UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
 
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	

For the fiscal year ended December 31, 2005
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the transition period from           to____

Commission File No. 1-985

INGERSOLL-RAND COMPANY LIMITED
(Exact name of registrant as specified in its charter)

Bermuda
(State or other jurisdiction of
incorporation or organization)	 	75-2993910
(I.R.S. Employer
Identification No. )	
Clarendon House
2 Church Street
Hamilton HM 11, Bermuda
(Address of principal executive offices)	

Registrant’s telephone number, including area code: (441) 295-2838

Securities registered pursuant to Section 12(b) of the Act:
 
  Title of each class	  Name of each exchange on which registered	
  Class A Common Shares,	  New York Stock Exchange	
  Par Value $1.00 per Share    	 	
                     
   Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o
 
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
  Large accelerated filer  x Accelerated filer  o Non-accelerated filer o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES  o NO x

The aggregate market value of common stock held by nonaffiliates on June 30, 2005 was   approximately $12,031,865,017 based on the closing price of such stock on the New York Stock Exchange.

The number of Class A Common Shares outstanding as of February 24, 2006 was 327,478,397.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement to be filed within 120 days of the close of the registrant’s fiscal year in connection with the registrant’s Annual General Meeting of Shareholders to be held June 7, 2006 are incorporated by reference into Part III of this Form 10-K.

PART I
Item 1.     BUSINESS

Overview
Ingersoll-Rand Company Limited, a Bermuda company ( we, our, IR-Limited or the Company), is a leading provider of climate control, industrial, compact vehicle, construction and security products. In each of these markets, we offer a diverse product portfolio that includes well-recognized industrial and commercial brands.  

Through our business segments, we design, manufacture, sell and service:
 
 	·	climate control technologies, including transport temperature control units and refrigerated display merchandisers ;	
 	·	compact vehicle technologies, including skid-steer loaders and golf vehicles;	
 	·	construction technologies, including road construction and repair equipment ;	
 	·	industrial technologies, including compressed air systems and tools; and	
 	·	security technologies, including mechanical and electronic security products.	

Ingersoll-Rand Company ( IR-New Jersey) was organized in 1905 under the laws of the State of New Jersey as a consolidation of Ingersoll-Sergeant Drill Company and the Rand Drill Company, whose businesses were established in the early 1870’s.

IR-Limited is the successor to IR-New Jersey following a corporate reorganization (the reorganization) that became effective on December 31, 2001. We believe that the reorganization has enabled us to begin to realize a variety of financial and strategic benefits, including to:

 	·	help enhance business growth;	
 	·	create a more favorable corporate structure for expansion of our current business;	
 	·	improve expected cash flow for use in investing in the development of higher-growth product lines and businesses;	
 	·	improve expected cash flow for use in reducing the amount of our debt;	
 	·	reduce our worldwide effective tax rate;	
 	·	enable us to implement our business strategy more effectively; and	
 	·	expand our investor base as our shares may become more attractive to non-U.S. investors.	

To consummate the reorganization, IR Merger Corporation , a New Jersey corporation , merged into IR-New Jersey, with IR-New Jersey as the surviving company. Upon the merger, IR-New Jersey became a wholly owned, indirect subsidiary of IR-Limited , and the outstanding shares of IR-New Jersey common stock were automatically cancelled in exchange for the issue of our Class A common shares. The number of Class B common shares issued had an aggregate value equal to the fair market value of the shares of the subsidiaries transferred (the transferred shares) and the amount of debt issued to us based on the market value of IR-New Jersey common stock at the effective time of the merger. Prior to the reorganization, neither IR-Limited nor IR-Merger Corporation had any significant assets or capitalization or engaged in any business or other activities other than in connection with formation and the merger and related reorganization transactions.   IR-Limited and its subsidiaries continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries. The reorganization has been accounted for as a reorganization of entities under common control and accordingly did not result in any changes to the consolidated amounts of assets, liabilities and shareholders’ equity.

2

 
Business Segments
Climate Control Technologies
The segment provides solutions to transport, preserve, store and display temperature-sensitive products by engaging in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers. Climate Control Technologies includes the Thermo King and Hussmann brands.

Compact Vehicle Technologies
The segment is engaged in the design, manufacture, sale and service of skid-steer loaders, all-wheel steer loaders, compact truck loaders, compact excavators, attachments and golf and utility vehicles. Compact Vehicle Technologies includes the Bobcat and Club Car brands.

Construction Technologies
The segment is engaged in the design, manufacture, sale and service of road construction and repair equipment, portable power products, general-purpose construction equipment, attachments and portable light towers and compressors. Construction Technologies is comprised of the Utility Equipment and Road Development businesses.

Industrial Technologies
The segment is focused on providing solutions to enhance customers’ industrial and energy efficiency, mainly by engaging in the design, manufacture, sale and service of compressed air systems, tools, fluid and material handling and energy generation systems. Industrial Technologies includes the Air Solutions and Productivity Solutions businesses.

Security Technologies
The segment is engaged in the design, manufacture, sale and service of mechanical and electronic security products, biometric access control systems, and security and scheduling software. Security Technologies includes the Schlage, LCN and Von Duprin brands.

Competitive Conditions
The Company's products are sold in highly competitive markets throughout the world and compete against products produced by both U.S. and non-U.S. corporations. The principal methods of competition in these markets relate to price, quality, service and technology. The Company believes that it is one of the leading manufacturers in the world of air compression systems, construction equipment, transport temperature control products, refrigerated display merchandisers, refrigeration systems and controls, air tools, golf cars and utility vehicles. In addition, the Company believes it is a leading supplier in U.S. markets for architectural hardware products, mechanical locks, and electronic and biometric access-control technologies.

Distribution
The Company's products are distributed by a number of methods, which the Company believes are appropriate to the type of product. Sales are made in the U.S. through branch sales offices and through distributors and dealers across the United States. Non-U.S. sales are made through numerous subsidiary sales and service companies with a supporting chain of distributors in over 100 countries.

3

Products	 	 	
Principal products of the Company include the following:	 	
 	 	 	
Air balancers	 	Hoists	
Air compressors & accessories	 	Hydraulic breakers	
Air dryers	 	Lubrication equipment	
Air logic controls	 	Microturbines	
Air motors	 	Material handling equipment	
Air and electric tools	 	Paving equipment	
Asphalt compactors	 	Piston pumps	
Asphalt pavers	 	Pneumatic breakers	
Automated dispensing systems	 	Pneumatic cylinders	
Automatic doors	 	Pneumatic valves	
Biometric access control systems	 	Portable compressors	
Compact hydraulic excavators	 	Portable generators	
Compact tractor-loader-backhoes	 	Portable light towers	
Diaphragm pumps	 	Portable security products	
Door closers and controls	 	Refrigerated display cases	
Door locks, latches and locksets	 	Refrigeration systems	
Doors and door frames (steel)	 	Road-building machinery	
Electrical security products	 	Rough-terrain material handlers	
Electronic access-control systems	 	Skid-steer loaders	
Engine-starting systems	 	Soil compactors	
Exit devices	 	Spray-coating systems	
Extrusion pump systems	 	Telescopic material handlers	
Fastener-tightening systems	 	Transport temperature control systems	
Fluid-handling equipment	 	Utility vehicles	
Golf cars	 	Winches	

These products are sold primarily under the Company’s name and also under other names including ABG®, Blaw-Knox®, Bobcat®, Bricard®, CISA®, Club Car®, Hussmann®, Koxka®, LCN®, Montabert®, Schlage®, Thermo King®, and Von Duprin®.
 
Additional information on the Company's business and financial information about industry segments is presented in the consolidated financial statements.

4

 
Working Capital
The products manufactured by the Company must usually be readily available to meet rapid delivery requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the Company's major competitors.

Customers
No material part of the Company's business is dependent upon a single customer or a small group of customers. Therefore, the loss of any one customer would not have a material adverse effect on the Company's operations.
 
Operations by Geographic Area
More than 40% of our 2005 net revenues were derived outside the United States. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not be expected to have a significant effect on the Company's non-U.S. operations. Additional information concerning the Company’s operating segments is contained in Note 14, Business Segment Information, to the consolidated financial statements contained in this Annual Report on Form 10-K.

Raw Materials
The Company manufactures many of the components included in its products. The principal raw materials required for the manufacture of the Company's products are purchased from numerous suppliers, and although higher prices for some raw materials important to some of the Company’s businesses, particularly steel, have caused pricing pressures, the Company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future.

Backlog
The Company’s approximate backlog of orders at December 31, 2005, believed by it to be firm, was $301.3 million for Climate Control Technologies, $178.6 million for Industrial Technologies, $162.6 million for Compact Vehicle Technologies, $129.7 million for Construction Technologies, and $140.0 million for Security Technologies, compared with $359.3 million, $121.6 million, $245.4 million, $98.0 million and $100.0 million, respectively, at December 31, 2004. These backlog figures are based on orders received. While the major portion of the Company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead times and are often subject to revision, deferral, cancellation or termination. The Company estimates that over 90% of the backlog will be shipped during the next twelve months.

Research and Development
The Company maintains extensive research and development facilities for experimenting, testing and developing high quality products. The Company spent $162.4 million in 2005, $149.2 million in 2004 and $164.5 million in 2003 on research and development expenditures, including qualifying engineering costs. The Company also incurs engineering costs, which are not considered research and development expenditures.

Patents and Licenses
The Company owns numerous patents and patent applications and is licensed under others. While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them. In the Company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses.

Environmental and Asbestos Matters
The Company continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the Company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities.

5

During 2005, the Company spent $4.1 million on capital projects for pollution abatement and control, and an additional $13.0 million for environmental remediation expenditures at sites presently or formerly owned or leased by the Company. It should be noted that these amounts are difficult to estimate because environmental projects are generally a part of the overall improvement program at a particular plant. The Company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.

The Company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all sites there are other PRPs and, in most instances, the Company's involvement is minimal.

In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.

Although uncertainties regarding environmental technology, U.S. federal and state laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year. It should be noted that when the Company estimates its liability for environmental matters, such estimates are based on current technologies, and the Company does not discount its liability or assume any insurance recoveries.

Certain wholly owned subsidiaries of the Company are named as defendants in asbestos-related lawsuits in state and federal courts. In virtually all of the suits, a large number of other companies have also been named as defendants. The vast majority of those claims have been filed against IR-New Jersey and generally allege injury caused by exposure to asbestos contained in certain of IR-New Jersey’s products. Although IR-New Jersey was neither a producer nor a manufacturer of asbestos, some of its formerly manufactured products utilized asbestos-containing components, such as gaskets purchased from third-party suppliers.

All asbestos-related claims resolved to date have been dismissed or settled. For the year ended December 31, 2005, total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $16.8 million, compared with $16.5 million for the year ended December 31, 2004. With the assistance of independent advisors, the Company performs a thorough analysis, updated periodically, of its actual and anticipated future asbestos liabilities projected seven years in the future. Based upon such analysis, the Company believes that its reserves and insurance are adequate to cover its asbestos liabilities, and that these asbestos liabilities are not likely to have a material adverse effect on its financial position, results of operations, liquidity or cash flows.

6

Legislation currently under consideration in Congress concerns pending and future asbestos-related personal injury claims. Whether and when such legislation will become law, and the final provisions of such legislation, are unknown. Consequently, the Company cannot predict with any reasonable degree of certainty what effect, if any, such legislation would have upon the Company’s financial position, results of operations or cash flows. See also the discussion under Note 8, Commitments and Contingencies, to the consolidated financial statements contained in this Annual Report on Form 10-K.

Employees
There are approximately 40,000 employees of the Company throughout the world, of whom approximately 19,000 work in the United States and 21,000 outside the United States. The Company believes relations with its employees are good.

Available Information
The Company files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 405 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that are filed by the Company at http://www.sec.gov.

