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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
INGERSOLL-RAND COMPANY LIMITED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</Table>
Payment of Filing Fee (Check the appropriate box):
<Table>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</Table>
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<Table>
<Caption>
Ingersoll-Rand Company Clarendon House
[LOGO] Limited 2 Church Street
Hamilton HM 11
Bermuda
</Table>
NOTICE OF 2002 ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Annual General Meeting of Shareholders of Ingersoll-Rand Company Limited
will be held on Wednesday, May 1, 2002, at 11:00 a.m., local time, at the
offices of the Company's principal United States subsidiary, Ingersoll-Rand
Company, 200 Chestnut Ridge Road, Woodcliff Lake, New Jersey, for the following
purposes:
1. To elect three directors of the Third Class to hold office for three
years and one director of the First Class to hold office for one year.
2. To amend the Ingersoll-Rand Company Savings and Stock Investment Plan.
3. To approve the appointment of PricewaterhouseCoopers as independent
auditors of the Company for 2002 and authorize the Board of Directors to
fix the auditors' remuneration.
4. To conduct such other business properly brought before the Annual
General Meeting.
Only shareholders of record at the close of business on March 4, 2002 are
entitled to notice of and to vote at the Annual General Meeting.
Directions to the meeting can be found on page 24 of the attached Proxy
Statement.
By Order of the Board of Directors
R.G. HELLER
VICE PRESIDENT AND SECRETARY
Dated: March 15, 2002
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE PROVIDE YOUR PROXY BY EITHER CALLING THE
TOLL-FREE TELEPHONE NUMBER, USING THE INTERNET, OR
FILLING IN, SIGNING, DATING, AND PROMPTLY MAILING THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
<Page>
TABLE OF CONTENTS
<Table>
INFORMATION CONCERNING VOTING AND SOLICITATION.............. 1
General Information....................................... 1
Who Can Vote.............................................. 1
How You Can Vote.......................................... 1
How to Vote under Our Employee Plans...................... 2
Revocation of Proxies..................................... 2
Quorum and Required Votes................................. 2
Solicitation.............................................. 3
Audited Financial Statements.............................. 3
Other Matters to be Acted Upon............................ 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 4
ITEM 1. ELECTION OF DIRECTORS.............................. 5
Nominees for Election for a Three-Year Term Expiring in
2005.................................................... 5
Nominee for Election for a One-Year Term Expiring in
2003.................................................... 6
Directors Continuing in Office until 2003................. 6
Directors Continuing in Office until 2004................. 6
Compensation of Directors................................. 7
Board Committees.......................................... 8
Audit Committee......................................... 8
Compensation and Nominating Committee................... 8
Corporate Affairs Committee............................. 8
Finance Committee....................................... 9
Executive Compensation.................................... 9
Report of the Compensation and Nominating Committee..... 9
Summary of Cash and Certain Other Compensation.......... 13
Stock Options........................................... 15
Long-Term Incentive Plan Awards......................... 16
Retirement Plans........................................ 17
Other Post-Employment Arrangements...................... 17
Change in Control Arrangements.......................... 18
Performance Graph....................................... 18
ITEM 2. APPROVAL OF AMENDMENT OF INGERSOLL-RAND COMPANY
SAVINGS AND STOCK INVESTMENT PLAN......................... 19
Principal Features of the Savings Plan.................... 20
Amended Plan Benefits..................................... 21
ITEM 3. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS.... 22
Audit Committee Report.................................... 22
Audit and Related Fees.................................... 22
TRANSACTIONS WITH MANAGEMENT................................ 23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 23
SHAREHOLDER PROPOSALS AND NOMINATIONS....................... 23
DIRECTIONS TO THE MEETING................................... 24
</Table>
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<Table>
<Caption>
Ingersoll-Rand Company Clarendon House
[LOGO] Limited 2 Church Street
Hamilton HM 11
Bermuda
</Table>
PROXY STATEMENT
INFORMATION CONCERNING VOTING AND SOLICITATION
GENERAL INFORMATION
The IR Board of Directors is soliciting proxies to be used at the May 1,
2002 Annual General Meeting of Shareholders. You are invited to attend the
annual general meeting and vote your shares directly. Even if you do not attend,
you may vote by proxy, which allows you to direct another person to vote your
shares at the meeting on your behalf. This proxy statement and the accompanying
proxy card are being distributed beginning on or about March 15, 2002.
In this proxy statement, "IR", the "Company", "we", "us" and "our" refer to
Ingersoll-Rand Company Limited or, for any information prior to January 1, 2002,
to Ingersoll-Rand Company, a New Jersey corporation which, as of that date
became the principal U.S. subsidiary of Ingersoll-Rand Company Limited.
Our principal executive offices are located at Clarendon House, 2 Church
Street, Hamilton HM 11, Bermuda. The telephone number there is 441-295-2838. The
executive offices of our principal United States subsidiary are located at 200
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677. The telephone number
there is (201) 573-0123.
WHO CAN VOTE
Shareholders of record of our Class A common shares at the close of business
on March 4, 2002 may vote at the annual general meeting.
On March 4, 2002, 168,307,565 Class A common shares were outstanding. Each
shareholder has one vote for each Class A common share owned of record at the
close of business on the record date.
HOW YOU CAN VOTE
Shareholders of record can give a proxy to be voted at the meeting in any
one of the following ways:
- over the telephone by calling the toll-free number identified on the
attached proxy card,
- over the Internet, or
- by completing, signing and returning the enclosed proxy card.
Shareholders who hold their shares through a broker (in "street name") must
vote their shares in the manner prescribed by their brokers.
The telephone and Internet voting procedures have been set up for your
convenience. These procedures are designed to authenticate your identity, to
allow you to give voting instructions, and to confirm that those instructions
have been recorded properly. If you are a shareholder of record and you would
like to vote by telephone or by using the Internet, please refer to the specific
instructions contained
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on the enclosed proxy card. If you wish to vote using the enclosed proxy card,
please sign and return your signed proxy to us before the annual general
meeting, and we will vote your shares as you direct.
Whether you vote by telephone, over the Internet or by mail, you can specify
whether your shares should be voted for all, some or none of the nominees for
director (Item 1 on the proxy card). You can also specify whether you approve,
disapprove or abstain from the other proposals presented at the meeting.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD (OR WHEN GIVING YOUR PROXY BY
TELEPHONE OR OVER THE INTERNET) HOW YOU WANT TO VOTE YOUR SHARES, WE WILL VOTE
THEM "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR AS SET FORTH UNDER ITEM 1
AND "FOR" ITEMS 2 AND 3.
HOW TO VOTE UNDER OUR EMPLOYEE PLANS
If you participate in the Ingersoll-Rand Company Savings and Stock
Investment Plan, the IR/Clark Leveraged Employee Stock Ownership Plan, the
Ingersoll-Rand/Thermo King Savings and Stock Investment Plan, the IR Savings
Plan for Bargaining Unit Employees, or the Dresser-Rand Company Retirement
Savings Plans, then you may be receiving these materials because of shares held
for you in those plans. In that case, you may use the enclosed proxy card to
instruct the plan trustees of those plans how to vote your shares, or give those
instructions over the telephone or the Internet. They will vote the shares in
accordance with your instructions and the terms of the plan.
If you do not provide voting instructions for shares held for you in any of
these plans, they will vote these shares in the same ratio as the shares for
which voting instructions are provided.
REVOCATION OF PROXIES
You may revoke your proxy at any time before it is exercised in any of
following ways:
- by notifying IR's secretary in writing;
- by submitting another proxy by telephone, via the Internet or by mail that
is received later and, if by mail, that is properly signed; or
- by voting in person at the meeting.
You may not revoke a proxy merely by attending the meeting. To revoke a
proxy, you must take one of the actions described above.
QUORUM AND REQUIRED VOTES
The presence, in person or by proxy, of the holders of a majority of all
outstanding Class A common shares is necessary to constitute a quorum.
In voting for the election of directors, shareholders have cumulative voting
rights. Accordingly, you may cumulate your voting power and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of your votes, or distribute your votes on the same principle among two
or more candidates, as you see fit. The enclosed proxy grants discretionary
authority for the exercise of such cumulative voting rights. In the election of
directors, persons receiving the highest number of "FOR" votes will be elected.
