debentures represented by the global
security will not be exchangeable for, and will not otherwise be issuable
as, debentures in certificated form. The global securities described
-41-
above may not be transferred except by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or to a successor
depositary or its nominee.
The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated
form. Such laws may impair the ability to transfer beneficial interests
in such a global security.
Except as provided below, owners of beneficial interests in such
a global security will not be entitled to receive physical delivery of
debentures in certificated form and will not be considered the holders
(as defined in the Indenture) thereof for any purpose under the
indenture, and no global security representing debentures shall be
exchangeable, except for another global security of like denomination and
tenor to be registered in the name of DTC or its nominee or to a
successor depositary or its nominee. Accordingly, each beneficial owner
must rely on the procedures of DTC or if such person is not a
participant, on the procedures of the participant through which such
person owns its interest to exercise any rights of a holder under the
indenture.
The Depositary
If debentures are distributed to holders of capital securities
in liquidation of such holders' interests in the trust, DTC will act as
securities depositary for the debentures. For a description of DTC and
the specific terms of the depositary arrangements, see "Description of
the Capital Securities--Book-Entry Only Issuance--The Depository Trust
Company." Ingersoll-Rand may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depositary for the global securities.
None of Ingersoll-Rand, the trust, the institutional trustee,
any paying agent and any other agent of Ingersoll-Rand or the debt
trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a global security for such debentures or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests.
A global security shall be exchangeable for debentures
registered in the names of persons other than DTC or its nominee only if:
- DTC notifies Ingersoll-Rand that it is unwilling or unable
to continue as a depositary for such global security and no
successor depositary shall have been appointed,
- DTC at any time, ceases to be a clearing agency registered
under the Exchange Act at which time the depositary is
-42-
required to be so registered to act as such depositary and
no successor depositary shall have been appointed,
- Ingersoll-Rand, in its sole discretion, determines that such
global security shall be so exchangeable, or
- there shall have occurred an indenture event of default with
respect to such debentures.
Any global security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for debentures registered in
such names as DTC shall direct. It is expected that such instructions
will be based upon directions received by DTC from its participants with
respect to ownership of beneficial interests in such global security.
Governing Law
The indenture and the debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
Miscellaneous
Ingersoll-Rand will pay all fees and expenses related to:
- the offering of the trust securities and the debentures,
- the organization, maintenance and dissolution of the trust,
- the retention of the Ingersoll-Rand trustees, and
- the enforcement by the institutional trustee of the rights
of the holders of the capital securities.
-43-
EFFECT OF OBLIGATIONS UNDER THE
DEBENTURES AND THE GUARANTEE
As set forth in the declaration of trust, the sole purpose of
the trust is to issue the trust securities evidencing undivided
beneficial interests in the assets of the trust, and to invest the
proceeds from such issuance and sale in the debentures and engage in only
those other activities necessary or incidental thereto.
As long as payments of interest and other payments are made when
due on the debentures, such payments will be sufficient to cover
distributions and payments due on the trust securities because of the
following factors:
- the aggregate principal amount of debentures will be equal
to the sum of the aggregate stated liquidation amount of the
trust securities,
- the interest rate and the interest and other payment dates
on the debentures will match the distribution rate and
distribution and other payment dates for the trust
securities,
- Ingersoll-Rand shall pay, and the trust shall not be
obligated to pay, all costs, expenses, debts, and
obligations of the trust (other than with respect to the
trust securities), and
- the declaration of trust further provides that the trustees
shall not take or cause or permit the trust to, among other
things, engage in any activity that is not consistent with
the purposes of the trust.
Payments of distributions (to the extent funds therefor are
available) and other payments due on the capital securities (to the
extent funds therefor are available) are guaranteed by Ingersoll-Rand as
and to the extent set forth under "Description of the Guarantee." If
Ingersoll-Rand does not make interest payments on the debentures
purchased by the trust, the trust will not have sufficient funds to pay
distributions on the capital securities. The guarantee does not apply to
any payment of distributions unless and until the trust has sufficient
funds for the payment of such distributions.