In addition, this Annual Report on Form 10-K, as well as the Company’s quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on the Company’s Internet website ( http://www.irco.com ) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The Board of Directors of the Company has also adopted and posted in the Investor Relations section of its website the Company’s Corporate Governance Guidelines and charters for each of the Board’s standing committees. A copy of the above filings will also be provided free of charge upon written request to the Company.

Certifications
New York Stock Exchange Annual Chief Executive Officer Certification
The Company’s Chief Executive Officer submitted to the New York Stock Exchange (“NYSE”) the Annual CEO Certification as the Company’s compliance with the NYSE’s corporate governance listing standards required by Section 303A.12 of the NYSE’s listing standards.

Sarbanes-Oxley Act Section 302 Certification
The certifications of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits to this Annual Report on Form 10-K.

7

Item 1A .   RISK FACTORS  

The following are certain risk factors that could affect our business, financial condition, results of operations, and cash flows. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you invest in our publicly traded securities, you should know that making such an investment involves some risks, including the risks described below. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our Class A common shares could decline, and you may lose all or part of your investment.

Risks Relating to Our Businesses

Currency exchange rate, commodity price and interest rate fluctuations may adversely affect our results.
 
We are exposed to a variety of market risks, including the effects of changes in non-U.S. currency exchange rates, commodity prices and interest rates. See Part II Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
More than 40% of our net revenues were derived outside the U.S. in 2005, and we expect sales to non-U.S. customers to continue to represent a significant portion of our consolidated net sales. Therefore, in the case where we manufacture our products in the U.S. and the U.S. dollar strengthens in relation to the currencies of the countries where we sell those products, such as the euro and Asian currencies, our U.S. dollar reported revenue and income will decrease. Although we enter into currency exchange contracts to reduce our risk related to currency exchange fluctuations, changes in the relative values of currencies occur from time to time and may, in some instances, have a significant effect on our results of operations. Furthermore, the reporting currency for our financial statements is the U.S. dollar. We have assets, liabilities, revenues and expenses denominated in currencies other than the U.S. dollar. To prepare our consolidated financial statements, we must translate those assets, liabilities, revenues and expenses into U.S. dollars at the applicable exchange rates. Consequently, increases and decreases in the value of the U.S. dollar versus other currencies will affect the amount of these items in our consolidated financial statements, even if their value has not changed in their original currency. Because we do not hedge against all of our currency exposure, our business will continue to be susceptible to currency fluctuations.
 
We are a large buyer of steel as well as other commodities required for the manufacture of our products. Volatility in the prices of these commodities could increase the costs of our products and services. We may not be able to pass on these costs to our customers and this could have a material adverse effect on our results of operations and cash flows. On a limited basis, we purchase commodity derivatives which reduce the volatility of the commodity prices for supplier contracts where fixed pricing is not available.

8

 
Material adverse legal judgments, fines, penalties or settlements could adversely affect our financial health.

We estimate that our available cash and our cash flow from operations will be adequate to fund our operations for the foreseeable future. In making this estimate, we have not assumed the need to make any material payments in connection with any pending litigation or investigations. As required by U.S. generally accepted accounting principles, we establish reserves based on our assessment of contingencies. Subsequent developments in legal proceedings, including current or future asbestos-related litigation, may affect our assessment and estimates of the loss contingency recorded as a reserve requiring us to make additional material payments, which could result in an adverse effect on our results of operations.
 
Such an outcome could have important consequences. For example, it could:
 
 	·	increase our vulnerability to general adverse economic and industry conditions;	
 	·	limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;	
 	·	restrict our ability to exploit business opportunities; and	
 	·	make it more difficult for us to satisfy our payment obligations with respect to our outstanding indebtedness.	

Significant shortages in the raw materials we use in our businesses could increase our operating costs.

We rely on suppliers to secure raw materials, particularly steel, required for the manufacture of our products. A disruption in deliveries from our suppliers or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. We believe that available sources of supply will generally be sufficient for our needs for the foreseeable future. Nonetheless, the unavailability of some raw materials may have an adverse effect on our results of operations or financial condition.

Our global operations subject us to economic risks.

Our global operations are dependent upon products manufactured, purchased and sold in the U.S. and internationally, including China, Brazil, Africa and Eastern Europe. These activities are subject to risks that are inherent in operating globally, including the following:

	·	countries could change regulations or impose currency restrictions and other restraints;	
 	·	in some countries, there is a risk that the government may expropriate assets;	
 	·	some countries impose burdensome tariffs and quotas;	
 	·	national and international conflict, including terrorist acts, could significantly impact our financial condition and results of operations; and	
 	·	economic downturns, political instability and war or civil disturbances may disrupt production and distribution logistics or limit sales in individual markets.	

9

Implementing our acquisition strategy involves risks and our failure to successfully implement this strategy could have a material adverse effect on our business.  
 
One of our key strategies is to grow our business by selectively pursuing bolt-on acquisitions. Since 2000, we have completed more than 60 acquisitions adding approximately $3 billion of revenue, and we are continuing to actively pursue additional bolt-on acquisition opportunities. Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including:
 
 	·	encountering difficulties identifying and executing acquisitions;	
 	·	increased competition for targets, which may increase acquisition costs;	
 	·	consolidation in our industries reducing the number of acquisition targets; and	
 	·	competition laws and regulations preventing us from making certain acquisitions.	
 
In addition, there are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition. For example, with any past or future acquisition, there is the possibility that:
 
 	·	the business culture of the acquired business may not match well with our culture;	
 	·	technological and product synergies, economies of scale and cost reductions may not occur as expected;	
 	·	management may be distracted from overseeing existing operations by the need to integrate acquired businesses;	
 	·	we may acquire or assume unexpected liabilities;	
 	·	unforeseen difficulties may arise in integrating operations and systems;	
 	·	we may fail to retain and assimilate employees of the acquired business; and	
 	·	we may experience problems in retaining customers and integrating customer bases.	
 
Failure to continue implementing our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our business, financial condition and results of operations.
 
Our reputation and our ability to do business may be impaired by improper conduct by any of our employees or agents.
 
We do business in many parts of the world that have experienced governmental corruption. Our corporate policy requires strict compliance with the U.S. Foreign   Corrupt   Practices Act and with local laws prohibiting payments to government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. Improper actions by our employees or agents could subject us to civil or criminal penalties, including substantial monetary fines, as well as disgorgement, and could damage our reputation and, therefore, our ability to do business.

10

 
Risks Relating to Our Reorganization as a Bermuda Company
 
The reorganization exposed us or our shareholders to the risks described below.  In addition, we cannot be assured that the anticipated benefits of the reorganization will be realized.
 
Changes in tax laws, adverse determinations by taxing authorities and changes in our status under U.S. tax laws could increase our tax burden and affect our operating results, as well as subject our shareholders to additional taxes.
 
While our U.S. operations are subject to U.S. tax, we believe that our non-U.S. operations are generally not subject to U.S. tax other than withholding taxes. The realization of this or any other tax benefit of the reorganization could be impacted by changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof by the Internal Revenue Service or any other tax authority. We believe that o ur risks have been diminished by the enactment of the American Jobs Creation Act of 2004. The American Jobs Creation Act includes a provision that denies tax benefits to companies that have reincorporated after March 4, 2003. We completed our reincorporation in Bermuda on December 31, 2001, and therefore our transaction is grandfathered by the American Jobs Creation Act. In addition, we believe that neither we nor IR-New Jersey will incur significant U.S. federal income or withholding taxes as a result of the transfer of the transferred shares. However, we cannot give any assurances that anticipated tax costs with respect to the transferred shares will ultimately   be borne out and that the Internal Revenue Service will not contest our determination in the course of its audit. The inability to realize any of these benefits could have a material impact on our operating results.
 
A non-U.S. corporation, such as the Company, will constitute a "controlled foreign corporation" or "CFC" for U.S. federal income tax purposes if certain ownership criteria are met. Although we believe that we and our non-U.S. subsidiaries currently are not CFCs, the U.S. Internal Revenue Service or a court may not concur with our conclusions. If the IRS or a court determined that we were a CFC, then each of our U.S. shareholders who own (directly, indirectly, or constructively) 10% or more of the total combined voting power of all classes of our stock on the last day of our taxable year (a "10% U.S. Voting Shareholder") would be required to include in gross income for U.S. federal income tax purposes its pro rata share of our “subpart F income" (and the subpart F income of any our subsidiaries determined to be a CFC) for the period during which we (and our non-U.S. subsidiaries) were a CFC. In addition, gain on the sale of our shares realized by such a shareholder may be treated as ordinary income to the extent of the shareholder's proportionate share of our and our CFC subsidiaries' undistributed earnings and profits accumulated during the shareholder's holding period of the shares while we are a CFC.
 
Legislation regarding non-U.S. chartered companies could adversely affect us and our subsidiaries.
 
The U.S. federal government and various other states and municipalities have proposed or may propose legislation intended to deny government contracts to U.S. companies that reincorporate outside of the U.S. For instance, The Homeland Security Appropriations Act, signed into law October 18, 2004, includes a provision that prohibits reincorporated companies from entering into contracts with the Department of Homeland Security for funds available under the Homeland Security Appropriations Act. In addition, the State of California adopted legislation intended to limit the eligibility of certain Bermuda and other non-U.S. chartered companies to participate in certain state contracts and the State of North Carolina enacted a bill that provides a preference for North Carolina or U.S. products and services. Generally, these types of legislation relate to direct sales and distribution, while we typically sell our products through distributors. However, we are unable to predict with any level of certainty the likelihood or final form of these types of legislation, the nature of regulations that may be promulgated thereunder, or the impact such enactments and increased regulatory scrutiny may have on our business. We cannot provide any assurance that the impact on us of any adopted or proposed legislation in this area will not be materially adverse to our operations.

11

 
Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our securities.
 
We are organized under the laws of Bermuda. It may not be possible to enforce court judgments in Bermuda that are obtained in the U.S. against us or our directors or officers in Bermuda based on the civil liability provisions of the U.S. federal or state securities laws. We have been advised that the U.S. and Bermuda do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Bermuda.  

In addition, as a result of Bermuda law, it would be difficult for a holder of our securities to effect service of process within the United States. However, we have irrevocably agreed that we may be served with process with respect to actions based on offers and sales of securities made in the United States by having Ingersoll-Rand Company, 155 Chestnut Ridge Road, Montvale, New Jersey 07645, be our U.S. agent appointed for that purpose.

Bermuda companies are governed by the Companies Act 1981 of Bermuda, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions, shareholder lawsuits and indemnification. Under Bermuda law, the duties of directors and officers of a Bermuda company are generally owed to the company only. Shareholders of Bermuda companies do not generally have rights to take action against directors or officers of the company, and may only do so in limited circumstances. Under Bermuda law, a company may also agree to indemnify directors and officers for any personal liability, not involving fraud or dishonesty, incurred in relation to the company. Thus, our shareholders may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S.

Item 1B.     UNRESOLVED STAFF COMMENTS

None.

Item 2.     PROPERTIES

Manufacturing and assembly operations are conducted in 38 plants in the United States; 1 plant in Canada; 32 plants in Europe; 16 plants in Asia; and 6 plants in Latin America. The Company also maintains various warehouses, offices and repair centers throughout the world.

Substantially all plant facilities are owned by the Company and the remainder are under long-term lease arrangements. The Company believes that its plants and equipment have been well maintained and are generally in good condition.

Facilities under long-term lease arrangements are included below and are not significant to each operating segment's total number of plants or square footage.