The affirmative vote of a majority of shares present in person or
represented by proxy at the meeting and entitled to vote, and voting on the
matter presented, is required to approve each proposal other than the election
of directors.
Abstentions are counted as "shares present" at the meeting for the purposes
of determining whether a quorum exists. However, since abstentions are not votes
in favor of or against any matter, they will not affect the outcome of the vote.
Proxies submitted by brokers that do not indicate a vote for some or all of
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the proposals because they do not have discretionary voting authority and have
not received instructions as to how to vote on those proposals (so-called
"broker nonvotes") are also considered "shares present," but also will not
affect the outcome of any vote.
SOLICITATION
We have hired Georgeson Shareholder Communications Inc. to assist in the
distribution of proxy materials and the solicitation of proxies for a fee
estimated at $10,000, plus out-of-pocket expenses. Proxies will be solicited on
behalf of the Board of Directors by mail, in person and by telephone. We will
bear the cost of soliciting proxies. We will also reimburse brokers and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
for forwarding proxy materials to the persons for whom they hold shares.
AUDITED FINANCIAL STATEMENTS
Under our bye-laws and Bermuda law, audited financial statements must be
presented to shareholders at an annual general meeting of shareholders. To
fulfill this requirement, we will present at the annual general meeting audited
consolidated financial statements for the fiscal year 2001. Copies of the
financial statements are contained in our 2001 Financial Report which is being
mailed to shareholders together with this proxy statement.
OTHER MATTERS TO BE ACTED UPON
We do not know of any matters to be presented or acted upon at the meeting
other than the items described in this proxy statement. Under our bye-laws,
shareholders may only bring business before an annual general meeting if it is
submitted to our secretary in a timely manner. (The deadline for timely
proposals for future meetings is discussed under "Shareholder Proposals and
Nominations" on page 23 of this proxy statement.) If any other matter is
presented at the meeting on which a vote may properly be taken, the shares
represented by proxies will be voted in accordance with the judgment of the
person or persons voting those shares.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 28, 2002, the beneficial
ownership of our Class A common shares by (i) each director and nominee for
director of the Company, (ii) each executive officer of the Company named in the
Summary Compensation Table below, and (iii) all directors and executive officers
of the Company as a group:
<Table>
<Caption>
CLASS A LESOP AND DEFERRED
COMMON SSIP EXERCISABLE SHARE
NAME SHARES(A) SHARES(B) OPTIONS(C) UNITS(D)
- ---- --------- --------- ----------- ---------
A. C. Berzin....................................... 2,000 -- -- 416
D. W. Devonshire................................... -- 913 159,999 26,000
J. P. Flannery(e).................................. 1,500 -- 6,750 15,595
P. C. Godsoe....................................... 3,000 -- 4,500 5,217
H. L. Henkel....................................... 3,000 1,233 474,999 107,836
C. J. Horner....................................... 842 -- 4,500 7,030
H. W. Lichtenberger................................ 3,500 -- 13,500 10,686
G. A. Mapp......................................... 3,834 1,942 116,986 10,162
T. E. Martin....................................... 760 -- 9,000 8,783
P. Nachtigal....................................... 32,021 7,260 206,999 12,002
O. R. Smith........................................ 1,500 -- 13,500 12,874
R. P. Smith........................................ 3,889 238 47,332 21,912
R. J. Swift........................................ 750 -- 9,000 8,718
J. E. Turpin....................................... 3,642 417 19,999 8,019
T. L. White........................................ 750 -- 9,000 8,497
All directors and executive officers as a group
(19 persons)(f).................................. 75,598 26,118 1,424,286 305,017
</Table>
- ------------------------
(a) Unless otherwise indicated, all shares are held directly. No director or
executive officer of the Company owns as much as 1% of the outstanding
Class A common shares.
(b) Represents shares held by the trustee under the IR/Clark Leveraged Employee
Stock Ownership Plan ("LESOP") and the Ingersoll-Rand Company Savings and
Stock Investment Plan ("SSIP") for the benefit of executive officers.
(c) Represents shares as to which directors and executive officers had
exercisable options under the Company's Incentive Stock Plans.
(d) In the case of non-employee directors these amounts represent shares earned
and vested under the Director Deferral Plan (referred to below under the
heading "Compensation of Directors"). In the case of executive officers
these amounts represent (i) shares earned and vested under the IR Executive
Deferred Compensation Plan (the "Executive Deferral Plan") and (ii) shares
in respect of vested stock awards deferred at the election of the
executives.
(e) Mr. Flannery is retiring from the Board of Directors effective March 31,
2002.
(f) The Class A common shares beneficially owned by all directors and executive
officers as a group (including shares issuable under exercisable options)
aggregated approximately 1% of the total outstanding Class A common shares.
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The following table sets forth each shareholder which, as of February 28,
2002, is known by us to be the beneficial owner of more than five percent of the
outstanding Class A common shares of the Company:
<Table>
<Caption>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------ -------------------- --------
FMR Corp.................................................... 22,285,071(a) 13.27%
82 Devonshire Street
Boston, Massachusetts 02109
</Table>
- ------------------------
(a) FMR Corp. (including its affiliates) has sole investment power as to all of
such shares. In addition, as to 1,494,311 shares, FMR Corp. (including its
affiliates) has sole voting power.
ITEM 1. ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes for purposes of
election. One class is elected at each annual meeting of shareholders to serve
for a three-year term. In addition, directors elected by the Board of Directors
to fill vacancies caused by the resignation, retirement or death of a director
or the creation of a new directorship stand for election at the next annual
general meeting.
Each director of the Third Class (i.e., Ann C. Berzin, Herbert L. Henkel, H.
William Lichtenberger and Tony L. White) is a nominee for a three-year term
expiring in 2005. Patricia Nachtigal is a director of the First Class and is a
nominee for a term expiring in 2003. Other directors are not up for election
this year and will continue in office for the remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee proposed by the Board or, as an alternative, the Board may
reduce the number of directors to be elected at the meeting.
The Board of Directors held nine meetings during 2001. Each incumbent
director, other than Mr. Godsoe, attended 75% or more of the total number of
meetings of the Board and the committees on which he or she served.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING IN 2005
ANN C. BERZIN -- age 49, director since 2001
- Private investor.
- Chairman and Chief Executive Officer of Financial Guaranty Insurance
Company (insurer of municipal bonds and structured finance obligations), a
subsidiary of General Electric Capital Corporation from 1992 to 2001.
HERBERT L. HENKEL -- age 53, director since 1999
- Chairman of the Board (since May 2000) and President and Chief Executive
Officer (since October 1999) of the Company.
- President and Chief Operating Officer of the Company from April 1999 to
October 1999.
- Chief Operating Officer of Textron Inc. (a multi-industry company with
operations in aircraft, automotive, industrial and finance) from 1998 to
March 1999.
- Vice President of Textron Inc. responsible for Textron Industrial Products
Segment from 1993 to 1998.
- Director of Pitney-Bowes, Inc.
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H. WILLIAM LICHTENBERGER -- age 66, director since 1995
- Chairman and Chief Executive Officer of Praxair, Inc. (an industrial gases
company) from 1992 until retirement in 2000.
- Director of Arch Chemicals, Inc.
TONY L. WHITE -- age 55, director since 1997
- Chairman, President and Chief Executive Officer of Applera Corporation (a
developer, manufacturer and marketer of life science systems and genomic
information products) since 1995.
- Executive Vice President of Baxter International Inc. from 1993 to 1995.
- Director of C.R. Bard, Inc.
NOMINEE FOR ELECTION FOR A ONE-YEAR TERM EXPIRING IN 2003
PATRICIA NACHTIGAL -- age 55, director since 2002
- Senior Vice President and General Counsel of the Company since 2000.
- Vice President and General Counsel of the Company from 1991 to 2000.
DIRECTORS CONTINUING IN OFFICE UNTIL 2003
THEODORE E. MARTIN -- age 62, director since 1996
- President and Chief Executive Officer of Barnes Group Inc. (manufacturer
and distributor of precision springs and custom metal parts) from 1995
until retirement in 1998.
- Director of:
- Applera Corporation
- Unisys Corporation
RICHARD J. SWIFT -- age 57, director since 1995
- Chairman of Financial Accounting Standards Advisory Council since January
2002.