If Ingersoll-Rand fails to make interest or other payments on
the debentures when due (taking account of any extension period), the
declaration of trust provides a mechanism whereby the holders of the
capital securities, using the procedures described in "Description of the
Capital Securities--Book-Entry Only Issuance--The Depository Trust
Company" and "--Voting Rights," may direct the institutional trustee to
enforce its rights under the indenture. If the institutional trustee
-44-
fails to enforce its rights under the indenture in respect of an
indenture event of default, such holder of record of capital securities
may, to the fullest extent permitted by applicable law, institute a legal
proceeding against Ingersoll-Rand to enforce the institutional trustee's
rights under the indenture without first instituting any legal proceeding
against the institutional trustee or any other person or entity.
Notwithstanding the foregoing, if a declaration event of default has
occurred and is continuing and such event is attributable to the failure
of Ingersoll-Rand to pay interest or principal on the debentures on the
date such interest or principal is otherwise payable, then a holder of
capital securities may directly institute a proceeding against Ingersoll-
Rand for payment. Ingersoll-Rand, under the guarantee, acknowledges that
the guarantee trustee shall enforce the guarantee on behalf of the
holders of the capital securities. If Ingersoll-Rand fails to make
payments under the guarantee, the guarantee provides a mechanism, whereby
the holders of the capital securities may direct the guarantee trustee to
enforce its rights thereunder. Notwithstanding the foregoing, if
Ingersoll-Rand has failed to make a payment under the guarantee, any
holder of capital securities may institute a legal proceeding directly
against Ingersoll-Rand to enforce its rights under the guarantee without
first instituting a legal proceeding against the trust, the guarantee
trustee, or any other person or entity.
The guarantee, when taken together with Ingersoll-Rand's
obligations under the debentures and the indenture and its obligations
under the declaration of trust, including its obligations to pay costs,
expenses, debts and liabilities of the trust (other than with respect to
the trust securities), has the effect of providing a full and
unconditional guarantee of amounts due on the capital securities.
-45-
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States
federal income tax consequences of the purchase, ownership and
disposition of the capital securities as of the date of this prospectus.
Except where we state otherwise, this summary deals only with capital
securities purchased pursuant to this offering and held as capital assets
by a holder who is a United States person (as defined below).
A "United States person'' is a holder who is one of the
following:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created
or organized in or under the laws of the United
States or any political subdivision of the United
States;
- an estate the income of which is subject to United
States federal income taxation regardless of its
source; or
- a trust
- that is subject to the primary supervision of
a court within the United States and the
control of one or more United States persons;
or
- that has a valid election in effect under
applicable United States Treasury regulations
to be treated as a United States person.
Your tax treatment may vary depending on your particular
situation. This summary does not address all the tax consequences that
may be relevant to holders that are subject to special tax treatment,
such as:
- dealers in securities or currencies;
- financial institutions;
- tax-exempt investors;
- traders in securities that elect to use a mark-to-
market method of accounting for their securities
holdings;
- persons liable for alternative minimum tax;
-46-
- insurance companies;
- persons holding capital securities as part of a
hedging, conversion, integrated or constructive sale
transaction;
- persons holding capital securities as part of a
straddle; or
- persons whose functional currency is not the United
States dollar.
In addition, this summary does not include any description of
the tax laws of any state, local or foreign government.
Furthermore, if a partnership holds capital securities, the tax
treatment of a partner will generally depend upon the status of the
partner and the activities of the partnership. If you are a partner of a
partnership holding capital securities, you should consult your own tax
advisor.
This summary is based on the Internal Revenue Code of 1986, as
amended (which we refer to as the "Code"), the Treasury regulations
promulgated under the Code and administrative and judicial
interpretations thereof. These income tax laws, regulations and
interpretations may change at any time, possibly on a retroactive basis.
In addition, the authorities on which this summary is based are subject
to various interpretations and either the Internal Revenue Service (the
"IRS") or the courts could disagree with the explanations or conclusions
contained in this summary.
You should consult your own tax advisor regarding the tax
consequences to you of the purchase, ownership and disposition of the
capital securities, including the tax consequences under state, local,
foreign and other tax laws. For a discussion of the possible redemption
of the capital securities upon the occurrence of a tax event, see
"Description of the Capital Securities -Optional Redemption" in this
prospectus.
Classification of the Trust
The trust has been treated as a grantor trust for United States
federal income tax purposes since its inception and we intend that it
will continue to be classified as a grantor trust and not as an
association taxable as corporation. As a result, for United States
federal income tax purposes, you generally will be treated as owning an
undivided beneficial ownership interest in the debentures. Thus, you
will be required to include in your gross income your proportionate share
of the interest income or original issue discount that is paid or accrued
-47-
on the debentures. See below under the caption "- Interest Income and
Original Issue Discount" in this section.