12

Climate Control Technologies’ manufacturing locations are as follows:

 	 	Number of
Plants	 	Approximate
Square Footage	 	
United States	 	 	10	 	 	3,576,000	 	
Non - U.S.	 	 	15	 	 	2,653,000	 	
Total	 	 	25	 	 	6,229,000	 	

Compact Vehicle Technologies’ manufacturing facilities are as follows:

 	 	Number of
Plants	 	Approximate
Square Footage	 	
United States	 	 	6	 	 	1,544,000	 	
Non - U.S.	 	 	2	 	 	254,000	 	
Total	 	 	8	 	 	1,798,000	 	

Construction Technologies’ manufacturing facilities are as follows:

 	 	Number of
Plants	 	Approximate
Square Footage	 	
United States	 	 	3	 	 	689,000	 	
Non - U.S.	 	 	3	 	 	530,000	 	
Total	 	 	6	 	 	1,219,000	 	

Industrial Technologies’ manufacturing facilities are as follows:
 
 	 	Number of
Plants	 	Approximate
Square Footage	 	
United States	 	 	9	 	 	1,416,000	 	
Non - U.S.	 	 	13	 	 	1,013,000	 	
Total	 	 	22	 	 	2,429,000	 	
 
Security Technologies’   manufacturing facilities are as follows:
 
 	 	Number of
Plants	 	Approximate
Square Footage	 	
United States	 	 	10	 	 	1,700,000	 	
Non - U.S.	 	 	22	 	 	2,531,000	 	
Total	 	 	32	 	 	4,231,000	 	

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Item 3.     LEGAL PROCEEDINGS

In the normal course of business, the Company is involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities and intellectual property disputes.  In the opinion of the Company, pending legal matters are not expected to have a material adverse effect on the results of operations, financial condition, liquidity or cash flows.

As previously reported, on November 10, 2004, the SEC issued an Order directing that a number of public companies, including the Company, provide information relating to their participation in transactions under the United Nations’ Oil For Food Program.  Upon receipt of the Order, the Company undertook a thorough review of its participation in the Program, provided the SEC with information responsive to the Order and provided additional information requested by the SEC. The Company will continue to cooperate fully with the SEC in this matter.

See also the discussion under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Environmental and Asbestos Matters and also Note 8, Commitments and Contingencies, to the consolidated financial statements contained in this Annual Report on Form 10-K.

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s security holders during the last quarter of its fiscal year ended December 31, 2005.

14

Executive Officers of the Registrant	 	 	
The following information is included in accordance with the provision of Part III, Item 10.	
 	 	 	
  	Date of Service as	Principal Occupation and	
Name and Age	an Executive Officer	Other Information for Past Five Years	
 	 	 	
Herbert L. Henkel (57)	4/5/1999	Chairman of Board and Chief Executive Officer, President	
 	 	and Director	
 	 	 	
Timothy R. McLevish (50)	5/1/2002	Senior Vice President and Chief Financial Officer (since June	
 	 	2002); (Mead Corporation, Vice President, Chief Financial	
 	 	Officer 1999-2002)	
 	 	 	
James R. Bolch (48)	10/16/2005	Senior Vice President and President, Industrial Technologies	
 	 	Sector (since October 2005); (Schindler Elevator Corporation,	
 	 	Executive Vice President, Service Business 2004-2005; United	
 	 	Technologies Corporation UTC Power, Vice President	
 	 	Operations 2001-2003)	
 	 	 	
Michael W. Lamach (42)	2/16/2004	Senior Vice President and President, Security Technologies	
 	 	(since February 2004); (Johnson Controls, Inc., Group Vice	
 	 	President and Managing Director Europe/Asia 2003-2004; Group	
 	 	Vice President and General Manager, Asia 2002-2003; Group	
 	 	Vice President and General Manager, Customer Business Units	
 	 	1999-2002)	
 	 	 	
Patricia Nachtigal (59)	11/2/1988	Director (since January 1, 2002); Senior Vice President and	
 	 	General Counsel	
 	 	 	
Richard F. Pedtke (57)	5/1/2005	Senior Vice President and President, Compact Vehicle	
 	 	Technologies (since May 2005); (President, ESA, Climate	
 	 	Control, 2003-2005; President, Thermo King International,	
 	 	2000-2003)	
 	 	 	
Steven R. Shawley (53)	8/1/2005	Senior Vice President and President, Climate Control	
 	 	Technologies (since August 2005); (President Climate Control	
 	 	Americas, 2003-2005; President, Thermo King North America,	
 	 	2002-2003; Vice President and Controller, 1998-2002)	
 	 	 	
Christopher P. Vasiloff (54)	11/1/2001	Senior Vice President and President, Construction Technologies	
 	 	(since November 2001); (President, Portable Power,	
 	 	Infrastructure Sector, 2000-2001)	
 	 	 	
Richard W. Randall (55)	10/1/2002	Vice President and Controller (since October 2002);	
 	 	(President, Engineered Solutions, Industrial Solutions	
 	 	Sector, April 2002-September 2002; Vice President, Finance	
 	 	and Sector Controller, Industrial Solutions Sector 2001-2002;	
 	 	Vice President and Controller, Bearings and Components,	
 	 	Industrial Productivity Sector, 1999-2001)	
 	 	 	
Michael J. Ryan (57)	5/1/2005	Vice President, Operations (since May 2005); (President,	
 	 	Compact Equipment, Infrastructure Sector, 2003-2005; United	
 	 	Supply Automotive, Vice President, 2002-2003; Intermet	
 	 	Corporation, Vice President, Operations, 2000-2002)	
 	 	 	
No family relationship exists between any of the above-listed executive officers of the company. All officers are elected to hold office for one year or until their successors are elected and qualified.	

15

PART II

Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information regarding the principal market for the Company's common shares and related shareholder matters are as follows:

Quarterly share prices and dividends for the Class A common shares are shown in the following tabulation. The common shares are listed on the New York Stock Exchange.

 	 	Common shares	 	
2005	 	High	 	Low	 	Dividend	 	
First quarter	 	 	$ 43.66	 	 	$ 36.53	 	 	$ 0.125	 	
Second quarter	 	 	41.18	 	 	35.40	 	 	0.125	 	
Third quarter	 	 	41.50	 	 	35.96	 	 	0.160	 	
Fourth quarter	 	 	41.23	 	 	36.35	 	 	0.160	 	
 
2004	 	 	 	 	 	 	 	
First quarter	 	 	$ 36.33	 	 	$ 31.27	 	 	$ 0.095	 	
Second quarter	 	 	36.78	 	 	29.52	 	 	0.095	 	
Third quarter	 	 	34.95	 	 	31.03	 	 	0.125	 	
Fourth quarter	 	 	41.45	 	 	32.37	 	 	0.125	 	

The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800) 524-4458) is the transfer agent, registrar and dividend reinvestment agent.

Future dividends on our Class A common shares, if any, will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant, as well as our ability to pay dividends in compliance with the Bermuda Companies Act. This Act regulates the payment of dividends and the making of distributions from contributed surplus. We may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that: (i) we are, or would be after the payment, unable to pay our liabilities as they become due; or (ii) the realizable value of our assets would thereby be less than the aggregate of our liabilities and issued share capital and share premium accounts.

The approximate number of record holders of Class A common shares as of February 24, 2006 was 8,151.

Information regarding equity compensation plans required to be disclosed pursuant to this Item is included elsewhere in this Annual Report on Form 10-K.

Shares owned by subsidiaries of IR-Limited are treated as treasury shares and are recorded at cost. On August 3, 2005, the Board of Directors of the Company expanded the Company’s existing share repurchase program to allow the repurchase of up to a total of $2 billion worth of Class A common shares. The plan was established on August 4, 2004 and initially authorized the Company to repurchase up to 20 million Class A common shares. During 2005, the Company repurchased 19.4 million Class A common shares at a cost of $763.6 million. Total purchases under the program as of December 31, 2005, have been 23.4 million Class A common shares at a cost of $903.7 million.

16

Total share repurchases for the three months ended December 31, 2005 are as follows:

Period	 	Total number
of shares
purchased
(000's)	 	Average price
paid
per share	 	Total number
of shares
purchased
as part of
the program
(000's)	 	Approximate dollar value of shares still available to be purchased under the program ($000's)	 	
10/01/2005 - 10/31/2005	 	 	3,155	 	 	$ 36.96	 	 	3,155	 	 	$ 1,119,473	 	
11/01/2005 - 11/30/2005	 	 	364	 	 	38.01	 	 	364	 	 	1,105,635	 	
12/01/2005 - 12/31/2005	 	 	233	 	 	39.78	 	 	233	 	 	1,096,374	 	
Total	 	 	3,752	 	 	 	 	 	3,752	 	 	 	 	
 
Item 6.     SELECTED FINANCIAL DATA

In millions, except per share amounts:

At and for the years ended December 31,	 	2005	 	2004	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 	$ 10,546.9	 	 	$ 9,393.6	 	 	$ 8,249.3	 	 	$ 7,583.0	 	 	$ 7,388.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	1,053.1	 	 	829.8	 	 	532.8	 	 	322.4	 	 	149.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	11,756.4	 	 	11,414.6	 	 	10,664.9	 	 	10,809.6	 	 	11,133.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	1,184.3	 	 	1,267.6	 	 	1,518.4	 	 	2,091.4	 	 	2,900.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shareholders' equity	 	 	5,762.0	 	 	5,733.8	 	 	4,493.3	 	 	3,478.2	 	 	3,916.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per common share: *	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	 	$ 3.12	 	 	$ 2.40	 	 	$ 1.56	 	 	$ 0.96	 	 	$ 0.46	 	
Discontinued operations	 	 	-	 	 	1.12	 	 	0.32	 	 	0.41	 	 	0.29	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per common share: *	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	 	$ 3.09	 	 	$ 2.36	 	 	$ 1.55	 	 	$ 0.95	 	 	$ 0.45	 	
Discontinued operations	 	 	-	 	 	1.11	 	 	0.32	 	 	0.41	 	 	0.29	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends per common share*	 	 	$ 0.57	 	 	$ 0.44	 	 	$ 0.36	 	 	$ 0.34	 	 	$ 0.34	 	
*These amounts have been restated to reflect a two-for-one stock split.	 	 	 	 	 	 	 	 	 	 	 	 	

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Item 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Item 1A. Risk Factors in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Annual Report.

Overview
Organization
Ingersoll-Rand Company Limited (we, our or the Company) is a leading innovation and solutions provider with strong brands and leading positions within its markets. Our business segments consist of Climate Control Technologies, Compact Vehicle Technologies, Construction Technologies, Industrial Technologies and Security Technologies. The Company generates revenue and cash primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include well-recognized, premium brand names such as Bobcat®, Club Car®, Hussmann®, Ingersoll Rand®, Schlage® and Thermo King®.

We seek to drive shareholder value by achieving:
 
 	·	Dramatic Growth, by developing innovative products and solutions that improve our customers’ operations, expanding highly profitable recurring revenues and executing low-risk, high-return bolt-on acquisitions;	

 	·	Operational Excellence, by fostering a culture of continuous improvement and cost control; and	

 	·	Dual Citizenship, by encouraging our employees’ active collaboration with colleagues across business units and geographic regions to achieve superior business results.	

To achieve these goals and to become a more diversified company with strong growth prospects, we have transformed our product portfolio by divesting cyclical, low-growth, and asset-intensive businesses over the last few years. We continue to focus on increasing our recurring revenue stream, which includes revenues from parts, service, used equipment, rentals and attachments. We also intend to continuously improve the efficiencies, capabilities, and products and services of our high-potential businesses. We expect to use our strong operating cash flow for bolt-on acquisitions, stock buybacks, capital expenditures and dividend enhancements.

At December 31, 2005, 2004 and 2003, employment was approximately 40,000, 36,200 and 36,500, respectively. The increase during 2005 was primarily due to the acquisitions made by Security Technologies throughout the year.