- Chairman, President and Chief Executive Officer of Foster Wheeler Ltd.
(provider of design, engineering, construction, manufacturing, management
and environmental services) from 1994 until 2001.
- Director of Public Service Enterprise Group.
DIRECTORS CONTINUING IN OFFICE UNTIL 2004
PETER C. GODSOE -- age 63, director since 1998
- Chairman of the Board and Chief Executive Officer of the Bank of Nova
Scotia since 1995.
- Deputy Chairman of the Board, President and Chief Executive Officer of the
Bank of Nova Scotia from 1993 to 1995.
- Director of Empire Company Limited.
CONSTANCE J. HORNER -- age 60, director since 1994
- Guest Scholar at the Brookings Institution since 1993.
- Commissioner of U.S. Commission on Civil Rights from 1993 to 1998.
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- Assistant to the President and Director of Presidential Personnel from
1991 to 1993.
- Deputy Secretary, U.S. Department of Health and Human Services from 1989
to 1991.
- Director of:
- Foster Wheeler Ltd.
- Pfizer Inc.
- Prudential Financial, Inc.
ORIN R. SMITH -- age 66, director since 1995
- Chairman and Chief Executive Officer of Engelhard Corporation (provider of
specialty chemical products, engineered materials and industrial
commodities management services for various industries) from 1995 until
retirement in 2000.
- President and Chief Executive Officer of Engelhard Corporation from 1984
to 1995.
- Director of:
- Applera Corporation
- Engelhard Corporation
- Vulcan Materials Company
COMPENSATION OF DIRECTORS
Directors who are not our employees receive an annual retainer of $30,000
and $1,000 for attendance at each board or committee meeting, except that
committee chairs receive $2,000 per committee meeting. In addition, each
non-employee director is annually granted options to purchase 2,250 Class A
common shares.
Under our Directors Deferred Compensation and Stock Award Plan (the
"Director Deferral Plan"), each non-employee director is credited annually with
units representing 600 Class A common shares. The units are credited to an
account maintained for each non-employee director (a "Deferred Compensation
Account"). Directors who are not employees may also defer all or a portion of
the retainer and meeting fees to which they are entitled. If a director defers
his or her fees and elects to have the deferred fees invested in Class A common
share units we credit an additional 20% of the retainer and meeting fees that
are deferred to the director's Deferred Compensation Account. Each director is
fully vested in amounts credited to the director's Deferred Compensation
Account, except that the additional 20% contributions in respect of deferred
fees are not vested until five years after crediting or, if earlier, the
cessation of the director's service on the Board of Directors by reason of death
or normal retirement (i.e., age 70 or 15 years of Board service). All
distributions of amounts invested in Class A common shares are made in the form
of Class A common shares equal to the number of units credited to the director's
Deferred Compensation Account.
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BOARD COMMITTEES
AUDIT COMMITTEE
MEMBERS: Richard J. Swift (Chair)
Joseph P. Flannery
Peter C. Godsoe
H. William Lichtenberger
Orin R. Smith
Tony L. White
NUMBER OF MEETINGS IN 2001: 4
FUNCTIONS:
- Review annual audited financial statements with management and the
independent auditors.
- Review significant issues regarding accounting and auditing principles and
practices, as well as the adequacy of internal controls.
- Recommend to the Board the public accounting firm to be proposed as our
independent auditors and review the performance of the independent
auditors.
- Review the scope of the audit and the findings and fees of the independent
auditors.
- Satisfy itself as to the independence of the independent auditors and
insure receipt of their annual independence statement.
A complete list of all the functions of the Audit Committee is included in
the charter of the committee which was attached to the proxy statement for the
2001 annual meeting of shareholders of Ingersoll-Rand Company. The members of
the Audit Committee are all "independent" as defined in the New York Stock
Exchange listing standards.
COMPENSATION AND NOMINATING COMMITTEE
MEMBERS: Joseph P. Flannery (Chair)
H. William Lichtenberger
Orin R. Smith
Richard J. Swift
NUMBER OF MEETINGS IN 2001: 6
FUNCTIONS:
- Establish executive compensation policies.
- Approve compensation of officers and key employees.
- Review and recommend changes in employee benefit programs.
- Review and recommend changes in management succession plans.
- Recommend nominees for election as directors and officers and members of
Board committees.
CORPORATE AFFAIRS COMMITTEE
MEMBERS: Constance Horner (Chair)
Theodore E. Martin
Orin R. Smith
Tony L. White
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NUMBER OF MEETINGS IN 2001: 2
FUNCTIONS:
- Review policies on public issues having broad social significance.
- Review the implementation of those policies.
- Review compliance by employees with ethical and legal standards.
FINANCE COMMITTEE
MEMBERS: H. William Lichtenberger (Chair)
Joseph P. Flannery
Peter C. Godsoe
Constance Horner
Theodore E. Martin
NUMBER OF MEETINGS IN 2001: 5
FUNCTIONS:
- Approve the appointment and review the performance of investment managers
under employee benefit plans.
- Review proposed borrowings and issuances of securities.
- Recommend to the Board the dividends to be paid on our common shares.
- Review cash management policies.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE
The Company's executive compensation program is administered by the
Compensation and Nominating Committee of the Board of Directors (the
"Compensation Committee"), which is composed solely of independent non-employee
directors. The Compensation Committee has responsibility for the Company's
executive officer compensation program, including the approval of salary
increases, annual bonuses, and the granting of stock options and stock awards,
in accordance with the terms of the respective plans governing such grants, to
executive officers who are not also directors of the Company. It also has
responsibility for making recommendations to the non-employee members of the
Board of Directors regarding salary increases, the payment of annual bonuses,
and the granting of stock options and stock awards to executive officers who
also are directors of the Company.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The Compensation Committee's executive officer compensation policies are
based on the belief that the interests of the Company's executive officers
should be aligned with those of the Company's shareholders. The policies relate
compensation to both short-term (annual) and long-term (multi-year) financial
performance of the Company, as well as to long-term shareholder investment
returns. Executive officer compensation policies provide that executive pay be
both contingent and variable based upon Company financial and operational
performance.
The objectives which guide policy development are to (a) provide a total
compensation package that will attract, motivate and retain as senior management
exceptionally talented individuals who are essential for building shareholder
value on a long-term basis, (b) establish annual incentives for members of
senior management that are directly tied to the overall financial performance of
the Company and to their
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respective individual performances and (c) create long-term incentives to focus
executives on managing from the viewpoint of an owner with an equity stake in
the business, thereby aligning executive compensation with the returns realized
by the Company's shareholders. While many compensation determinations are based
upon objective criteria, certain of such determinations include subjective
elements.
The objectives described above are generally accomplished through a mix of
compensation components, targeted degrees of competitiveness and direct linkages
to Company financial performance. The value of the variable compensation
components (annual cash incentive payments plus stock options and stock awards)
is directly linked to the financial performance of the Company and to the value
of the Company's Class A common shares. Thus, alignment of the interests of the
shareholders and of the executives is achieved.
The Compensation Committee periodically reviews and evaluates its executive
officer compensation practices against the practices and pay levels of other
similar companies. These comparisons are conducted continuously throughout the
year through a variety of methods such as direct analysis of peer company proxy
statements, compilation of survey data published by several independent
consulting firms, and customized compensation surveys performed by independent
consulting firms. The companies included in these compensation surveys are not
necessarily the same as those comprising the Standard Poor's Supercom Industrial
Machinery Index or the Standard & Poor's Machinery-Diversified Index referred to
below under the caption "Performance Graph," although some of the companies
comprising such Indexes are included in the compensation surveys.
Salary increases normally are granted annually to executive officers by the
Compensation Committee based upon individual performance, the Compensation
Committee's evaluation of general U.S. industry salary trends derived from
surveys and various business publications and the salaries paid for comparable
positions at the surveyed corporations referred to above. Weighing of these
salary determination factors varies because each salary determination is based
upon an individual's particular circumstances.
Executive officers with direct responsibility for business unit operations
may receive annual bonuses under the terms of written performance agreements
established early each year. The agreements for 2001 provided that a bonus equal
to 35-50% of salary would be payable if their respective group operations met
certain pre-established sales, operating income, cash flow and return on
invested capital targets, and an additional 30-45% of salary would be payable
for substantially exceeding those targets. In addition, a discretionary bonus of
up to 30% of salary would be payable based upon subjective criteria applicable
to the respective operations managed by these executive officers.