Classification of the Debentures
The debentures have been treated as indebtedness of Ingersoll-
Rand for all United States tax purposes since they were initially issued
and we intend that they will continue to be so classified. Ingersoll-
Rand, the trust and you (by your acceptance of an undivided beneficial
ownership interest in a Capital Security) agree to treat the debentures
as indebtedness for all United States tax purposes. The remainder of
this discussion assumes that the debentures will be classified as
indebtedness of Ingersoll-Rand.
Interest Income and Original Issue Discount
The debentures were not issued with an issue price that was less
that their stated redemption price at maturity. Therefore, subject to
the discussion below, the debentures are currently not subject to the
special original issue discount (which we refer to as "OID") rules and
you will generally be taxed on the stated interest on the debentures as
ordinary income at the time it is paid or accrued in accordance with your
regular method of tax accounting.
If, however, we exercise our right to defer payments of interest
on the debentures, the debentures will become OID instruments at such
time. In such case, you will be subject to the special OID rules
described below. Once the debentures become OID instruments, they will
be taxed as OID instruments for as long as they remain outstanding.
Under OID economic accrual rules, the following occur:
- regardless of your method of accounting, you would
accrue an amount of interest income each year that
approximates the stated interest payments called for
under the terms of the debentures using the
constant-yield-to-maturity method of accrual
described in section 1272 of the Code;
- the actual cash payments of interest you receive on
the debentures would not be reported separately as
taxable income;
- any amount of OID included in your gross income
(whether or not during a deferral period) with
respect to the capital securities would increase
your tax basis in such capital securities; and
-48-
- the amount of distributions you receive in respect
of such accrued OID would reduce your tax basis in
such capital securities.
The Treasury regulations dealing with OID and the deferral of
interest payments have not yet been addressed in any ruling or other
interpretations by the IRS. It is possible that the IRS could assert
that the debentures were issued initially with OID, merely because of our
right to defer payments of interest. If the IRS were successful in this
regard, you would be subject to the special OID rules described above
regardless of whether we exercise our option to defer payments of
interest on such debentures.
Because the debentures are debt for tax purposes, you will not
be entitled to a dividends received deduction with respect to any income
you recognize on the capital securities.
Market Discount
If you purchase a capital security for an amount that is less
than the stated redemption price at maturity of the debentures to which
such capital security relates, or, if such debentures are OID
instruments, their adjusted issue price, the amount of the difference
will be treated as "market discount" for United States federal income tax
purposes, unless that difference is less than a specified de minimis
amount. Under the market discount rules, you will be required to treat
any payment, other than qualified stated interest, on, or any gain on the
sale, exchange, retirement or other disposition of, a capital security or
debenture as ordinary income to the extent of the market discount that
you have not previously included in income and are treated as having
accrued on the capital security or debenture at the time of its payment
or disposition. In addition, you may be required to defer, until the
maturity of the capital security or debenture or its earlier disposition
in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness attributable to such capital
security or debenture.
Any market discount will be considered to accrue ratably during
the period from the date of acquisition to the maturity date of the
capital security or debenture, unless you elect to accrue on a constant
interest method. You may elect to include market discount in income
currently as it accrues, on either a ratable or constant interest method,
in which case the rule described above regarding deferral of interest
deductions will not apply. Your election to include market discount in
income currently, once made, applies to all market discount obligations
acquired by you on or after the first taxable year to which your election
applies and may not be revoked without the consent of the IRS. You
should consult your own tax advisor before making this election.
-49-
Amortizable Bond Premium
If you purchase a capital security for an amount in excess of
the sum of all amounts payable on the capital security after the purchase
date other than qualified stated interest, the amount of the difference
will be treated as "premium" for United States federal income tax
purposes, and, if the debentures to which such capital security relates
are OID instruments, you will not be required to include any OID in
income. You generally may elect to amortize the premium over the
remaining term of the debentures on a constant yield method as an offset
to interest when includible in income under your regular accounting
method. If you do not elect to amortize bond premium, that premium will
decrease the gain or increase the loss you would otherwise recognize on
disposition of the capital security or debenture. Your election to
amortize premium on a constant yield method will also apply to all debt
obligations held or subsequently acquired by you on or after the first
day of the first taxable year to which the election applies. You may not
revoke the election without the consent of the IRS. You should consult
your own tax advisor before making this election.