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Trends and Economic Conditions
We are a global corporation with worldwide operations. More than 40% of our 2005 net revenues were derived outside the United States. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors, as well as political factors, wherever we operate or do business. However, our geographic and industry diversity, as well as the diversity of our product sales and services, has helped limit the impact of any one industry, or the economy of any single country, on the consolidated operating results. Given the broad range of products manufactured and geographic markets served, management uses a variety of factors to predict the outlook for the Company. The Company monitors key competitors and customers to gauge relative performance and the outlook for the future. In addition, our order rates are highly indicative of future revenue and thus a key measure of anticipated performance. In those industry segments where we are a capital equipment provider, revenues depend on the capital expenditure budgets and spending patterns of our customers, who may delay or accelerate purchases in reaction to changes in their businesses and in the economy.

Despite the diversity of our businesses, most of our major end markets continued to improve as the year 2005 came to an end. For full-year 2005, all business segments experienced growth in revenues compared with 2004, including more than 10% growth in the Compact Vehicle Technologies, Construction Technologies, Industrial Technologies and Security Technologies segments. Improved markets, new product introductions, product mix and pricing improvements drove this revenue growth. This strong revenue growth was further enhanced with bolt-on acquisitions. The Company has been able to increase prices and add surcharges to help offset the impact of cost inflation.

In 2006, we expect to build on the momentum of 2005 to continue generating greater market share gains and operating performance improvements across our businesses. The Company sees continued strength in most of its worldwide markets as indicated by the increase in our backlog during the year. We also expect to see continued high material and energy costs, which we plan to offset by increased productivity and pricing actions. Additionally, the Company once again expects to produce substantial operating cash flow in 2006.

Significant Events in 2005
In January, the Company completed the acquisition of the remaining 70% interest in Italy-based CISA S.p.A. (CISA) for approximately $267 million in cash and the assumption of approximately $244 million of debt. CISA manufactures an array of security products, including electronic locking systems, cylinders, door closers, and emergency exit hardware, and also markets safes and padlocks. In April, the Company acquired the remaining 20% interest in Shanghai Ingersoll-Rand Compressor Company Limited (SIRC), a joint venture established in 1987, for approximately $26 million. SIRC manufactures a wide range of air compressors and components for the Company and provides a network of company-owned distribution centers located in most major cities in China to sell, install and service the Company’s products. In May, the Company acquired Security One Systems, a security systems integrator located in Florida, for approximately $31 million. Security One provides security design solutions including access control, closed circuit TV, video surveillance and alarm monitoring. In August, the Company established a joint venture with Taiwan Fu Hsing Industrial Company Ltd. (Taiwan Fu Hsing), a leading manufacturer of mechanical locks based in Taiwan, for approximately $72 million. The Company has a majority interest in Taiwan Fu Hsing’s mechanical door lock manufacturing subsidiaries in China and Malaysia, as well as a minority equity interest in Taiwan Fu Hsing. The Company also made several other bolt-on acquisitions during the year.

19

On August 3, 2005, the Company’s Board of Directors declared a two-for-one stock split effected in the form of a stock distribution to shareholders on September 1, 2005. The Board also declared a 28% increase in the quarterly dividend of the Company’s Class A common shares to 16 cents per share and expanded the Company’s share repurchase program, which was established in August 2004, to $2 billion. During 2005, the Company repurchased 19.4 million Class A common shares at a cost of $763.6 million.

During the second quarter of 2005, the Company issued $300 million aggregate principal amount of its 4.75% Senior Notes due in 2015. The notes are unconditionally guaranteed by IR-New Jersey.

The Company made discretionary cash contributions of $86.4 million to its pension plans during the year ended December 31, 2005, as well as $33.0 million in required employer contributions.

Results of Operations

Dollar amounts in millions, except per share data	 	2005	 	2004	 	2003	 	
Net revenues	 	 	$ 10,546.9	 	 	$ 9,393.6	 	 	$ 8,249.3	 	
Cost of goods sold	 	 	7,744.1	 	 	6,854.0	 	 	6,109.0	 	
Selling and administrative expenses	 	 	1,441.0	 	 	1,419.3	 	 	1,355.9	 	
Restructuring reversal	 	 	-	 	 	-	 	 	(3.2	)	
Operating income	 	 	1,361.8	 	 	1,120.3	 	 	787.6	 	
Interest expense	 	 	(144.3	)	 	(153.1	)	 	(175.5	)	
Other income, net	 	 	53.0	 	 	17.0	 	 	10.9	 	
Minority interests	 	 	(12.7	)	 	(16.0	)	 	(14.9	)	
Earnings before income taxes	 	 	1,257.8	 	 	968.2	 	 	608.1	 	
Provision for income taxes	 	 	204.7	 	 	138.4	 	 	75.3	 	
Earnings from continuing operations	 	 	1,053.1	 	 	829.8	 	 	532.8	 	
Discontinued operations, net of tax	 	 	1.1	 	 	388.9	 	 	111.7	 	
Net earnings	 	 	$ 1,054.2	 	 	$ 1,218.7	 	 	$ 644.5	 	
 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per common share:	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	$ 3.09	 	 	$ 2.36	 	 	$ 1.55	 	
Discontinued operations, net of tax	 	 	-	 	 	1.11	 	 	0.32	 	
Net earnings	 	 	$ 3.09	 	 	$ 3.47	 	 	$ 1.87	 	
 
Revenues
2005 vs. 2004 : Net revenues increased by 12.3% in 2005, or $1,153.3 million, compared with 2004, which primarily resulted from improved end markets, new product introductions and product mix (7%), acquisitions (4%) mainly in our Security Technologies and Climate Control Technologies segments, as well as improved pricing in all segments. Increased sales volumes were most prevalent in our Compact Vehicle Technologies, Construction Technologies and Industrial Technologies segments.

20

2004 vs. 2003 : Net revenues increased by 13.9% in 2004, or $1,144.3 million, compared with 2003, which primarily resulted from improved end markets, new product introductions and product mix (9%), the favorable effects of currency translation (3%) and improved pricing in all segments (2%). Volume increases were most significant in the Bobcat, Club Car and Road Development business lines. The worldwide truck and trailer market for Climate Control Technologies also continued to improve. The Industrial Technologies and Security Technologies segments also had higher sales volumes.

Cost of Goods Sold
2005 vs. 2004 : Cost of goods sold in 2005 was 73.4% of sales, compared with 73.0% in 2004. Cost benefits from higher volumes and productivity improvements were offset by higher material costs.

2004 vs. 2003 : Cost of goods sold in 2004 was 73.0% of sales, compared with 74.1% in 2003. Contributions from higher volumes and increased productivity accounted for the majority of the improvement. These positive effects were partially offset by higher material and component parts costs.

Selling and Administrative Expenses
2005 vs. 2004 : Selling and administrative expenses were 13.7% of sales in 2005, compared with 15.1% for 2004. The decrease in the ratio is mainly due to higher revenues in 2005. Total selling and administrative expenses were favorably impacted by lower stock-based liability costs ($44 million), as well as the favorable settlement of certain product-related litigation, an adjustment to the allowance for doubtful accounts estimate and lower employee benefit costs. Acquisitions increased the 2005 selling and administrative expenses ($64 million). Expenses for 2004 included higher product and litigation expenses, offset by a gain on sale of corporate real estate.

2004 vs. 2003 : Selling and administrative expenses were 15.1% of sales in 2004, compared with 16.4% for 2003. The decrease in the ratio is mainly due to higher revenues in 2004, a reduction in expenses due to a gain on sale of corporate real estate ($13 million) and increased productivity. These positive effects were partially offset by the cost of operational improvement investments and increased litigation expenses.

Operating Income
2005 vs. 2004 : Operating income increased by $241.5 million in 2005, compared with 2004, while operating income margins increased from 11.9% to 12.9%. The increase in operating income was mainly attributable to increased revenues and improved cost ratios for cost of goods sold and selling and administrative expenses as previously discussed. Productivity improvements also favorably impacted operating income for 2005.

2004 vs. 2003 : Operating income increased by $332.7 million in 2004, compared with 2003, while operating income margins increased from 9.5% to 11.9%. The increase in operating income was mainly attributable to increased revenues and improved cost ratios for cost of goods sold and selling and administrative expenses, as previously discussed. The effect of currency also had a favorable impact on operating income.

21

Interest Expense
2005 vs. 2004 : Interest expense decreased by $8.8 million in 2005, compared with 2004. The benefits of lower average interest rates were partially offset by higher year-over-year average debt levels resulting from the issuance of $300 million of debt in the second quarter of 2005.

2004 vs. 2003 : Interest expense decreased by $22.4 million in 2004, compared with 2003, due to lower year-over-year debt levels resulting from the net repayment of debt of $469.4 million and from lower interest rates.

Other Income, Net
2005 vs. 2004 :   In 2005, other income, net, increased by $36.0 million, compared with 2004, mainly due to increased interest income ($17.3 million), increased income from currency exchange gains ($11.7 million) and an accrual adjustment for a business previously divested ($10.4 million). These increases were partially offset by lower earnings from equity investments ($4.5 million).

2004 vs. 2003 :   In 2004, other income, net, increased by $6.1 million, compared with 2003. The change is primarily attributable to increased interest income ($9.8 million) due to the increase in cash from the sale of Dresser-Rand and increased income from partially owned affiliates ($8.1 million). These increases were partially offset by higher currency exchange losses in 2004 ($3.2 million) and 2003 dividend income and gain on sale from common stock received in the divestiture of the Engineered Solutions business ($10.0 million).

Minority Interests
2005 vs. 2004 : Minority interests decreased by $3.3 million in 2005, compared with 2004. This decrease resulted from the buyout of the minority interests of several consolidated subsidiaries, partially offset by new minority interests of majority-owned consolidated subsidiaries purchased in 2005.
 
2004 vs. 2003 : Minority interests increased by $1.1 million in 2004, compared with 2003 due to higher earnings from majority-owned consolidated subsidiaries.

Provision for Income Taxes
The effective tax rate for 2005 was 16.3%, compared with 14.3% for 2004 and 12.4% for 2003. The increase in the tax provision and effective rate over the last two years relates to an increase in earnings, especially in higher tax rate jurisdictions.

Discontinued Operations
Discontinued operations for the year ended December 31, 2005, amounted to income of $1.1 million, net of tax benefits of $48.2 million. This total includes net after tax gains of $35.2 million, mainly due to Ingersoll-Dresser Pump Company (IDP) ($12.0 million), Dresser-Rand ($10.3 million) and Waterjet ($12.2 million), primarily from the resolution of tax matters regarding these divestitures. The after-tax loss from on-going discontinued operations amounted to $34.1 million. These costs are mainly due to Engineered Solutions ($7.7 million), IDP ($18.3 million) and Dresser-Rand ($6.3 million), and include product liability costs primarily related to asbestos liability claims, environmental costs and employee benefit costs.

22

Discontinued operations for the year ended December 31, 2004, amounted to income of $388.9 million, net of tax provisions of $343.5 million. This total includes net after tax gains of $334.9 million, primarily comprised of gains from the sales of Dresser-Rand ($282.5 million) and Drilling Solutions ($38.6 million). After-tax income from discontinued operations amounted to $54.0 million. This income mainly includes profit from Dresser-Rand ($45.0 million) and Engineered Solutions ($20.9 million), which includes an antidumping subsidy net of tax of $29.5 million. This income is partially offset by retained costs related to IDP ($14.9 million), which mostly include product liability costs primarily related to asbestos liability claims and employee benefit costs.

Discontinued operations for the year ended December 31, 2003, amounted to income of $111.7 million, net of tax provisions of $58.6 million. This total includes net after tax gains of $68.8 million, comprised of gains from the sales of Engineered Solutions ($58.2 million) and Waterjet ($18.2 million), offset by a loss from the sale of Laidlaw ($7.6 million). After-tax income from discontinued operations amounted to $42.9 million. This income principally includes profit from Dresser-Rand ($41.1 million) and Drilling Solutions ($19.6 million), partially offset by retained costs related to IDP ($19.8 million), which include product liability costs primarily related to asbestos liability claims and employee benefit costs.