Other executive officers, including those responsible for staff functions,
may receive annual bonuses based upon both the Company's and their individual
performance during each such year. The determination of the amount of any bonus
payable to these other executive officers is subjective. In fixing such bonus
awards, the Compensation Committee considers several financial metrics,
including the Company's earnings per share, cash flow, and return on invested
capital performance compared to the annual plan and also the individual's
contribution to such performance. In addition, the general economic environment
in which the Company operated during such year is taken into account as are the
prevailing pay levels for similar positions in similar companies.
The Senior Executive Performance Plan (the "Performance Plan") limits the
bonuses that may be awarded to participants in the Performance Plan, who consist
of the chief executive officer plus the four other highest compensated executive
officers (as determined under Securities Exchange Act regulations). Bonuses to
Performance Plan participants are limited to their respective allocated share of
the Performance Plan's bonus pool for the year in question.
The Company's executive officer compensation program provides for a
substantial component of total executive officer compensation to reflect the
returns realized by shareholders and the degree to which
10
<Page>
future performance targets are met. This aligns the long-term interests of the
Company's executive officers with those of the Company's shareholders and is
accomplished through the following long-term incentive programs:
- Stock options under the Company's Incentive Stock Plans generally have
been granted annually at an exercise price equal to the fair market value
of the Class A common shares on the date of grant. Currently, options
granted to executive officers become exercisable in three equal annual
installments beginning one year from the date of grant and expire on the
tenth anniversary of the grant.
- Stock awards payable in Class A common shares periodically have been
granted under the Company's Incentive Stock Plans to executive officers
and other key employees of the Company. Awards to executive officers
normally are distributed at the conclusion of multi-year performance
periods. Under the terms of all awards granted to executive officers since
1997 (other than certain awards to Messrs. Henkel and Devonshire as part
of their initial employment arrangements with the Company), distribution
of 100% of the shares awarded to executive officers is contingent upon the
Company's achievement of predetermined operating income and earnings per
share objectives. In the event such objectives are not met, payouts are
made only at the discretion of the members of the Board of Directors who
do not participate in the executive compensation program.
- The IR Executive Deferred Compensation Plan (the "Executive Deferral
Plan") enables and encourages eligible executives to defer receipt of all
or part of their Company annual cash bonus in exchange for Class A common
share equivalents or mutual fund investments. The Executive Deferral Plan
is designed to increase stock ownership by executives. Certain
participants who agree to prescribed share ownership guidelines which are
expressed as multiples of their annual salary are eligible for a 20%
supplemental amount on those deferrals invested in Class A common share
equivalents. Vesting of the 20% supplemental amount is generally subject
to the completion of five years of employment following the date of
deferral. In certain years, such executives may also be given the option
to elect to forego cash bonus payments in exchange for options to purchase
our Class A common shares issued under the Company's Incentive Stock Plan.
The number of stock options and stock awards granted are based upon the
position responsibility of each recipient, his or her individual performance,
the Company's performance, and the long-term incentive practices of the surveyed
corporations referred to above. These factors are periodically reevaluated by
the Compensation Committee. The Compensation Committee seeks to provide total
opportunity, comprised of salary, annual incentives and long-term incentives,
for executive officers up to (approximately) the 75th percentile of the pay
levels for equivalent positions as determined through the survey processes
discussed above. This level of opportunity is earned only with commensurate
achievement of business results. The Compensation Committee uses these
guidelines in making its award grant determinations. New awards of both stock
options and stock grants are issued without regard to the options or awards
previously granted or still outstanding.
2001 CHIEF EXECUTIVE OFFICER COMPENSATION
Throughout calendar year 2001, Mr. Henkel's annual salary was $1,000,000,
which is approximately the median salary level for chief executive officers of
comparable companies.
In addition, the Compensation Committee recommended that the Board approve a
bonus to Mr. Henkel in an amount equal to 76% of his 2001 year-end salary. This
recommendation, as well as the Board's subsequent award of that bonus, was based
upon Mr. Henkel's contributions to the Company's 2001 business results.
11
<Page>
2001 COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
During 2001, in accordance with the policies stated above,
Messrs. Devonshire, Smith and Mapp were granted salary increases averaging
approximately 5.4%. Bonus awards to Messrs. Devonshire, Mapp, Smith and Turpin
were granted pursuant to performance agreements of the type described above.
Based on the Company's financial performance, and the contributions made by
these executives, they were awarded bonuses averaging approximately 71% of
year-end salary. Where applicable, the bonus awards were in accordance with the
Performance Plan.
The named executive officers were also granted stock options in respect of
the Company's Class A common shares, as indicated in the Summary Compensation
Table and under the caption "Stock Options", and stock awards as indicated under
the caption "Long-Term Incentive Plan Awards," in each case in accordance with
the practices referred to above.
SUMMARY
The Compensation Committee believes the compensation program for the
Company's executive officers is competitive with the compensation programs
provided to similarly situated officers in the surveyed corporations. The
Compensation Committee believes the bonus payments made to the executive
officers named in the Summary Compensation Table below in respect of the year
2001 are appropriate and commensurate with the Company's 2001 financial and
strategic performance and their respective individual achievements during the
year. Based on information the Compensation Committee has been provided by
consultants relative to the compensation practices of surveyed corporations, it
believes the stock incentive compensation opportunities provided to these
officers, in the form of stock awards and stock options, are also appropriate
and are awarded in a manner fully consistent with the Company's strategy of
basing a substantial component of total executive officer compensation on the
total returns realized by the Company's shareholders.
<Table>
<Caption>
COMPENSATION AND NOMINATING
COMMITTEE
Joseph P. Flannery (Chair)
H. William Lichtenberger
Orin R. Smith
Richard J. Swift
</Table>
12
<Page>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ended December 31, 1999, 2000 and
2001, the cash compensation we paid, as well as certain other compensation paid
or accrued for those years, to the individuals named below:
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- -------------------------- PAYOUTS
OTHER RESTRICTED SECURITIES ---------
ANNUAL STOCK UNDERLYING LTIP
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS
PRINCIPAL POSITION YEAR ($) ($) ($)(A) ($)(B) (#) ($)(C)
- ------------------ ---- --------- --------- ------------- ---------- ------------- ---------
H. L. Henkel................. 2001 1,000,000 760,000(f) -- 184,570(f) 150,000 1,113,500(g)
Chairman of the Board, 2000 950,000 850,000(f) 3,417 187,410(f) 150,000 989,119(g)
President & Chief 1999 581,731 1,000,000(f) 177,334 3,651,744(f) 350,000 --
Executive Officer (e)
D. W. Devonshire............. 2001 525,000 309,800 -- -- 65,000 280,602(g)
Executive Vice President 2000 500,000 410,000 -- -- 65,000 292,556(g)
& Chief Financial Officer
(h) 1999 485,000 430,000 10,822 -- 35,000 266,963(g)
G. A. Mapp................... 2001 414,583 305,300(f) 22,772 2,759 42,000 157,338(g)
Senior Vice President 2000 358,000 201,540(i) 26,496 2,829 45,000 133,276(g)
1999 276,667 128,625(f) 25,353 21,010(f) 30,000 109,455
R. P. Smith.................. 2001 418,333 346,000(f) -- 75,472(f) 42,000 178,160(g)
Senior Vice President (j) 2000 366,667 353,354(f) -- 70,671(f) 50,000 --
J. E. Turpin................. 2001 375,000 263,800(f) 75,000(g) 69,098(f) 60,000 178,160
Senior Vice President (k)
<Caption>
ALL
OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(D)
- ------------------ -------------
H. L. Henkel................. 85,583
Chairman of the Board, 85,000
President & Chief 251,854
Executive Officer (e)
D. W. Devonshire............. 49,987
Executive Vice President 41,484
& Chief Financial Officer
(h) 55,064
G. A. Mapp................... 90,949
Senior Vice President 59,154
50,637
R. P. Smith.................. 38,829
Senior Vice President (j) 13,720
J. E. Turpin................. 18,216
Senior Vice President (k)
</Table>
- ------------------------
(a) These amounts represent that portion of relocation benefit payments which
compensated the named executive officers for the income taxes payable in
respect of relocation compensation. The relocation benefit amounts are
reflected in the column headed "All Other Compensation."