Distribution of Debentures or Cash Upon Liquidation of the Trust
As described under the caption "Description of the Capital
Securities -- Liquidation Distribution upon Dissolution" in this
prospectus, the debentures held by the trust may be distributed to you in
exchange for your capital securities if the trust is liquidated before
the maturity of the debentures.
Under current law, except as described below, this type of
distribution from a grantor trust would not be taxable. Upon such a
distribution, you will receive your proportionate share of the debentures
previously held indirectly through the trust. Your holding period and
total tax basis in the debentures will equal the holding period and total
tax basis that you had in your capital securities before the
distribution. If, however, the trust is treated as an association
taxable as a corporation, and accordingly, its income is subject to
United States federal income tax, a tax event will occur. If we elect to
distribute the debentures to you at this time, the distribution could be
taxable to the trust and to you.
If you receive debentures in exchange for your capital
securities, you would accrue interest in respect of the debentures
received from the trust in the manner described above under the caption
"- Interest Income and Original Issue Discount" in this section.
In certain circumstances described above under the caption
"Description of Debentures -Tax Event Redemption" in this prospectus, we
may redeem the debentures and distribute cash in liquidation of the
trust. This redemption would be taxable as described below under "--
Sales of Capital Securities or Redemption of Debentures" in this section.
-50-
Sales of Capital Securities or Redemption of Debentures
If you sell your capital securities or receive cash upon
redemption of the debentures, you will recognize gain or loss equal to
the difference between:
- the amount realized on the sale or redemption of the
capital securities or debentures (less an amount
equal to any accrued but unpaid qualified stated
interest that you did not previously include in
income, which will be taxable as ordinary income);
and
- your adjusted tax basis in your capital securities
or debentures sold or redeemed.
Your gain or loss will be a capital gain or loss, provided that
you held the capital securities or debentures as a capital asset. The
gain or loss will generally be a long-term capital gain or loss if you
have held your capital securities or Debentures for more than one year.
Long-term capital gains of individuals derived with respect to capital
assets held for more than one year are currently subject to tax at a
maximum rate of 20%. The deductibility of capital losses is subject to
limitations.
Non-United States Holders
The following discussion only applies to you if you are not a
United States person. As discussed above, the capital securities will be
treated by the parties as evidence of undivided beneficial ownership
interests in the debentures. See above under the caption "-
Classification of the Trust " in this section.
U.S. Federal Withholding Tax
The 30% U.S. federal withholding tax will not apply to any
payment of principal or interest (including OID) on the capital
securities or the debentures provided that:
- you do not actually (or constructively) own 10% or
more of the total combined voting power of all
classes of our voting stock within the meaning of
the Code and United States Treasury regulations;
- you are not a controlled foreign corporation that is
related to us through stock ownership;
- you are not a bank whose receipt of interest on the
capital securities or the debentures is described in
section 881(c)(3)(A) of the Code; and
-51-
- you provide your name and address on an IRS Form W-
8BEN (or other applicable form), and certify, under
penalties of perjury, that you are not a United
States person, or (b) if you hold your capital
securities or debentures through certain foreign
intermediaries, you must satisfy the certification
requirements of applicable United States Treasury
regulations.
If you cannot satisfy the requirements described above, payments
of interest (including OID) made to you will be subject to the 30% U.S.
federal withholding tax, unless you provide us with a properly executed
(1) IRS Form W-8BEN (or other applicable form) claiming an exemption
from, or reduction in the rate of, withholding under the benefit of an
applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating
that interest paid on the capital securities or the debentures is not
subject to withholding tax because it is effectively connected with your
conduct of a trade or business in the United States.
The 30% U.S. federal withholding tax will generally not apply to
any gain or income that you realize on the sale, exchange, retirement or
other disposition of the capital securities or debentures.
U.S. Federal Income Tax
If you are engaged in a trade or business in the United States
and interest (including OID) on the capital securities or the debentures
is effectively connected with the conduct of that trade or business, you
will be subject to U.S. federal income tax on that interest on a net
income basis (although exempt from the 30% withholding tax) in the same
manner as if you were a United States person as defined under the Code.
In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of your
earnings and profits for the taxable year, subject to adjustments, that
are effectively connected with your conduct of a trade or business in the
United States.