Review of Business Segments
During the first quarter of 2005, the Company realigned its internal organization and operating segments to reflect its market focus and to promote greater transparency of results. The former Infrastructure segment was disaggregated into two segments - the Compact Vehicle Technologies segment and the Construction Technologies segment. The prior year segment results have been restated to conform to this change.

Climate Control Technologies
Climate Control Technologies provides solutions to transport, preserve, store and display temperature-sensitive products by engaging in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers. The segment includes the Thermo King and Hussmann brands.

Dollar amounts in millions	 	 	2005	 	 	% change	 	 	2004	 	 	% change	 	 	2003	 	
Net revenues	 	$ 2,853.6	 	 	2.1	%	$ 2,793.7	 	 	5.5	%	$ 2,648.9	 	
Operating income	 	 	315.1	 	 	1.9	%	 	309.1	 	 	41.1	%	 	219.1	 	
Operating margin	 	 	11.0	%	 	 	 	 	11.1	%	 	 	 	 	8.3	%	

2005 vs. 2004: Net revenues increased by 2.1% in 2005, or $59.9 million, compared with 2004, which primarily resulted from acquisitions (2%) and improved product pricing (2%), partially offset by lower volumes and product mix (2%). Operating margins were relatively flat, while operating income increased slightly due to improved product pricing ($42 million) and increased productivity ($15 million), offset by higher material costs ($51 million) and product mix .

Net revenue increases by Climate Control Americas (4%) and Climate Control Asia Pacific (11%), offset a decline in Climate Control Europe (3%). Net revenues and operating income benefited from strong worldwide market conditions for the truck & trailer, aftermarket and container business lines. The retail business declined in the Americas and Europe, but strengthened in Asia Pacific.

23

2004 vs. 2003: Net revenues increased by 5.5% in 2004, or $144.8 million, compared with 2003, which primarily resulted from the favorable effects of currency (3%) and improved pricing (2%), as well as higher volumes and product mix. Operating income and margins for the year ended 2004 increased significantly, mainly due to improved pricing ($49 million) and higher volumes and product mix ($31 million). Increased productivity from cost saving programs, such as low-cost country manufacturing ($22 million), improved labor and overhead efficiencies ($18 million) and improved operating efficiencies in service and aftermarket businesses ($13 million), more than offset higher material costs ($29 million).

Compact Vehicle Technologies
The Compact Vehicle Technologies segment is engaged in the design, manufacture, sale and service of skid-steer loaders, all-wheel steer loaders, compact truck loaders, compact excavators, attachments and golf and utility vehicles. The segment includes the Bobcat and Club Car brands.

Dollar amounts in millions	 	 	2005	 	 	% change	 	 	2004	 	 	% change	 	 	2003	 	
Net revenues	 	$ 2,681.1	 	 	18.5	%	$ 2,261.7	 	 	23.8	%	$ 1,827.6	 	
Operating income	 	 	415.2	 	 	25.1	%	 	332.0	 	 	35.9	%	 	244.3	 	
Operating margin	 	 	15.5	%	 	 	 	 	14.7	%	 	 	 	 	13.4	%	
 
2005 vs. 2004 : Net revenues increased by 18.5% in 2005, or $419.4 million, compared with 2004, mainly due to higher volumes and product mix (17%) and improved pricing (2%). Operating income and margins for the year ended 2005 increased significantly. Higher volumes and product mix ($106 million) and improved pricing ($51 million) increased operating income in 2005. Operating income and margins were negatively impacted by higher material costs ($53 million), investments in productivity improvements ($8 million) and currency translation ($9 million).
 
Bobcat’s sales volumes and pricing improvements were driven by improved markets, new products and attachments introduced during the year and an increase in aftermarket parts sales. Club Car’s business also had improvements in volume and pricing, with growth in golf and utility vehicles due to increased market share and new product launches.

2004 vs. 2003 :   Net revenues increased by 23.8% in 2004, or $434.1 million, compared with 2003, mainly due to higher volumes and product mix (18%), improved pricing (4%) and the effect of favorable currency exchange (2%). Operating income and margins for the year ended 2004 increased significantly, mainly due to higher volumes and product mix ($91 million) and improved pricing ($68 million). Operating income and margins were negatively impacted by higher material costs ($53 million) and component parts costs.

Construction Technologies
Construction Technologies is engaged in the design, manufacture, sale and service of road construction and repair equipment, portable power products, general-purpose construction equipment, attachments and portable light towers and compressors. The segment is comprised of the Utility Equipment and Road Development businesses.
Dollar amounts in millions	 	 	2005	 	 	% change	 	 	2004	 	 	% change	 	 	2003	 	
Net revenues	 	$ 1,168.6	 	 	16.0	%	$ 1,007.1	 	 	25.2	%	$ 804.2	 	
Operating income	 	 	103.8	 	 	-1.3	%	 	105.2	 	 	116.5	%	 	48.6	 	
Operating margin	 	 	8.9	%	 	 	 	 	10.4	%	 	 	 	 	6.0	%	

24

2005 vs. 2004 :   Net revenues increased by 16.0% in 2005, or $161.5 million, compared with 2004, mainly due to higher volumes and product mix (12%) and improved product pricing (3%). Operating income was relatively flat, while operating margins declined in 2005. Operating income improvements came from higher volumes and product mix ($20 million) and improved pricing ($34 million). Higher material costs ($42 million), investments in productivity programs and new product development ($7 million) and manufacturing inefficiencies, offset the improvements and reduced operating income and margins for the segment.
 
Net revenues for all businesses in the segment had significant growth in 2005, despite a decline in the Road Development business experienced at the end of the year due to the curtailment of construction investment by the Chinese government. The product line also experienced operating margin pressure from high material costs and manufacturing inefficiencies throughout the year. Utility Equipment continued to show significant growth as it launched new products, expanded distribution and was in position to assist during the hurricane season.

2004 vs. 2003 :   Net revenues increased by 25.2% in 2004, or $202.9 million, compared with 2003, mainly due to higher volumes and product mix (19%) and the effects of favorable currency exchange (4%), as well as improved product pricing. Operating income and margins also significantly improved, mainly due to higher volumes and product mix ($43 million), improved pricing ($9 million) and productivity ($15 million). Higher material costs ($14 million) reduced operating income and margins for 2004.

Industrial Technologies
Industrial Technologies is focused on providing solutions to enhance customers’ industrial and energy efficiency, mainly by engaging in the design, manufacture, sale and service of compressed air systems, tools, fluid and material handling and energy generation systems. The segment includes the Air Solutions and Productivity Solutions businesses.
 
Dollar amounts in millions	 	2005	 	% change	 	2004	 	% change	 	2003	 	
Net revenues	 	 	$ 1,743.9	 	 	12.3	%	 	$ 1,552.8	 	 	13.9	%	 	$ 1,363.6	 	
Operating income	 	 	224.9	 	 	24.6	%	 	180.5	 	 	73.4	%	 	104.1	 	
Operating margin	 	 	12.9	%	 	 	 	 	11.6	%	 	 	 	 	7.6	%	

2005 vs. 2004: Net revenues increased by 12.3% in 2005, or $191.1 million, compared with 2004, mainly due to higher volumes and product mix (10%) and impacted product pricing (2%). Operating income and margins for 2005 increased significantly due to higher volumes and product mix ($37 million), improved product pricing ($29 million) and productivity improvements ($12 million). Investments in productivity ($11 million) and higher material costs ($5 million) partially offset some of the operating income gains.

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Net revenues and operating income increased substantially for all businesses in the segment, mainly due to new product launches and increased recurring revenues. Net revenue increases by Air Solutions (14%) and Productivity Solutions (9%) were also generated by geographic expansion, contributing to higher net revenues in all regions.

2004 vs. 2003: Net revenues increased by 13.9% in 2004, or $189.2 million, compared with 2003, mainly due to higher volumes, new product introductions and product mix (10%) and the effects of currency translation (2%), as well as improved pricing. Operating income and margins for 2004 increased significantly. Higher volumes and product mix ($46 million), improved pricing ($13 million) and productivity ($15 million) increased operating income. The effect of currency also had a favorable effect on operating profit.

Security Technologies
Security Technologies is engaged in the design, manufacture, sale and service of mechanical and electronic security products, biometric access control systems, and security and scheduling software. The segment includes the Schlage, LCN and Von Duprin brands.

Dollar amounts in millions	 	2005	 	% change	 	2004	 	% change	 	2003	 	
Net revenues	 	 	$ 2,099.7	 	 	18.1	%	 	$ 1,778.3	 	 	10.8	%	 	$ 1,605.0	 	
Operating income	 	 	380.7	 	 	24.9	%	 	304.8	 	 	-3.7	%	 	316.6	 	
Operating margin	 	 	18.1	%	 	 	 	 	17.1	%	 	 	 	 	19.7	%	

2005 vs. 2004 : Net revenues increased by 18.1% in 2005, or $321.4 million, compared with 2004, mainly due to acquisitions during the year (16%) and improved product pricing (3%), partially offset by divestitures. Operating income and margins also improved during 2005. Improved pricing ($54 million), productivity improvements ($29 million) and acquisitions ($23 million) all had favorable impacts on operating income. Operating income was negatively impacted by higher material costs ($29 million), unfavorable product mix and volumes ($19 million) and productivity investment costs ($18 million). The 2004 operating income was also negatively impacted by one-time costs ($28 million) related to a product warranty issue, a plant closing and the discontinuance of a plumbing fixture product line, and legal expenses.

Net revenues in the segment benefited from strong growth in the electronic controls and integrated solutions businesses in 2005. Increases in North American revenues (6%) were the result of strong construction markets, especially commercial, and recurring revenues. International revenues were helped by the 2005 acquisitions, which increased the breadth of products and customer base in Europe and Asia Pacific.
 
2004 vs. 2003 : Net revenues increased by 10.8% in 2004, or $173.3 million, compared with 2003, mainly due to higher volumes and product mix (8%) and improved pricing (2%), as well as the effects of currency translation. Operating income and margins declined during 2004. Operating income was negatively impacted by productivity investment costs ($25 million) and one-time costs ($28 million) related to a product warranty issue, a plant closing and the discontinuance of a plumbing fixture product line and legal expenses. These increased costs were partially offset by increases in operating income from improved pricing ($33 million), and higher volumes and product mix ($14 million).

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Employee Benefit Plans
Pensions
Net pension cost for 2005 totaled $32.4 million. In addition, the Company incurred $4.0 million in settlement losses as a result of lump-sum distributions under the supplemental benefit plans for officers and key employees. Net pension cost for the pension plans for 2005 was based on the weighted-average assumptions used at the end of 2004 to calculate the pension benefit obligation. Pension expense for 2006 is projected to be approximately $37.1 million, utilizing the assumptions for calculating the pension benefit obligations at the end of 2005 .

Net pension cost for 2004 totaled $26.5 million. The sale of Dresser-Rand and Drilling Solutions caused net pension curtailment and settlement losses of $41.1 million. Net pension cost for the pension plans for 2004 was based on the weighted-average assumptions used at the end of 2003 to calculate the pension benefit obligation.

Net pension cost for 2003 totaled $83.0 million. The sale of Engineered Solutions caused net pension curtailment and settlement gains of $10.1 million. In the first quarter of 2003, the Company remeasured its major U.S. pension plan due to the sale of Engineered Solutions. Prior to remeasurement, the assumptions used to calculate pension benefits were as follows: 6.75% discount rate, 4.00% rate of compensation increase and an 8.75% expected return on plan assets. Upon remeasurement, the discount rate was decreased to 6.50% to reflect the change in market conditions. The net periodic pension cost for non-U.S. plans for 2003 was based on the weighted-average assumptions disclosed at December 31, 2002.