(b) The amounts reflected as Restricted Stock Awards are composed of the
following:
- the portion of stock awards granted Mr. Henkel in 1999 to be issued
subject to his continued employment with the Company;
- amounts credited under the Executive Deferral Plan equal to 20% of the
cash bonuses deferred by the named executives; and
- the crediting of additional Class A common share equivalents to accounts
of the named executives under the Executive Deferral Plan arising from the
reinvestment of dividend equivalents under that plan.
The total number and fair market value as of December 31, 2001 of the number
of Class A common shares issuable contingent upon the continued employment
of the named executives are as follows:
<Table>
<Caption>
FAIR MARKET
NAME # SHARES VALUE ($)
- ---- -------- -----------
H. L. Henkel............................................ 68,253 2,853,658
D. W. Devonshire........................................ -- --
G. A. Mapp.............................................. 512 21,407
R. P. Smith............................................. 1,612 67,398
J. E. Turpin............................................ 342 14,299
</Table>
13
<Page>
(c) The amounts reflected in this column represent the value of the performance
portion of stock awards distributed to the named executives. The shares
subject to the performance portion of the stock awards are distributable if
the Company achieves established earnings per share goals. Distributions of
100% of shares subject to awards granted are contingent on Company
performance (other than certain awards to Messrs. Henkel and Devonshire as
part of their initial employment arrangements with the Company).
(d) The amounts reflected in this column represent:
- our contributions for the account of the named executive officers under
our Savings and Stock Investment Plan (the "Savings Plan") (which includes
contributions under our Leveraged Employee Stock Ownership Plan (the
"LESOP")), as well as amounts credited to the accounts of such executive
officers under the related supplemental plans, which provide benefits
which would have been provided under the applicable tax-qualified plan but
for Internal Revenue Code restrictions on such benefits;
- dividend equivalents paid to the named executive officers in respect of
the performance portion of stock awards (see footnote (c) above); and
- relocation benefits paid to the named executive officers.
For 2001 such amounts were as follows:
<Table>
<Caption>
SAVINGS PLAN
(INCLUDING
SUPPLEMENTAL
PLAN AND LESOP DIVIDEND RELOCATION
NAME CONTRIBUTIONS) ($) EQUIVALENTS ($) BENEFITS ($)
- ---- ------------------ --------------- ------------
H. L. Henkel......................... 47,333 38,250 --
D. W. Devonshire..................... 39,277 10,710 --
G. A. Mapp........................... 44,900 8,415 37,634
R. P. Smith.......................... 31,944 6,885 --
J. E. Turpin......................... 11,331 6,885 --
</Table>
(e) Mr. Henkel joined the Company in April 1999.
(f) Pursuant to the Executive Deferral Plan, annual cash bonuses have been
deferred in exchange, among other investment options, for common share
equivalents equal to 120% of the deferred amounts. Common stock equivalents
representing deferred cash bonuses are included in the "Bonus" column, while
the 20% additional amounts are included in the column captioned "Restricted
Stock Awards". The deferred cash bonus amounts for the executive officers
named above who elected to defer bonus payments in exchange for common share
equivalents were as follows:
<Table>
<Caption>
NAME 1999 2000 2001
- ---- ---------- -------- --------
H. L. Henkel................................ $1,000,000 $850,000 $760,000
D. W. Devonshire............................ -- -- --
G. A. Mapp.................................. 100,000 -- --
R. P. Smith................................. -- 353,354 346,000
J. E. Turpin................................ -- -- 338,800*
</Table>
* In addition to deferring his bonus for 2001, Mr. Turpin deferred the $75,000
to which he was entitled as part of his initial employment arrangement with
the Company (see footnote (k) below).
(g) Receipt of these amounts has been deferred at the election of the
executives.
(h) Mr. Devonshire resigned from his position as Executive Vice President and
Chief Financial Officer effective January 31, 2002.
14
<Page>
(i) Mr. Mapp elected to forego the payment of an additional $201,540 and to
receive in lieu thereof an award of options, issued on February 7, 2001, to
purchase up to 26,320 shares of common stock at an exercise price of $44.23.
(j) Mr. Smith joined the Company in February 2000.
(k) Mr. Turpin joined the Company in January 2001. As part of his initial
employment arrangement, the Company agreed to pay Mr. Turpin $75,000 (which
he deferred).
STOCK OPTIONS
The following tables contain information for the year 2001 concerning the
grants to, and exercises by, the executive officers named above, of stock
options under the Company's Incentive Stock Plans and the value of such options
held by such executive officers as of December 31, 2001:
OPTION/SAR GRANTS IN 2001
<Table>
<Caption>
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS/SARS IN BASE EXPIRATION VALUE
NAME GRANTED(#)(A) 2001 PRICE($)/(SH) DATE ($)(B)
- ---- ------------- ------------ ------------- ---------- ----------
H. L. Henkel....................... 150,000 3.20 40.53 1/2/11 2,139,000
D. W. Devonshire................... 65,000 1.39 40.53 1/2/11 986,900
G. A. Mapp......................... 42,000 0.90 40.53 1/2/11 598,920
26,320 0.56 44.23 2/7/11 416,646
R. P. Smith........................ 42,000 0.90 40.53 1/2/11 598,920
J. E. Turpin....................... 60,000 1.28 40.53 1/2/11 855,600
</Table>
- ------------------------
(a) All options other than the 26,320 options granted to Mr. Mapp on
February 7, 2001 become exercisable in three equal annual installments
beginning on the first anniversary of the date of grant. The February 7,
2001 option grant to Mr. Mapp was issued based upon his election to receive
a portion of his annual bonus in the form of options. Such options became
fully exercisable 90 days after issuance.
(b) Grant date value is based on the Black-Scholes option pricing model adapted
for use in valuing executive stock options. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The grant date values were determined
based in part upon the following assumptions:
<Table>
<Caption>
JANUARY 2, 2001 FEBRUARY 7, 2001
--------------- ----------------
Expected volatility............................. 0.3749 0.3781
Risk-free rate of return........................ 5.03% 4.97%
Dividend yield.................................. 1.68% 1.54%
Time of exercise (expected)..................... 5 years 5 years
</Table>
15
<Page>
AGGREGATED OPTION/SAR EXERCISES IN 2001 AND DECEMBER 31, 2001 OPTION/SAR VALUE
<Table>
<Caption>
NUMBER OF VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS/SARS AT OPTIONS/SARS AT
OPTIONS/ 12/31/01(#) 12/31/01 ($)
SARS VALUE REALIZED --------------------------- ---------------------------
NAME EXERCISED(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- ------------- ----------- -------------
H. L. Henkel.................. -- -- 349,998 300,002 -- 191,805
D. W. Devonshire.............. -- -- 104,999 120,001 -- 83,115
G. A. Mapp.................... -- -- 81,319 82,001 13,412 53,705
R. P. Smith................... -- -- 16,666 75,334 -- 53,705
J. E. Turpin.................. -- -- -- 60,000 -- 76,722
</Table>
LONG-TERM INCENTIVE PLAN AWARDS
As part of our executive officer compensation program, we have awarded
Class A common shares under our Incentive Stock Plans to executive officers and
other key employees. Distributions are contingent upon a combination of our
earnings per share performance and business sector operating income during the
payout period. The relative weighting of the components varies based upon the
particular executive's business responsibilities. The following table reflects
the stock awards granted during 2001 to the executive officers named above:
LONG-TERM INCENTIVE PLAN AWARDS IN 2001
<Table>
<Caption>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERIOD UNTIL NON-STOCK PRICE BASED PLANS
SHARES, UNITS OR MATURATION -------------------------------------
OTHER RIGHTS OR PAYOUT(A) THRESHOLD(#) TARGET(#) MAXIMUM(#)
---------------- ------------ ------------ --------- ----------
H. L. Henkel..................... 25,000 (a) 5,000 25,000 37,500
D. W. Devonshire................. 7,000 (a) 1,400 7,000 10,250
G. A. Mapp....................... 5,500 (a) 1,100 5,500 8,250
R. P. Smith...................... 4,500 (a) 900 4,500 6,750
J. E. Turpin..................... 4,500 (a) 900 4,500 6,750
</Table>
- ------------------------
(a) The shares subject to these stock awards are issuable in 2004 based upon
performance during the 2001-2003 period.