Any gain realized on the disposition of a capital security or a
debenture generally will not be subject to U.S. federal income tax unless
(1) that gain is effectively connected with the conduct of a trade or
business by you in the United States or (2) you are an individual who is
present in the United States for 183 days or more in the taxable year of
that disposition, and certain other conditions are met.
U.S. Federal Estate Tax
Your estate will not be subject to U.S. federal estate tax on
the capital securities (or the debentures) beneficially owned by you at
the time of your death, provided that (1) you do not own 10% or more of
the total combined voting power of all classes of our voting stock
-52-
(within the meaning of the Code and United States Treasury regulations)
and (2) interest on those capital securities or debentures would not have
been, if received at the time of your death, effectively connected with
the conduct by you of a trade or business in the United States
Information Reporting and Backup Withholding
United States Holders
In general, information reporting requirements will apply to
payments of interest (including OID) on the capital securities or the
debentures and to the proceeds of the sale of capital securities or
debentures made to you (unless you are an exempt recipient such as a
corporation). A 31% backup withholding will apply to such payments if
you fail to provide a taxpayer identification number, a certification of
exempt status, or fail to report in full interest income.
Non-United States Holders
In general, no information reporting or backup withholding will
be required regarding payments of interest on the capital securities or
the debentures that we make to you provided that we do not have actual
knowledge that you are a United States person and we have received from
you the certification described above in the fourth bullet point under
the caption "Non-United States Holders - U.S. Federal Withholding Tax."
In addition, no information reporting or backup withholding will
be required regarding the proceeds of the sale of capital securities or
debentures made within the United States or conducted through certain
United States financial intermediaries if (1) the payor receives the
certification described above and does not have actual knowledge that you
are a United States person or (2) you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal income tax
liability provided the required information is furnished to the IRS.
-53-
PLAN OF DISTRIBUTION
The offering is being made (1) under the terms and subject to
the conditions contained in a remarketing agreement dated as of March 23,
1998, among us, the trust, the purchase contract agent and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and (2) subject to the terms of an
underwriting agreement to be entered into as of May 11, 2001 among us and
the other parties to the 1998 agreement. Pursuant to these agreements,
Merrill Lynch has agreed to offer on May 11, 2001 capital securities on
behalf of Income PRIDES holders who have failed to notify the purchase
contract agent on or prior to May 9, 2001 of their intention to settle
their related purchase contracts with separate cash. These agreements
require Merrill Lynch to use its reasonable efforts to sell the capital
securities (bearing the reset rate set forth in the 1998 agreement) at a
price of approximately 100.5% of the aggregate stated liquidation amount
of each capital security, plus any accrued and unpaid distributions
(including any deferred distributions). The portion of the proceeds from
this offering equal to the aggregate stated liquidation amount of the
capital securities will be applied automatically to satisfy in full the
Income PRIDES holders' obligations to purchase common stock under their
relation purchase contracts.
The estimated expenses payable by us in connection with this
offering (other than underwriting discounts and commissions) are as
follows:
SEC registration fee . . . . . . . . . . . . . . $101,129
Printing expenses . . . . . . . . . . . . . . . 50,000
Accounting fees and expenses . . . . . . . . . . 50,000
Legal fees and expense . . . . . . . . . . . . 100,000
Blue Sky fees and expenses . . . . . . . . . . . 10,000
Trustee's expenses . . . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . 28,871
--------
Total $350,000
========
Pursuant to the underwriting agreement, in addition to
reimbursing Merrill Lynch for the expenses incurred by it in connection
with this offering, we have agreed to allow Merrill Lynch to retain a
placement fee from any proceeds received in connection with this offering
in excess of the aggregate stated liquidation amount of the capital
securities offered hereby plus any accrued and unpaid distributions
(including any deferred distributions). The placement fee will not
exceed 25 basis points (.25%) of the aggregate stated liquidation amount
of the capital securities. After deducting its placement fee, Merrill
Lynch will remit the remaining portion of the excess proceeds, if any,
for the benefit of the holders of capital securities participating in
this offering. Neither we nor the holders of capital securities
-54-
participating in this offering will otherwise be responsible for any
placement fee in connection with this offering.
The following table shows the total underwriting commissions to
be paid to Merrill Lynch by us in the form of the placement fee, assuming
that all outstanding capital securities are sold at 100.5% of their
aggregate stated liquidation amount. The amount will be adjusted
downward to the extent that less than all of the outstanding capital
securities are offered or the capital securities are sold at a price less
than 100.25% of their aggregate stated liquidation amount.