The Company’s pension plans for U.S. non-collectively bargained employees provide benefits on a final average pay formula. The Company’s collectively bargained pension plans principally provide benefits based on a flat benefit formula. Non-U.S. plans usually provide benefits based on earnings and years of service formula. Additional supplemental benefit plans are maintained by the Company for officers and other key employees. Pension benefit payments, which reflect future service, as appropriate, are expected to be paid as follows: $180.9 million in 2006, $184.5 million in 2007, $184.8 million in 2008, $195.7 million in 2009, $219.5 million in 2010 and $1,049.9 million for the years 2011 to 2015.

The Company’s investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long term, minimizes the present value of required Company contributions, at the appropriate levels of risk; and to meet any statutory requirements, laws and local regulatory agencies’ requirements. Key investment management decisions reviewed regularly are asset allocations, investment manager performance, investment advisors and trustees. An asset/liability modeling (ALM) study is used as the basis for global asset allocation decisions and updated approximately every five years or as required. The Company’s current strategic global asset allocation for its pension plans is 60% in equity securities and 40% in debt securities and cash. The Company sets upper limits and lower limits of plus or minus 5%. The asset allocations are reviewed at least quarterly and appropriate adjustments are made.

The Company made required and discretionary contributions of $33.0 million and $86.4 million, respectively, to its pension plans in 2005. The Company currently projects that it will be required to contribute approximately $25 million to its plans worldwide in 2006. The Company’s policy allows it to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current tax regulations. The Company anticipates funding the plans in 2006 in accordance with contributions required by funding regulations or the laws of each jurisdiction.

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Postretirement Benefits Other Than Pensions
Net periodic postretirement benefit cost other than pension cost totaled $74.0 million and $76.9 million for 2005 and 2004, respectively. The assumptions used for 2005 and 2004 expense include a discount rate of 5.75% and 6.00%, respectively, and a health care cost trend rate of 11.00%, gradually reducing to 5.25% in 2012 and 2011, respectively. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was enacted. The Act introduced a government-provided subsidy based on the percentage of a beneficiary’s annual prescription drug benefits, within defined limits, and the opportunity for a retiree to obtain prescription drug benefits under Medicare. The Company adopted FASB Staff Position 106-2 as of April 1, 2004. The Company and its actuarial advisors determined that some benefits provided by the plan were at least actuarially equivalent to Medicare Part D. The Company remeasured the accumulated postretirement benefit obligation effects of the Act as of April 1, 2004. The effect of the federal subsidy to which the Company is entitled has been accounted for as an actuarial gain of $86.3 million, which is amortized and reduces current and future benefit costs. The subsidy had the effect of reducing postretirement benefit expense for 2005 by $18.5 million and for 2004 by $9.2 million. The components of the reduction in expense were a decrease in the amortization of the actuarial loss of $9.7 million and $5.0 million, a reduction in service cost of $0.5 million and $0.3 million and a reduction in the interest cost on the benefit obligation of $8.3 million and $3.9 million for 2005 and 2004, respectively. The assumptions used to remeasure the plan as of April 1, 2004, remained the same as the prior measurement date due to the existence of similar economic conditions.

Net periodic postretirement benefit cost other than pension cost for 2003 totaled $77.1 million. A curtailment gain of $6.9 million relating to the sale of Engineered Solutions was recorded in 2003. In February 2003, the Company remeasured its postretirement plan due to the sale of Engineered Solutions. Prior to remeasurement, the discount rate used to calculate postretirement benefits was 6.75%. Upon remeasurement, the discount rate was decreased to 6.50% to reflect the change in market conditions. No change was made to the health care cost trend rate upon remeasurement. The weighted-average assumptions used to calculate the postretirement benefit obligation at the end of 2003 were a discount rate of 6.00% and increases in per capita cost of covered health care benefits of 11.00%, gradually reducing to 5.25% in 2010.

Postretirement benefit cost for 2006 is projected to be approximately $79.4 million, utilizing the assumptions used to calculate the postretirement benefit obligations at year end. The assumptions expected to be used in the 2006 net periodic postretirement benefit cost are the same as were used at the end of 2005 to calculate the postretirement benefit obligation.

As of January 1, 2003, postretirement health care benefits are no longer available for new non-bargaining employees. These benefits were also curtailed for existing non-bargaining employees not meeting minimum eligibility requirements. Hourly bargaining employees are eligible if they attain normal retirement age with the required years of service. When eligible employees retire from the Company between ages 55 and 65, they receive, at a cost to the retiree, certain health care benefits. After attaining age 65, an eligible retiree’s health care benefit coverage becomes coordinated with Medicare. Postretirement health care benefits for eligible non-bargaining employees and retirees have their benefits subsidized to a flat dollar cap with cost escalation equally shared between the Company and the retiree. When the cap is reached, the retiree becomes responsible for all additional cost escalation. The Company funds postretirement benefit costs principally on a pay-as-you-go basis. Benefit payments for postretirement benefits, which reflect future service and are net of expected Medicare Part D subsidy, as appropriate, are expected to be paid as follows: $71.1 million in 2006, $73.1 million in 2007, $75.1 million in 2008, $76.2 million in 2009, $77.2 million in 2010 and $372.7 million for the years 2011 to 2015.

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Liquidity and Capital Resources
The following table contains several key measures to gauge the Company’s financial condition and liquidity:
 
Dollar amounts in millions	 	2005	 	2004	 	2003	 	
Operating cash flow from continuing operations	 	 	$ 843.2	 	 	$ 753.2	 	 	$ 138.4	 	
Working capital	 	 	1,048.5	 	 	1,732.8	 	 	878.0	 	
Current ratio	 	 	1.3	 	 	1.6	 	 	1.3	 	
Debt-to-total capital ratio	 	 	26.7	%	 	24.3	%	 	33.4	%	
Average working capital to net revenues	 	 	10.6	%	 	13.1	%	 	10.7	%	
Average days outstanding in receivables	 	 	56.5	 	 	55.6	 	 	57.0	 	
Inventory turnover	 	 	5.9	 	 	5.8	 	 	6.6	 	

Overview of Cash Flows and Liquidity
As of December 31, 2005, the Company held approximately $880.6 million of cash and cash equivalents, as well as $156.5 million of short-term marketable securities. The Company’s primary source for liquidity is operating cash flow from continuing operations, which increased by $90.0 million in 2005, compared with 2004. This change was mainly due to higher earnings from continuing operations of $1,053.1 million, compared with $829.8 million in 2004, and an increase in deferred income taxes, partially offset by decreases in other current and noncurrent liabilities.

Net cash used in investing activities from continuing operations in 2005 was $741.7 million, compared with net cash provided by investing activities of $1,329.2 million in 2004. The decrease reflects the cash used for the acquisitions of CISA S.p.A. and Taiwan Fu Hsing Industrial Company Ltd. in 2005 and the significant decrease in proceeds received for business divestitures, compared with 2004.

Net cash used in financing activities from continuing operations in 2005 was $875.7 million, compared with $807.2 million in 2004. The increase reflects the 2005 repurchase of approximately 19.4 million Class A common shares for $763.6 million, partially offset by the higher debt repayments in 2004 and the issuance of $300 million of debt during 2005. Also during 2005, the Company repurchased the preferred shares of two subsidiaries for $73.6 million, from unrelated third party holders of the shares. The Company has fully consolidated these subsidiaries since their initial purchase.

The Company has revised its 2004 and 2003 consolidated statements of cash flows to separately disclose the operating, investing and financing portions of the cash flows attributable to its discontinued operations. The Company had previously reported these amounts on a combined basis.

The Company’s working capital decreased $684.3 million from December 31, 2004 to December 31, 2005. The change was primarily due to a lower cash balance at December 31, 2005, resulting from acquisitions, share repurchases, dividend payments and pension contributions. An increase in current maturities of long-term debt also reduced working capital. This decrease was partially offset by an increase in marketable securities, accounts receivable from increased sales and a planned increase in inventory due to expected sales volumes and continued material availability concerns.
 
Capitalization
In addition to operating cash flow, the Company has the ability to supplement its liquidity with commercial paper. The Company’s ability to borrow at a cost-effective rate under the commercial paper program is contingent upon maintaining an investment-grade credit rating. As of December 31, 2005, the Company’s credit ratings were as follows:

 	 	Short-term	 	Long-term	
Moody's	 	P-2	 	A3	
Standard and Poor's	 	A-2	 	A-	
Fitch	 	F2	 	A-	
 
The security ratings set forth above are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organization. Each rating should be evaluated independently of any other rating.

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The Company’s debt-to-total capital ratio at December 31, 2005 was 26.7% compared to 24.3% at December 31, 2004. This increase was mainly due to the second quarter issuance of $300 million aggregate principle amount of its 4.75% Senior Notes due in 2015.

The Company has additional short-term borrowing alternatives, should the need arise. At December 31, 2005, the Company had $2.0 billion of committed revolving credit lines that consisted of two five-year lines, of which $750 million expires in June 2009 and $1.25 billion expires in August 2010, both of which were unused. The Company's public debt has no financial covenants and its $2.0 billion revolving credit lines have a debt-to-total capital covenant of 65%, which is calculated excluding non-cash items. As of December 31, 2005, the Company’s debt-to-total capital ratio was significantly beneath this limit. Additionally, $667.8 million of non-U.S. credit lines were available for bank guarantees, letters of credit and other working capital purposes, of which $510.9 million were unused at December 31, 2005. The Company did not have any commercial paper outstanding at December 31, 2005 or 2004.

In 2006, the Company has required debt retirements of $507.5 million, which excludes $349.1 million in bonds that may require repayment at the option of the holders. The Company does not expect the bond holders to exercise these options. The Company’s cash generation, large unused capacity under its committed borrowing facilities and the ability to refinance debt over longer maturities provide it sufficient capacity to cover all cash requirements for capital expenditures, dividends, share repurchases, debt repayments, and operating lease and purchase obligations in 2006. Additionally, these capacities provide support for commercial paper and other financial instruments, such as letters of credit.

On August 3, 2005, the Company’s Board of Directors declared a two-for-one stock split effected in the form of a stock distribution to shareholders on September 1, 2005. All references to the number of shares outstanding, per share amounts, and stock option data of the Company’s common shares have been restated to reflect the effect of the stock split for all periods presented. Shareholders’ equity reflects the stock split by reclassifying from “Retained earnings” to “Class A common shares” an amount equal to the par value of the additional shares from the split as of the distribution date. The Board also authorized on August 3, 2005, an increase of the quarterly dividend on the Company’s Class A common shares from 12.5 cents to 16 cents per share and expanded to $2 billion the Company’s share repurchase program, initially established in August 2004. During 2005, the Company repurchased 19.4 million Class A common shares at a cost of $763.6 million. Total repurchases under the program as of December 31, 2005, have been 23.4 million Class A common shares at a cost of $903.7 million.

In 2005, currency translation adjustments decreased shareholders' equity by $267.7 million. This was due to the strengthening of the U.S. dollar against other currencies in countries where the Company has significant operations. In 2004, currency translation adjustments increased shareholders' equity by $168.7 million.

30

Contractual Obligations
The following table summarizes the Company’s contractual cash obligations by required payment periods, in millions:
Payments due by period	 	 	Long-term debt	 	 	 	Purchase
obligations	 	 	Operating
leases	 	 	Total
contractual
cash obligations	 	
Less than 1 year	 	$ 856.6	*	 	$ 579.7	 	$ 58.5	 	$ 1,494.8	 	
1 - 3 years	 	 	419.2	 	 	 	54.8	 	 	82.1	 	 	556.1	 	
3 - 5 years	 	 	21.0	 	 	 	13.2	 	 	34.8	 	 	69.0	 	
More than 5 years	 	 	744.1	 	 	 	-	 	 	14.7	 	 	758.8	 	
Total	 	$ 2,040.9	 	 	$ 647.7	 	$ 190.1	 	$ 2,878.7	 	
*Includes required debt retirements of $507.5 million and $349.1 million of bonds redeemable at the option of the holder.