16
<Page>
RETIREMENT PLANS
The Company and its subsidiaries maintain a number of defined benefit
pension plans for their officers and other employees. The pension plans provide
for fixed benefits in the event of retirement at a specified age and after a
specified number of years of service. All of the executive officers of the
Company named above are eligible to participate in the Ingersoll-Rand Company
Pension Plan Number One (the "Pension Plan") and the Elected Officers
Supplemental Program. The following table illustrates approximate annual
pensions for retirements in 2002 under the Pension Plan and under the Elected
Officers Supplemental Program computed as a straight life annuity, before the
reduction specified in footnote (a) below and based on the indicated
assumptions:
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 BEFORE OFFSET(A)
<Table>
<Caption>
FINAL AVERAGE 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 35 YEARS OF 40 YEARS OF
COMPENSATION($) SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
- --------------- ----------- ----------- ----------- ----------- ----------- -----------
500,000.......................... $142,500 $190,000 $237,500 $ 285,000 $ 332,500 $ 332,500
700,000.......................... 199,500 266,000 332,500 399,000 465,500 465,500
900,000.......................... 256,500 342,000 427,500 513,000 598,500 598,500
1,100,000......................... 313,500 418,000 522,500 627,000 731,500 731,500
1,300,000......................... 370,500 494,000 617,500 741,000 864,500 864,500
1,500,000......................... 427,500 570,000 712,500 855,000 997,500 997,500
1,700,000......................... 484,500 646,000 807,500 969,000 1,130,500 1,130,500
1,900,000......................... 541,500 722,000 902,500 1,083,000 1,263,500 1,263,500
For each additional $100,000...... 28,500 38,000 47,500 57,000 66,500 66,500
</Table>
- ------------------------
(a) Benefits payable to participants in the Pension Plan and the Elected
Officers Supplemental Plan are reduced by a portion of the Social Security
benefits to which such participants are entitled.
The credited years of service and covered compensation as of December 31,
2001 for the individuals named above are as follows:
<Table>
<Caption>
YEARS OF
NAME CREDITED SERVICE COVERED COMPENSATION($)
---- ---------------- -----------------------
H. L. Henkel..................................... 14(a) 1,870,000
D. W. Devonshire................................. 4 892,960
G. A. Mapp....................................... 34 685,401
R. P. Smith...................................... 2 749,677
J. E. Turpin..................................... 1 638,800
</Table>
- ------------------------
(a) Mr. Henkel's credited years of service exceed his actual service pursuant to
the provisions of his employment arrangements.
OTHER POST-EMPLOYMENT ARRANGEMENTS
The Company has entered into an arrangement with Messrs. Henkel and
Devonshire, whereby the Company is obligated to pay certain annual benefits for
a ten-year period commencing upon normal retirement, so long as their employment
with the Company is not terminated by the Company for cause (as defined), so
long as they meet certain noncompetition obligations and, in certain cases, so
long as they retire from the Company at normal retirement age. In the event of
death, the benefits are payable to the individual's estate to the extent not
already paid. The annual benefit payable to Messrs. Henkel and Devonshire is
$125,000 and $65,000, respectively. Under this arrangement, the Company is a
beneficiary of
17
<Page>
life insurance policies on such executives and, based on actuarial assumptions,
the life insurance proceeds receivable by the Company will defray the costs
associated with this program.
The Company has also adopted a program which provides the executive officers
named above with life insurance coverage ranging from one times annual earnings
(as defined) to two times annual earnings (increased in certain instances to
account for income tax obligations payable in respect of such supplemental
coverage).
The Company has also entered into an agreement with Mr. Henkel providing him
with severance benefits if he is terminated without cause. The benefit amount
payable to Mr. Henkel will equal twice his annual salary plus his last bonus
plus distribution of 60,000 shares of Company stock under the provisions of a
stock award granted to Mr. Henkel.
In connection with Mr. Devonshire's retirement, the Company has agreed to
make payments to him of $1,690,000, representing his accrued benefits under the
non-qualified retirement programs in which he participated, and $978,000 for
various separation related items.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with each of the executive officers
named above which provide that if the employment of a particular executive
officer is terminated (by the Company or, under certain circumstances, by the
executive officer) within five years following a change in control of the
Company (as defined in such agreements), the executive will receive a lump sum
severance payment from the Company equal to three times the sum of (a) the
executive's highest annual salary from the date of the change in control to the
date of termination plus (b) the highest bonus awarded to the executive during
the period beginning five years prior to the change in control and ending on the
date of termination. In addition, the executive will receive an amount
approximating the Company's contribution which would have been made for such
executive's account under the SSIP (including the related supplemental plan)
during the three years following termination of employment and will be entitled
during such three-year period to continue to participate in the Company's
welfare employee benefit programs. For purposes of calculating the executive's
retirement benefits, five years will be added to both the executive's age and
service with the Company. The agreements further provide that if the payments
described above constitute "excess parachute payments" under applicable
provisions of the Internal Revenue Code and related regulations, the Company
will pay the executive an additional amount sufficient to place the executive in
the same after-tax financial position the executive would have been in if the
executive had not incurred the excise tax imposed under Section 4999 of the
Internal Revenue Code in respect of excess parachute payments.
PERFORMANCE GRAPH
The following graph compares for the five years ended December 31, 2001, the
cumulative total shareholder return on our common shares with the cumulative
total return on the (a) Standard & Poor's 500 Stock Index, (b) Standard & Poor's
Machinery-Diversified Index and (c) Standard & Poor's Supercom Industrial
Machinery Index. Since the Standard & Poor's Machinery Diversified Index has
been eliminated effective January 1, 2002, we will no longer be comparing our
shareholder returns with that Index. Future comparisons will be to the
Standard & Poor's Supercom Industrial Machinery Index. The graph assumes that
$100 was invested on December 31, 1996 in each of our common shares, the
Standard & Poor's 500 Stock Index, the Standard & Poor's Machinery-Diversified
Index and the Standard & Poor's Supercom Industrial Machinery Index and assumes
the reinvestment of dividends.
18
<Page>
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<Table>
<Caption>
1996 1997 1998 1999 2000 2001
Ingersoll-Rand 100 138 164 193 149 151
S&P 500 100 133 171 207 188 166
S&P Supercom Ind Mach Index 100 133 122 136 129 139
S&P 500 Machinery (Div.) 100 127 97 112 115 119
</Table>
ITEM 2. APPROVAL OF AMENDMENT OF INGERSOLL-RAND COMPANY SAVINGS AND STOCK
INVESTMENT PLAN
The Ingersoll-Rand Company Savings and Stock Investment Plan (the "Savings
Plan") is a broad-based defined contribution plan (commonly referred to as a
"401(k) plan"), which was originally approved by the shareholders of
Ingersoll-Rand Company in 1979. As so approved, the Savings Plan provides that
it can be amended by action of the Board of Directors, except that the following
types of amendments require the approval of the shareholders:
(a) to permit the Company's matching contributions to be invested by employees
in other than Class A common shares of the Company;
(b) to extend Savings Plan benefits to employees whose benefits are determined
under collective bargaining agreements;
(c) to increase the Company's matching contributions (see the discussion below
under the heading "Principal Features of the Savings Plan") to an annual
amount in excess of 100% of the employees' contributions; or
(d) to deny any employees participating in the Savings Plan voting rights in the
common shares credited to the employees' Savings Plan accounts.
19
<Page>
The Company proposes to amend the Savings Plan to eliminate the need to
obtain shareholder approval (a) to allow employees to invest the Company's
matching contributions in Saving Plan investments other than Class A common
shares of the Company and (b) to permit all U.S.-based employees to participate
in the Savings Plan (aggregating approximately 32,000 individuals). As a result
of the reorganization which became effective on December 31, 2001, by which
Ingersoll-Rand Company became an indirect wholly-owned subsidiary of
Ingersoll-Rand Company Limited, it is technically not required that the
shareholders of Ingersoll-Rand Company Limited approve these amendments.