Total
-----
Merrill Lynch, Pierce, Fenner & Smith Incorporation . . . . . . . . . . . $
If, despite using its reasonable efforts, Merrill Lynch cannot
sell the capital securities (other than to us) at a price not less than
100% of the aggregate stated liquidation of the capital securities plus
accrued and unpaid distributions (including deferred distributions, if
any), then Merrill Lynch will not be required to take or pay for any of
the capital securities and the offering will fail. In that event, we
will exercise our rights as a secured party to dispose of the capital
securities in accordance with applicable law. The proceeds from that
disposition will satisfy in full each capital securities holder's
obligations to purchase common stock under their related purchase
contracts. In addition, on May 14, 2001, we will cause a notice of the
failed offering to be published in a daily newspaper in the English
language of general circulation in New York City, which is expected to be
The Wall Street Journal.
In order to facilitate the offering of the capital securities,
Merrill Lynch may engage in transactions that stabilize, maintain or
otherwise affect the price of the capital securities. These transactions
consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the capital securities. In general, purchases
of a security for the purpose of stabilization could cause the price of
the security to be higher than it might be in the absence of these
purchases.
Neither we nor Merrill Lynch makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the capital
securities. In addition, neither we nor Merrill Lynch makes any
representation that Merrill Lynch will engage in these transactions or
that these transactions, once commenced, will not be discontinued without
notice.
-55-
We and Merrill Lynch have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of
1933 or to contribute to the payments each of us may be required to make
in respect thereof.
Merrill Lynch has in the past provided, and may in the future
provide, investment banking and underwriter services to us and our
affiliates for which they have received customary compensations.
-56-
LEGAL MATTERS
The validity of the debentures and guarantee will be passed upon
for the Ingersoll-Rand and the trust by Simpson, Thacher & Bartlett, New
York, New York. Certain matters of Delaware law with respect to the
validity of the capital securities offered hereby will be passed upon for
Ingersoll-Rand and the trust by Richards, Layton & Finder P.A., special
Delaware counsel to Ingersoll-Rand and trust. The validity of the
debentures and the capital securities, will be passed upon for the agent
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended
December 31, 2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounts.
AVAILABLE INFORMATION
This prospectus is part of a registration statement on Form S-3
relating to the securities covered by this prospectus. The prospectus
does not include all of the information in the registration statement. We
refer you to the registration statement and its exhibits for further
information about us and the securities.
We are subject to the Securities Exchange Act of 1934, and file
reports and other information with the SEC as required by the Exchange
Act. You can inspect and copy our reports and filings by contacting the
SEC at these offices:
Public Reference Room 7 World Trade Center Northwestern Atrium Center
Judiciary Plaza New York, NY 10048 500 West Madison Street
450 Fifth Street, NW Chicago, IL 60661
Washington, DC 20549
You can also get copies of these materials from the SEC's web
site (http://www.sec.gov), or view them at the offices of the New York
Stock Exchange, 20 Broad Street, New York, NY 10005.
We have not included any separate financial statements for the
trust. They were omitted because the trust is our wholly owned subsidiary
with no independent operations, we guarantee the fee obligations relating
to the capital securities and the SEC has exempted these types of trusts
from filing obligations for as long as we continue to file our
information with the SEC.
-57-
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 is incorporated by reference in this prospectus. All
future filings that we make under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until we sell all of the securities we are offering are
deemed incorporated into and part of this prospectus once filed. Any
statement in this prospectus, or in any document incorporated by
reference that is different from any statement contained in any later-
filed document should be regarded as changed by that later statement.
Once so changed, the earlier statement is no longer considered part of
this prospectus.
If you ask us by phone or in writing, we will give you a copy of
any of the materials incorporated (other than exhibits, unless the
exhibits are themselves specifically incorporated). Please make your
request to R.G. Heller, Secretary, P.O. Box 8738, Woodcliff Lake, New
Jersey 07677, telephone 201-573-0123.