Future expected obligations under the Company’s pension and postretirement benefit plans have not been included in the contractual cash obligations table above. The Company’s pension plan policy allows it to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current tax regulations. The Company anticipates funding the plans in 2006 in accordance with contributions required by funding regulations or laws of each jurisdiction. The Company currently projects that it will be required to contribute approximately $25 million to its pension plans worldwide in 2006. Our postretirement benefit plans, excluding pensions, are not required to be funded in advance and are principally funded on a pay-as-you-go basis. The Company currently projects that it will make payments, net of plan participants’ contributions and Medicare Part D Subsidy, of approximately $71 million in 2006 for its postretirement benefit plans.

The average short-term borrowings outstanding, excluding current maturities of long-term debt, were $85.3 million compared with $88.0 million in 2004. The weighted-average interest rate for these borrowings was unchanged at 10.3% for short-term borrowings during 2005 and 2004. The maximum amounts of short-term borrowings outstanding during 2005 and 2004, excluding current maturities of long-term debt, were $134.7 million and $214.7 million, respectively.

Capital expenditures were $111.8 million, $108.6 million and $99.3 million for 2005, 2004 and 2003, respectively. The Company continues investing to improve manufacturing productivity, reduce costs and provide environmental enhancements and advanced technologies for existing facilities. The capital expenditure program for 2006 is estimated at approximately $200 million, including amounts approved in prior periods. Many of these projects are subject to review and cancellation at the option of the Company without incurring substantial charges. There are no planned projects, either individually or in the aggregate, that represent a material commitment for the Company.

For financial market risk impacting the Company, see Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Environmental and Asbestos Matters
The Company continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the Company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities.

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During 2005, the Company spent $4.1 million on capital projects for pollution abatement and control, and an additional $13.0 million for environmental remediation expenditures at sites presently or formerly owned or leased by the Company. It should be noted that these amounts are difficult to estimate because environmental projects are generally a part of the overall improvement program at a particular plant. The Company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.

The Company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all sites there are other PRPs and, in most instances, the Company's involvement is minimal.

In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.

Although uncertainties regarding environmental technology, U.S. federal and state laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year. It should be noted that when the Company estimates its liability for environmental matters, such estimates are based on current technologies, and the Company does not discount its liability or assume any insurance recoveries.

Certain wholly owned subsidiaries of the Company are named as defendants in asbestos-related lawsuits in state and federal courts. In virtually all of the suits, a large number of other companies have also been named as defendants. The vast majority of those claims have been filed against IR-New Jersey and allege injury caused by exposure to asbestos contained in certain of IR-New Jersey’s products. Although IR-New Jersey was neither a producer nor a manufacturer of asbestos, some of its formerly manufactured products utilized asbestos-containing components, such as gaskets purchased from third-party suppliers.

All asbestos-related claims resolved to date have been dismissed or settled. For the year ended December 31, 2005, total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $16.8 million, compared with $16.5 million for the year ended December 31, 2004. With the assistance of independent advisors, the Company performs a thorough analysis, updated periodically, of its actual and anticipated future asbestos liabilities projected seven years in the future. Based upon such analysis, the Company believes that its reserves and insurance are adequate to cover its asbestos liabilities, and that these asbestos liabilities are not likely to have a material adverse effect on its financial position, results of operations, liquidity or cash flows.

32

 
Legislation currently under consideration in Congress concerns pending and future asbestos-related personal injury claims. Whether and when such legislation will become law, and the final provisions of such legislation, are unknown. Consequently, the Company cannot predict with any reasonable degree of certainty what effect, if any, such legislation would have upon the Company’s financial position, results of operations or cash flows. See also the discussion under Note 8, Commitments and Contingencies, to the consolidated financial statements contained in this Annual Report on Form 10-K.

Guarantees
As part of its reorganization in 2001, the Company has fully and unconditionally guaranteed payment of all of the issued public debt securities of IR-New Jersey. No other subsidiary of the Company guarantees these securities.

IR-New Jersey has unconditionally guaranteed payment of the principal, premium, if any, and interest on the Company’s 4.75% Senior Notes due in 2015 in aggregate principal amount of $300 million. The guarantee is unsecured and provided on an unsubordinated basis. The guarantee ranks equally in right of payment with all of the existing and future unsecured and unsubordinated debt of IR-New Jersey.

Critical Accounting Policies
The notes to the financial statements include a summary of significant accounting policies and methods used in the preparation of the consolidated financial statements and the following summarizes what the Company believes are the critical accounting policies and methods used by the Company:

·	Allowance for doubtful accounts and inventory reserves - The Company has provided an allowance for doubtful accounts receivable and inventory reserves using a Company policy formula based upon its knowledge of its end markets, customer base and products.	

·	Goodwill and other intangible assets - The Company has significant goodwill and other intangible assets on its balance sheet related to acquisitions. The valuation and classification of these assets and the assignment of amortization lives involves significant judgments and the use of estimates. The testing of these intangibles under established accounting guidelines for impairment also requires significant use of judgment and assumptions, particularly as it relates to the determination of fair market value. The Company’s goodwill and other intangible assets are tested and reviewed annually for impairment during the fourth quarter or when there is a significant change in circumstances. The Company believes that its use of estimates and assumptions are reasonable and comply with generally accepted accounting principles. Changes in business conditions could potentially require future adjustments to these valuations.	

·	Long-lived assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows can be generated. An impairment in the carrying value of an asset would be recognized whenever anticipated future undiscounted cash flows from an asset are less than its carrying value. The impairment is measured as the amount by which the carrying value exceeds the fair value of the asset as determined by an estimate of discounted cash flows.	

33

 
·	Loss contingencies - Liabilities are recorded for various contingencies arising in the normal course of business, including litigation and administrative proceedings, environmental matters and product liability, product warranty, worker’s compensation and other claims. The Company has recorded reserves in the financial statements related to these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of the reserve, and in certain instances with consultation of legal counsel, internal and external consultants and engineers. Subject to the uncertainties inherent in estimating future costs for these types of liabilities, the Company believes its estimated reserves are reasonable and does not believe the final determination of the liabilities with respect to these matters would have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year.	

·	Income taxes - Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The Company recognizes future tax benefits, such as net operating losses and non-U.S. tax credits, to the extent that realizing these benefits is considered in its judgment to be more likely than not. The Company regularly reviews the recoverability of its deferred tax assets considering its historic profitability, projected future taxable income, timing of the reversals of existing temporary differences and the feasibility of its tax planning strategies. Where appropriate, the Company records a valuation allowance with respect to a future tax benefit.	

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income, and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, U.S. and non-U.S. tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. The Company believes that it has adequately provided for any reasonably foreseeable resolution of these matters. The Company will adjust its estimate if significant events so dictate. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes in the period that the matter is finally resolved.

·	Employee benefit plans - The Company provides a range of benefits to eligible employees and retired employees, including pensions, postretirement and postemployment health-care benefits. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, employee mortality and turnover rates, and health-care cost trend rates. Independent actuaries perform the required calculations to determine expense in accordance with U.S. generally accepted accounting principles. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized over future periods. The Company reviews its actuarial assumptions at each measurement date and makes modifications to the assumptions based on current rates and trends, if appropriate. The discount rate, the rate of compensation increase and the expected long-term rates of return on plan assets are determined as of the measurement date. The discount rate reflects a rate at which pension benefits could be effectively settled. It is established and based primarily on the yields of high-quality fixed-income investments available and expected to be available during the life of the plans, a study based on the Citigroup Pension Liability index, and a review of the current yields reported by Moody’s on AA corporate bonds. The rate of compensation increase is dependent on expected future compensation levels. The expected long-term rates of return are projected to be the rates of return to be earned over the period until the benefits are paid, which should reflect the rates of return on present investments, and on reinvestments over the period. The expected long-term rate of return on plan assets is based on what is achievable given the plan’s investment policy and the types of assets held. Historical assets return trends for the larger plans are reviewed over fifteen, ten and five-year periods. The actual rates of return for plan assets over the last ten and fifteen-year periods have exceeded the expected rates of return used. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on input from its actuaries, outside investment advisors, and information as to assumptions used by plan sponsors.	

34

Changes in any of the assumptions can have an impact on the net periodic pension cost or postretirement cost. Estimated sensitivities to the net periodic pension cost of a 0.25% rate decrease in the three basic assumptions are as follows: the discount rate would increase expense by approximately $6.3 million, the rate of compensation increase would decrease expense by approximately $4.2 million, and the estimated return on assets assumption would increase expense by approximately $6.5 million. A 0.25% rate decrease in the discount rate for postretirement benefits would increase net periodic postretirement benefit cost by $1.5 million and a 1.0% increase in the health care cost trend rate would increase the cost by approximately $5.2 million.

The preparation of all financial statements includes the use of estimates and assumptions that affect a number of amounts included in the Company’s financial statements. If actual amounts are ultimately different from previous estimates, the revisions are included in the Company’s results for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between the Company’s estimates and actual amounts in any year have not had a significant impact on the consolidated financial statements.

New Accounting Standards
In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (SFAS 151). SFAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS 151 is effective for the Company on January 1, 2006. The adoption of SFAS 151 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share Based Payment” (SFAS 123(R)). SFAS 123(R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” which supersedes Accounting Principles Board (APB) No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123(R) requires companies to recognize compensation expense in the income statement for an amount equal to the fair value of the share-based payment issued. This applies to all transactions involving the issuance of equity by a company in exchange for goods and services, including employees. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) outlining the SEC Staff’s interpretation of SFAS 123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. Subsequently in August, October and November 2005, the FASB released Financial Staff Position (FSP) 123(R)-1, “Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R),” FSP 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R)” and FSP 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” Additionally, on February 1, 2006, the FASB agreed to issue FSP 123(R)-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event.” The FSPs clarify certain accounting provisions set forth in SFAS 123(R). The Company will adhere to the requirements and guidance prescribed in SFAS 123(R), SAB 107 and the FSPs in connection with its adoption in the first quarter of 2006. The Company estimates that the impact on 2006 earnings will approximate $0.03 to $0.04 of cost per share for the year.

35

 
In December 2004, the FASB released Financial Staff Position 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (FSP 109-2). The American Jobs Creation Act (AJCA) provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated in either an enterprise’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. FSP 109-2 allows time for enterprises beyond the financial reporting period of enactment to evaluate the effect of the AJCA on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. We have completed our review of the foreign earnings repatriation provision of the AJCA. We concluded that, given the effective foreign tax rates applicable to our unrepatriated earnings, as well as certain restrictions in the AJCA and in the laws of other jurisdictions, and the composition of other tax attributes, the foreign earnings repatriation provision of the AJCA does not provide a material financial benefit to the Company. Based on that analysis, we do not plan to change our existing repatriation practices as a result of the AJCA.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 requires an entity to recognize a liability for a conditional asset retirement obligation when incurred if the liability can be reasonably estimated. The Interpretation also clarifies that the term Conditional Asset Retirement Obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 was effective for the Company on December 31, 2005, and the adoption did not have a material impact on its consolidated financial position, results of operations and cash flows.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (SFAS 154) which replaces APB No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes a retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of SFAS 154 to have a material impact on its consolidated financial position and results of operations.

36

 
Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE   ABOUT MARKET   RISK

The Company is exposed to fluctuations in the price of major raw materials used in the manufacturing process, currency fluctuations and interest rate changes. From time to time, the Company enters into agreements to reduce its raw material, currency and interest rate risks. To minimize the risk of counter party non-performance, those agreements are made only through major financial institutions with significant experience in such financial instruments.

The Company experiences currency exposures in the normal course of business. To mitigate the risk from currency exchange rate fluctuations, the Company will generally enter into forward currency exchange contracts for the purchase or sale of a currency to hedge this exposure.