Nevertheless, the Board of Directors believes that it is consistent with the
intent of the terms of the Savings Plan as originally adopted that it present
the proposed amendments to the shareholders of Ingersoll-Rand Company Limited
prior to their implementation. The Board of Directors believes that adoption of
the proposed amendments will provide flexibility to the Board of Directors to
change the Savings Plan in the areas described thereby enabling the Company to
act quickly to maintain the Savings Plan's competitiveness both as a retirement
income source and a recruitment and retention tool.
In the years since its adoption the Savings Plan has become an increasingly
important element of the retirement benefits available to our U.S. employees.
The provision requiring that Company matching contributions be invested only in
Company common shares has become a source of concern, particularly to older,
longer-service employees. These employees are prevented, as a result of this
provision, from diversifying the investment of a significant portion of their
retirement benefits. Consequently, if the proposal is approved by the
shareholders, the Board of Directors expects to modify this provision and permit
diversification of matching contributions from Class A common shares after the
participating employee has met certain minimum requirements (for example, a
minimum age, service or holding period).
A number of our subsidiary companies have plans similar to the Savings Plan
covering hourly employees who, in some cases, are covered by collective
bargaining agreements. Eliminating the shareholder approval requirement
associated with adding bargaining unit employees would allow us to gain
administrative efficiencies (potentially reducing costs) which are not currently
available.
PRINCIPAL FEATURES OF THE SAVINGS PLAN
The Savings Plan is a defined contribution plan covering most salaried
U.S.-based employees of Ingersoll-Rand Company and its subsidiaries, including
executive officers.
The main features of the Savings Plan include the following:
- salaried employees are eligible to participate in the Savings Plan on
their date of hire or at any time thereafter;
- employees may contribute between 1% and 14% of their eligible compensation
on either a pretax or after-tax basis;
- Ingersoll-Rand Company has contributed $0.50 for each $1.00 saved by
employees up to a maximum of 6% of eligible compensation ("matching
contributions");
- Ingersoll-Rand Company also makes contributions for certain employees
equal to 1% or 2% (depending upon age and service) of such employees'
eligible contributions ("retirement account contributions"); and
- employees may take loans and distributions from their accounts subject to
specific provisions and restrictions.
INVESTMENTS: Employees may elect to have their contributions invested in
one or more of 10 investment funds, including a stable value fund, various
equity funds or in Class A common shares. All matching contributions are
invested in Class A common shares. Employees receiving retirement account
contributions have the same investments options as apply to employee
contributions.
20
<Page>
VESTING: Employees are always 100% vested in the current value of their
Savings Plan contributions. Employees with five or more years of service are
fully vested in all matching contributions and retirement account contributions.
Employees with less than five years of service are subject to a graded vesting
schedule under which they are immediately vested in 20% of matching and
retirement account contributions. Additional vesting occurs in four equal annual
installments beginning when the employees reach two years of service.
WITHDRAWALS: Voluntary withdrawals of matching contributions or employees'
after-tax contributions may be made during employment, subject to certain
limitations, suspension rules and tax penalties. However, withdrawals of pretax
contributions prior to age 59 1/2 are restricted to specified hardship
situations.
DISTRIBUTIONS: Employees may generally defer distribution of all or part of
their account balances beyond the date of their termination of employment.
However, participants must begin receiving distributions within a prescribed
period after reaching age 70 1/2.
FEDERAL INCOME TAX CONSEQUENCES: Prior to withdrawal or distribution
employees are not taxed on their pretax contributions, or on matching or
retirement account contributions (or earnings from the investment of their
accounts). Loans from an employee's account are not taxed unless the employee
defaults in repayment. Withdrawals and distributions of an employee's account
balance are taxable, except for the portion attributable to the employee's
after-tax contributions. Special tax rules may apply if an employee receives a
distribution of Class A common shares.
AMENDED PLAN BENEFITS
The proposed amendments would not impact the benefits to be received by any
Savings Plan participant. The table below indicates the amounts contributed in
2001 by Ingersoll-Rand Company under the Savings Plan (and the companion
Supplemental Savings and Stock Investment Plan and Supplemental Retirement
Account Plan, both of which were adopted to provide Savings Plan benefits to
those employees subject to certain Internal Revenue Code limitations) to the
executive officers named above, all current executive officers as a group, and
all employees (including officers who are not executive officers) as a group:
<Table>
<Caption>
DOLLAR VALUE
OF COMPANY CONTRIBUTIONS
NAME AND POSITION ($)
----------------- ------------------------
H. L. Henkel
Chairman, President and Chief Executive Officer........... 47,333
D. W. Devonshire
Executive Vice President and Chief Financial Officer...... 39,277
G. A. Mapp
Senior Vice President..................................... 44,900
R. P. Smith
Senior Vice President..................................... 31,944
J. E. Turpin
Senior Vice President..................................... 11,331
All current executive officers as a group................... 225,699
All non-executive officers as a group....................... 108,163
All employees, including officers who are not executive
officers, as a group...................................... 23,596,338
</Table>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
SAVINGS PLAN.
21
<Page>
ITEM 3. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
Under Bermuda law our shareholders have the authority to appoint the
independent auditors of the Company and to authorize our Board of Directors to
fix the auditors' remuneration. At the annual general meeting, shareholders will
be asked to appoint PricewaterhouseCoopers as our independent auditors for the
fiscal year ending December 31, 2002, and to authorize the Board of Directors to
fix the independent auditors' remuneration. PricewaterhouseCoopers has been
acting as our independent auditors for many years and, both by virtue of its
long familiarity with the Company's affairs and its ability, is considered best
qualified to perform this important function.
AUDIT COMMITTEE REPORT
The members of the Audit Committee report to the shareholders of the Company
as follows:
- We have reviewed and discussed with the management of the Company the
audited consolidated financial statements of the Company for the year
ended December 31, 2001.
- We have discussed with PricewaterhouseCoopers, the Company's independent
accountants, the matters required to be discussed with them under
Statement of Auditing Standard No. 61 (Codification of Statements on
Auditing Standards, AU 380).
- We have received the written disclosures and the letter from
PricewaterhouseCoopers required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and have discussed
with PricewaterhouseCoopers their independence.
Based on the review and discussions referred to in this report, we have
recommended to the Company's Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, for filing with the Securities and Exchange
Commission.
<Table>
AUDIT COMMITTEE
Richard J. Swift H. William
(Chair) Lichtenberger
Joseph P. Flannery Orin R. Smith
Peter C. Godsoe Tony L. White
</Table>
AUDIT AND RELATED FEES
The following table shows the fees paid or accrued by the company for the
audit and other services provided by PricewaterhouseCoopers for fiscal year
2001:
<Table>
Audit Fees (a).............................................. $ 3,234,000
Financial Information Systems Design and Implementation
Fees...................................................... $ --
All Other Fees (b).......................................... $11,867,000
Total....................................................... $15,101,000
</Table>
- ------------------------
(a) Audit services of PricewaterhouseCoopers for 2001 consisted of the
examination of the consolidated financial statements of the company and
quarterly review of financial statements.
(b) "All Other Fees" includes $2,107,000 for audit-related services, including,
among other items, statutory and benefit plan audits, and services related
to filings made with the Securities and Exchange Commission, as well as
certain services relating to periodic reports at international locations,
$5,410,000 for tax services, and $4,350,000 for other services, including,
among other items employee benefit and accounting consulting.
The Audit Committee has determined that the provision of the services
described under "All Other Fees" is compatible with maintaining the independence
of PricewaterhouseCoopers.
Representatives of PricewaterhouseCoopers are expected to be present at the
annual general meeting and to be available to respond to appropriate questions.
They will have an opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPOINT
PRICEWATERHOUSECOOPERS AS INDEPENDENT AUDITORS OF THE COMPANY AND TO AUTHORIZE
THE BOARD OF DIRECTORS TO FIX THE AUDITORS' REMUNERATION.