-58-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses payable by Ingersoll-Rand in
connection with the offering described in this Registration Statement
(other than underwriting discounts and commissions) are as follows:
SEC registration fee . . . . . . . . . . . . . . . . $101,129
Printing and engraving expenses . . . . . . . . . . 50,000
Accounting fees and expenses . . . . . . . . . . . 50,000
Legal fees and expenses . . . . . . . . . . . . . . 100,000
Blue Sky fees and expenses . . . . . . . . . . . . . 10,000
Trustee's expenses . . . . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . . . 28,871
--------
Total . . . . . . . . . . . . . . . . . . . . . . $350,000
========
Item 15. Indemnification of Directors and Officers
Article Seventh of the Company's Restated Certificate of
Incorporation, as amended, provides that, to the fullest extent permitted
by the laws of the State of New Jersey, directors and officers of the
Company shall not be personally liable to the Company or its shareholders
for damages for breach of any duty owed to the Company or its
shareholders, except that no such director or officer shall be relieved
from liability for any breach of duty based upon an act or omission (i)
in breach of such person's duty of loyalty to the Company or its
shareholders, (ii) not in good faith or involving a knowing violation of
law or (iii) resulting in receipt by such person of an improper personal
benefit.
Article Seventh also provides that each person who was or is
made a party or is threatened to be made a party to or is involved in any
pending, threatened or completed civil, criminal, administrative or
arbitrative action, suit or proceeding, by reason of his or her being or
having been a director or officer of the Company, or by reason of his or
her being or having been a director, officer, trustee, employee or agent
of any other corporation or of any partnership, joint venture, employee
benefit plan or other entity or enterprise, serving as such at the
request of the Company, shall be indemnified and held harmless by the
Company to the fullest extent permitted by the New Jersey Business
Corporation Act (the "Act"), from and against all reasonable costs,
disbursements and attorneys' fees, and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties, incurred or
suffered in connection with any such proceeding, and such indemnification
shall continue as to a person who has ceased to be a director, officer,
II-1
trustee, employee or agent and shall inure to the benefit of his or her
heirs, executors, administrators and assigns; provided, however, that
there shall be no indemnification with respect to any settlement of any
proceeding unless the Company has given its prior consent to such
settlement or disposition. This right to indemnification includes the
right to be paid by the Company the expenses incurred in connection with
any proceeding in advance of the final disposition of such proceeding as
authorized by the Board of Directors; provided, however, that, if the Act
so requires, the payment of such expenses shall be made only upon receipt
by the Company of an undertaking to repay all amounts so advanced unless
it shall ultimately be determined that such director or officer is
entitled to be indemnified.
Article Seventh also provides that the right to indemnification
thereunder is a contract right and gives claimants certain rights with
respect to claims for indemnification not paid by the Company after 30
days following a written request. Finally, Article Seventh provides that
the right to indemnification and advancement of expenses provided thereby
shall not exclude or be exclusive of any other rights to which any person
may be entitled under a certificate of incorporation, by-law, agreement,
vote of shareholders or otherwise. Sections 1 and 2 of Article IX of the
Company's By-Laws also provide directors and officers with certain rights
to indemnity that are substantially similar to the foregoing provisions
of Article Seventh.
Section 14A: 3-5 of the Act provides that no indemnification
shall be made if such person shall have been adjudged liable for
negligence or misconduct unless the court in which such proceeding was
brought determines upon application that the defendant, officers or
directors are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability. In any case, a
corporation must indemnify an officer director against expenses
(including attorney's fees) to the extent that he has been successful on
the merits or otherwise or in defense of any claim or issue.
The Company has a liability insurance policy in effect which
covers certain claims against any officer or director of the Company by
reason of certain breaches of duty, neglect, errors or omissions
committed by such person in his capacity as an officer or director.
Under the trust agreement of each trust, the Company will agree
to indemnify each of the regular trustees of such trust (or any
predecessor trustee for such trust), and to hold harmless such regular
trustee against any loss, damage, claims, liability or expense incurred
without negligence or bad faith on its part arising out of or in
connection with the acceptance or administration of such trust agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties under such trust agreement.
II-2
Item 16. See Exhibit Index.
Each of the undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to
Rule 424 (b) (1 ) or (4) or 497 (h) under the Securities
Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment
that contains a form of prospectus shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that in the
opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid
by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification
by it is against public policy as expressed in the
Securities Act and will be governed by the final
adjudication of such issue.
(4) It will reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
II-3
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Ingersoll-Rand Company certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement or amendment thereto to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Woodcliff Lake, New Jersey on April 6, 2001.
Ingersoll-Rand Company
By: /s/ Herbert L. Henkel
------------------------------
(Herbert L. Henkel)
Chairman of the Board of Directors,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities indicated o on April 4, 2001.