22
<Page>
TRANSACTIONS WITH MANAGEMENT
Since January 1, 2001, we have engaged in transactions in the ordinary
course of business with, or have used products or services of, a number of
organizations in which our directors have interests. The amounts involved have
in no case been material in relation to our business and we believe that they
have not been material in relation to the businesses of the other organizations
or to the individual directors concerned. We have not made payments to directors
other than the fees to which they are entitled as directors (described under the
heading "Compensation of Directors" on page 7) and the reimbursement of expenses
relating to their services as directors. We have made no loans to any director
or officer nor have we purchased any shares of the Company from any director or
officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and officers, and persons who own more than ten percent of the Company's common
stock, to file reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange. To the
Company's knowledge, based solely on its review of such forms received by the
Company and written representations that no other reports were required, all
Section 16(a) filing requirements were complied with for the year 2001, except
that J.E. Turpin erroneously reported on his initial report on Form 3 ownership
of 500 Class A common shares rather than 1,000 shares. The error was corrected
by the filing of an amended Form 3 within ten days.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any proposal by a shareholder intended to be presented at the 2003 Annual
General Meeting of Shareholders of the Company must be received at the offices
of the Company's primary U.S. subsidiary at 200 Chestnut Ridge Road (P.O. Box
8738), Woodcliff Lake, New Jersey 07677, Attn: Vice President and Secretary, no
later than November 15, 2002, for inclusion in the proxy materials relating to
that meeting.
The Company's Bye-laws, as amended, set forth procedures to be followed by
shareholders who wish to nominate candidates for election to the Board in
connection with annual general meetings of shareholders or pursuant to written
shareholder consents or who wish to bring other business before a shareholders'
general meeting. All such nominations must be made following written notice to
the Secretary of the Company accompanied by certain background and other
information specified in the Bye-laws. In connection with any annual general
meeting, written notice of a shareholder's intention to make such nominations
must be given to the Secretary not later than the date which is 90 days in
advance of the anniversary of the immediately preceding annual general meeting
or, if the date of the annual general meeting occurs more than 30 days before,
or 60 days after, the anniversary of such immediately preceding annual general
meeting, not later than the seventh day after the date on which notice of such
annual general meeting is given.
In order for you to bring other business before a shareholder general
meeting, timely notice must be received by our Secretary within the time limits
described above. The notice must include a description of the proposed item, the
reasons you believe support your position concerning the item, and other
specified matters. These requirements are separate from and in addition to the
requirements you must meet to have a proposal included in our proxy statement.
The foregoing time limits also apply in determining whether notice is timely for
purposes of rules adopted by the Securities and Exchange Commission relating to
the exercise of discretionary voting authority.
Dated: March 15, 2002
23
<Page>
DIRECTIONS TO THE MEETING
FROM J.F. KENNEDY AIRPORT -- Take the Van Wyck Expressway North to the Grand
Central Parkway West to the Triboro Bridge. Cross the Triboro Bridge and take
the Major Deegan Expressway North to the George Washington Bridge. Cross the
George Washington Bridge and take Interstate Route 80 West to Garden State
Parkway North to Exit 171.
Leave the Garden State Parkway at Exit 171, turn left at Glen Road, cross under
the Garden State Parkway and turn left on Chestnut Ridge Road south
approximately 3/4 of a mile to Ingersoll-Rand.
FROM LAGUARDIA -- Take the Grand Central Parkway West and follow the same route
as described above from J.F. Kennedy Airport.
FROM NEWARK -- Take the New Jersey Turnpike North to Interstate Route 80 West
and follow the same route as described above from J.F. Kennedy Airport.
FROM MANHATTAN -- Take the West Side Highway North to the Henry Hudson Parkway
to the George Washington Bridge. Then follow the same route as described above
from J.F. Kennedy Airport.
FROM THE NEW YORK THRUWAY -- Follow signs leading to the Garden State Parkway.
The first exit southbound on the Garden State Parkway connection is Schoolhouse
Road. Turn left off the ramp on Schoolhouse Road and travel one mile to Summit
Avenue. Turn right on Summit Avenue and proceed approximately one mile to
Chestnut Ridge Road. Turn left on Chestnut Ridge Road and continue south
approximately two miles to Ingersoll-Rand.
24
<Page>
[LOGO]
<Page>
Mark, Sign, Date and Return
the Proxy Card Promptly
Using the Enclosed Envelope.
x
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY THE INTERNET OR TELEPHONE
Votes must be indicated
(x) in Black or Blue ink.
FOR AGAINST ABSTAIN
2. Approval of amendment of Ingersoll-Rand
Company Savings and Stock Investment Plan.
3. Appointment of independent auditors and
authorization of Board of Directors to fix
the auditors' remuneration.
1. Election of the following nominees as Directors
FOR WITHHOLD
ALL FOR ALL EXCEPTIONS
Nominees: 01 - A. C. Berzin, 02 - H. L. Henkel, 03 - H. W. Lichtenberger,
04 - P. Nachtigal, 05 - T.L. White
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions _________________________________________________________
x x x x x x
x x x
Date Share Owner sign here Co-Owner sign here
Votes must be indicated (X) in black
or blue ink as in this example.
To change your address, please mark this box. x
INTERNET
https://www.proxyvotenow.com/irc
o Go to the website address listed
above.
o Have your proxy card ready.
o Enter your Control Number located in
the box below.
o Follow the simple instructions on the
website.
MAIL
o Mark, sign and date your proxy card.
o Detach your proxy card.
o Return your proxy card in the
postage-paid envelope provided.
Your telephone or Internet vote authorizes the named
proxies to vote your shares in the same manner as if you
marked, signed and returned your proxy card. If you have
submitted your proxy by the Internet or telephone there is no
need for you to mail back your proxy card.
1-866-246-8472
CALL TOLL-FREE TO VOTE
Two New Ways to Vote
VOTE BY INTERNET OR TELEPHONE
24 Hours a Day - 7 Days a Week
Save your Company Money - It's Fast and Convenient
OR OR
TELEPHONE
<Page>
1-866-246-8472
o Use any touch-tone telephone.
o Have your proxy card ready.
o Enter your Control Number located
in the box below.
o Follow the simple recorded
instructions.
The Board of Directors recommends a vote FOR all nominees, and a vote FOR
Proposal 2 and Proposal 3.
INGERSOLL-RAND COMPANY LIMITED
P.O. BOX 11266
NEW YORK, N.Y. 10203-0266
INGERSOLL-RAND COMPANY LIMITED
Proxy Solicited on Behalf of the Board of Directors for Annual General Meeting
of Shareholders May 1, 2002
The undersigned hereby appoints HERBERT L. HENKEL and PATRICIA NACHTIGAL, or
either of them, with power of substitution, attorneys and proxies to vote, as
indicated on the reverse hereof, all Class A Common Shares of Ingersoll-Rand
Company Limited (the "Company") which the undersigned is entitled to vote at the
Annual General Meeting of Shareholders to be held at 200 Chestnut Ridge Road,
Woodcliff Lake, New Jersey, on Wednesday, May 1, 2002, at 11:00 A.M., or at any
adjournments thereof, with all the powers the undersigned would possess,
including cumulative voting rights, if then and there personally present, upon
the matters described in the Notice of Annual General Meeting of Shareholders
and Proxy Statement, dated March 15, 2002, receipt of which is hereby
acknowledged, and upon any other business that may come before the meeting or
any such adjournment.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no contrary specifications are made above, this
proxy will be voted FOR items 1, 2 and 3. This card also constitutes your voting
instructions with respect to shares held in accounts under the Ingersoll-Rand
Company Savings and Stock Investment Plan and similar plans of Ingersoll-Rand
Company and its subsidiaries.
PLEASE MARK, SIGN AND DATE ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE.
March 15, 2002
Dear Shareholder:
It is my pleasure to invite you to the 2002 Annual General Meeting of
Shareholders of Ingersoll-Rand Company Limited. The meeting will be held at
11:00 a.m. on Wednesday, May 1, 2002, at the offices of Ingersoll-Rand Company
in Woodcliff Lake, New Jersey. The enclosed Notice of Annual General Meeting and
Proxy Statement covers the formal business of the meeting, which includes the
election of directors, the amendment of the Ingersoll-Rand Company Savings and
Stock Investment Plan and the appointment of the independent auditors for this
year. Also during the meeting, management will address other corporate matters
which may be of interest to you as a shareholder. It is important that your
shares are represented at this meeting, whether or not you attend the meeting in
person and regardless of the number of shares you own. To be sure your shares
are represented, we urge you to complete, sign and mail the attached proxy card
as soon as possible. If you attend the meeting and wish to vote in person, the
ballot that you submit will supersede your proxy.
Sincerely,
Herbert L. Henkel
Chairman, President
and Chief Executive Officer
Clarendon House
2 Church Street
Hamilton, HM 11
Bermuda