Signature Title Date
--------- ----- ----
* HERBERT L. HENKEL Chairman of the Board of April 6, 2001
- ---------------------------- Directors, President and
Herbert L. Henkel Chief Executive Officer
(Principal Executive
Officer)
* DAVID W. DEVONSHIRE Executive Vice President April 6, 2001
- ---------------------------- and Chief Financial
David W. Devonshire Officer (Principal
Financial Officer)
* STEVEN R. SHAWLEY Vice President and April 6, 2001
- ---------------------------- Controller (Principal
Steven R. Shawley Accounting Officer)
* JOSEPH P. FLANNERY Director April 6, 2001
- ----------------------------
Joseph P. Flannery
* PETER C. GODSOE Director April 6, 2001
- ----------------------------
Peter C. Godsoe
* CONSTANCE J. HORNER Director April 6, 2001
- ----------------------------
Constance J. Horner
* H. WILLIAM LICHTENBERGER Director April 6, 2001
- ----------------------------
H. William Lichtenberger
* THEODORE E. MARTIN Director April 6, 2001
- ----------------------------
Theodore E. Martin
II-5
* ORIN R. SMITH Director April 6, 2001
- ----------------------------
Orin R. Smith
* RICHARD J. SWIFT Director April 6, 2001
- ----------------------------
Richard J. Swift
* TONY L. WHITE Director April 6, 2001
- ----------------------------
Tony L. White
*By: /s/ PATRICIA NACHTIGAL
-------------------------
Patricia Nachtigal, Attorney-in-Fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Ingersoll-Rand Financing I certify that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and
that they have duly caused this Registration Statement or amendment
thereto to be signed on their behalf by the undersigned, thereunto duly
authorized, in Woodcliff Lake, New Jersey on April 6, 2001.
INGERSOLL-RAND FINANCING I
By: /s/ Patricia Nachtigal
------------------------------
Name: Patricia Nachtigal
Title: Trustee
II-7
INDEX TO EXHIBITS
1.1* -- Remarketing Agreement dated as of March 28, 1988, among,
Ingersoll-Rand Company, Ingersoll-Rand Financing I, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and the Bank of New
York as Purchase Contract Agent.
1.2* -- Form of Underwriting Agreement.
4.1 -- Indenture, dated as of March 23, 1998, between Ingersoll-Rand
Company and The Bank of New York, as Trustee, as supplemented by
the First Supplemental Indenture (incorporated by reference to
Form 10-K of Ingersoll-Rand Company for the year ended December
31, 1998).
4.2 -- Amended and Restated Declaration of Trust of Ingersoll-Rand
Financing I dated as of March 23, 1998 (incorporated by reference
to Form 10-K of Ingersoll-Rand Company for the year ended
December 31, 1998).
4.3 -- Guarantee Debenture Agreement dated March 23, 1998, between
Ingersoll-Rand Company and the First National Bank of Chicago, as
trustee (incorporated by reference to Form 10-K of Ingersoll-Rand
Company for the year ended December 31, 1998).
4.4 -- Form of Debenture Security (included in 4.1).
4.5 -- Form of Capital Security (included in 4.2).
4.6 -- Form of Guarantee (included in Exhibit 4.3).
5.1 -- Opinion of Simpson Thacher & Bartlett as to the validity of the
Debentures and Guarantee (incorporated by reference to Form S-3
Registration Statement No. 333-38367)
5.2 -- Opinion of Richards, Layton & Finger, P.A. (Ingersoll-Rand
Financing I) (incorporated by reference to Form S-3 Registration
Statement No. 333-38367 of Ingersoll-Rand Company).
12 -- Computation of Ratio of Earnings to Fixed Charges (incorporated
by reference to Form 8-K dated February 9. 2000 of Ingersoll-
Rand Company).
23.1 -- Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).
23.2 -- Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5.2).
23.3 -- Consent of Independent Accountants.
24.1 -- Powers of Attorney (Ingersoll-Rand Company).
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Trustee under the
Indenture.
25.2 -- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Bank One, National Association, as Indenture
Trustee under the Amended and Restated Trust Agreement of
Ingersoll-Rand Financing I.
25.3 -- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Bank One, National Association, as Guarantee
Trustee under the Guarantee of Ingersoll-Rand Company for the
benefit of the holders of Trust Securities of Ingersoll-Rand
Financing I.
- ---------------------
* To be filed by amendment