The Company evaluates its exposure to changes in currency exchange rates using a sensitivity analysis. The sensitivity analysis is a measurement of the potential loss in fair value based on a percentage increase or decrease in exchange rates against the U.S. dollar. Based on the firmly committed currency derivative instruments in place at December 31, 2005, a hypothetical change in fair value of those financial instruments assuming a 10% increase in exchange rates against the U.S. dollar would result in an unrealized loss of approximately $16.0 million, as compared with $15.0 million at December 31, 2004. These amounts would be offset by changes in the fair value of underlying currency transactions.

With regard to interest rate risk, the effect of a hypothetical 1% increase in interest rates, across all maturities, would decrease the estimated fair value of the Company’s total long-term debt from $2,191.5 million to an estimated fair value of $2,058.6 million at December 31, 2005, and from $1,990.8 million to an estimated fair value of $1,878.5 million at December 31, 2004.

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a)	The following consolidated financial statements and the report thereon of PricewaterhouseCoopers LLP dated February 28, 2006, are presented following Item 15 of this Annual Report on Form 10-K.	

Consolidated Financial Statements:
 Report of independent registered public accounting firm
 Consolidated balance sheets at December 31, 2005 and 2004
 For the years ended December 31, 2005, 2004 and 2003:
  Consolidated statements of income
  Consolidated statements of shareholders’ equity
  Consolidated statements of cash flows
 Notes to consolidated financial statements

Financial Statement Schedule:
  Consolidated schedule for the years ended December 31, 2005, 2004 and 2003:
  Schedule II -- Valuation and Qualifying Accounts

Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

37

 
(b)	The unaudited quarterly financial data for the two years ended December 31, is as follows:	

In millions, except per share amounts	 	 	 	 	 	 	 	 	 	 	 	 	 	
2005	 	Net sales	 	Cost of
goods sold	 	Operating
income	 	Net
 earnings	 	Basic earnings per common share*	 	Diluted earnings per common share*	 	
First quarter	 	 	$ 2,458.8	 	 	$ 1,810.6	 	 	$ 297.0	 	 	$ 223.0	 	 	$ 0.64	 	 	$ 0.64	 	
Second quarter	 	 	2,759.5	 	 	2,019.1	 	 	379.1	 	 	285.4	 	 	0.84	 	 	0.83	 	
Third quarter	 	 	2,615.3	 	 	1,920.7	 	 	340.0	 	 	254.2	 	 	0.76	 	 	0.75	 	
Fourth quarter	 	 	2,713.3	 	 	1,993.7	 	 	345.7	 	 	291.6	 	 	0.88	 	 	0.87	 	
Year 2005	 	 	$ 10,546.9	 	 	$ 7,744.1	 	 	$ 1,361.8	 	 	$ 1,054.2	 	 	$ 3.12	 	 	$ 3.09	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
First quarter	 	 	$ 2,122.2	 	 	$ 1,554.5	 	 	$ 225.5	 	 	$ 179.5	 	 	$ 0.52	 	 	$ 0.51	 	
Second quarter	 	 	2,444.4	 	 	1,783.0	 	 	318.7	 	 	286.2	 	 	0.83	 	 	0.82	 	
Third quarter	 	 	2,368.0	 	 	1,738.8	 	 	278.2	 	 	237.8	 	 	0.69	 	 	0.68	 	
Fourth quarter	 	 	2,459.0	 	 	1,777.7	 	 	297.9	 	 	515.2	 	 	1.50	 	 	1.48	 	
Year 2004	 	 	$ 9,393.6	 	 	$ 6,854.0	 	 	$ 1,120.3	 	 	$ 1,218.7	 	 	$ 3.52	 	 	$ 3.47	 	
* The amounts have been restated to offset a two-for-one stock split.

Item 9.     CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.
 
Item 9A       CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2005, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Annual Report on Form 10-K has been recorded, processed, summarized and reported when required.  
 
Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined under Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management has assessed the effectiveness of internal control over financial reporting as of December 31, 2005. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control - Integrated Framework. Management concluded that based on its assessment, the Company’s internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report.

The audited consolidated financial statements of the Company include the results of a number of business acquisitions completed during fiscal 2005. As permitted by the SEC’s June 23, 2004 implementation guidance to issuers relating to the SEC’s final rules on internal control over financial reporting, management’s assessment does not include an assessment of the internal control over financial reporting of those acquisitions. The total assets and total revenues of these acquisitions represent approximately 8% and 3%, respectively, of the related consolidated financial statement as of and for the year ended December 31, 2005. None of the acquisitions were individually significant to the Company’s financial position, results of operations or cash flows.

Changes in Internal Control Over Financial Reporting
There has been no change in the Company's internal controls over financial reporting during the quarter ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
 
Item 9B.     OTHER INFORMATION

None.

38

PART III

The information called for by Part III (Items 10, 11, 12, and 13) of Form 10-K will be included in the Company’s Proxy Statement for the Company’s 2006 Annual General Meeting of Shareholders, which the Company intends to file within 120 days after the close of its fiscal year ended December 31, 2005 and is hereby incorporated by reference to such Proxy Statement, except that the information as to the Company’s executive officers which follows Item 4 in this Report, is incorporated by reference into Items 10 and 12, respectively, of this Report.

Item 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the information contained under the caption “Audit and Non-Audit Fees” in our 2005 Proxy Statement.

In early 2005, our registered public accounting firm, PricewaterhouseCoopers LLP (PwC), informed the Securities Exchange Commission (the SEC), the Public Company Accounting Oversight Board and our Audit Committee that certain non-audit work that PwC previously performed in China and Taiwan has raised questions regarding PwC’s independence with respect to its performance of audit services for us.

During the fiscal years 2004, 2003, 2002 and 2001, certain PwC affiliates, in connection with the preparation of local tax returns, made payments to local tax authorities with respect to individual employee tax liabilities. As a result, PwC’s non-U.S. affiliates had temporary custody of small amounts of our corporate funds. The fees we paid to PwC’s non-U.S. affiliates in China and Taiwan for the preparation of these tax returns, including the services mentioned above, were $433, $14,765, $24,849 and $18,767 for the years 2004, 2003, 2002 and 2001, respectively. These services were discontinued in 2004.

Our Audit Committee has reviewed the facts surrounding these services provided by PwC. PwC has informed the Audit Committee that it does not believe that the performance of the tax services described above has impaired PwC’s independence. In light of the de minimis fees paid to PwC, the ministerial nature of the actions performed and the fact that the services have been discontinued, neither our Audit Committee nor PwC believes that PwC’s independence was impaired by the performance of these services.

39

PART IV

Item 15.   EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

(a) 1. and 2.	Financial statements and financial statement schedules	
 	See Item 8.	

3.	Exhibits	
 	The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K.	

40

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))

Description  

2	Agreement and Plan of Merger, dated as of October 31, 2001, among Ingersoll-Rand Company Limited, Ingersoll-Rand Company and IR Merger Corporation. Incorporated by reference to Amendment No. 1 to Form S-4. Registration Statement No, 333-71642, filed October 30, 2001.	
 
2.1	Stock and Asset Purchase Agreement, dated as of October 16, 2002, between Ingersoll-Rand Company Limited, on behalf of itself and certain of its subsidiaries and The Timken Company, on behalf of itself and certain of its subsidiaries. Incorporated by reference to Form 8-K dated October 16, 2002.	

2.2	Amendment to the Stock and Asset Purchase Agreement, dated as of February 18, 2003, amending the Stock Purchase Agreement, dated as of October 16, 2002, between Ingersoll-Rand Company Limited, on behalf of itself and certain of its subsidiaries and The Timken Company, on behalf of itself and certain of its subsidiaries. Incorporated by reference to Form Schedule 13D, filed March 5, 2003 by Ingersoll-Rand Company.	

2.3	Equity Purchase Agreement between FRC Acquisition LLC, on behalf of itself and the other buyers named therein, and Ingersoll-Rand Company Limited, on behalf of itself and the other sellers named therein, dated August 25, 2004, in connection with the divestiture of Dresser-Rand. Incorporated by reference to Form 8-K dated August 25, 2004.	

2.4	Pricing Agreement, dated as of May 24, 2005 among Ingersoll-Rand Company Limited, Banc of America Securities, LLC, Deutsche Bank Securities Inc. and Ingersoll-Rand Company. Incorporated by reference to Form 8-K for Ingersoll-Rand Company Limited, dated May 24, 2005, filed May 27, 2005.	

3.1	Memorandum of Association of Ingersoll-Rand Company Limited. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001.	

3.2	Amended and Restated Bye-Laws of Ingersoll-Rand Company Limited, dated June 1, 2005. Incorporated by reference to Form 10-Q for the quarter ended June 30, 2005, of Ingersoll-Rand Company Limited, filed August 5, 2005.	

4.1	Certificate of Designation, Preferences and Rights of Series A Preference Shares of Ingersoll-Rand Company Limited. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001.	

4.2	Rights Agreement between Ingersoll-Rand Company Limited and The Bank of New York, as Rights Agent. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001.	

4.3	Voting Agreement between Ingersoll-Rand Company Limited and Ingersoll-Rand Company. Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement No. 333-71642, filed October 30, 2001.	

41

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)

Description
 
4.4	Indenture dated as of August 1, 1986, between Ingersoll-Rand Company and The Bank of New York, as Trustee, as supplemented by first, second and third supplemental indentures. Incorporated by reference to Ingersoll-Rand Company’s Form S-3 Registration Statement No. 333-39474 as filed March 18, 1991 and to Form S-3 Registration Statement No. 333-50902 as filed November 29, 2000.	

4.5	Fourth Supplemental Indenture, dated as of December 31, 2001, among Ingersoll-Rand Company Limited, Ingersoll-Rand Company and The Bank of New York, as trustee. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2001, filed March 13, 2002.	

4.6	Credit Agreement dated as of August 12, 2005, among Ingersoll-Rand Company and Ingersoll-Rand Company Limited, the banks listed therein, and Citicorp USA, Inc., as Syndication Agent, and Bank of America, N.A., Deutsche Bank Securities Inc., The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and UBS Securities LLC, as Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, and J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Lead Arrangers and Bookrunners. Filed herewith.	
 
4.7	Credit Agreement, dated as of June 25, 2004, among Ingersoll-Rand Company and Ingersoll-Rand Company Limited, the banks listed therein, The JPMorgan Chase Bank, as Administrative Agent, Citibank N.A., and Deutsche Bank Securities Inc., as Co-Syndication Agents, and The Bank of Tokyo-Mitsubishi, Ltd, as Documentation Agent, and J.P. Morgan Securities Inc., as Lead Arranger and Bookrunner. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.	

4.8	Ingersoll-Rand Company Limited and its subsidiaries are parties to several long-term debt instruments under which in each case the total amount of securities authorized does not exceed 10% of the total assets of Ingersoll-Rand Company Limited and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii) of Item 601(b) of Regulation S-K, Ingersoll-Rand Company Limited agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.	

4.9	Indenture dated as of May 24, 2005 among Ingersoll-Rand Company Limited, Ingersoll-Rand Company and Wells Fargo Bank, N.A., as trustee. Incorporated by reference to Form 8-K for Ingersoll-Rand Company Limited, dated May 24, 2005, filed May 27, 2005.	

10.1	Management Incentive Unit Plan of Ingersoll-Rand Company. Amendment to the Management Incentive Unit Plan, effective January 1, 1982. Amendment to the Management Incentive Unit Plan, effective January 1, 1987. Amendment to the Management Incentive Unit Plan, effective June 3, 1987. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.	

42

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)

Description

10.2	Reorganization Amendment to Management Incentive Unit Plan, dated December 31, 2001. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2001, filed March 13, 2002.	

10.3	Amended and Restated Director Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 2000, filed March 20, 2001.	

10.4	First Amendment to Director Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2001, filed March 13, 2002.	

10.5	Second Amendment to Director Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2003, filed February 27, 2004.	

10.6	Third Amendment to Director Deferred Compensation and Stock Award Plan, dated December 31, 2004. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited, dated December 31, 2004, filed January 6, 2005.	

10.7	Fourth Amendment to Director Deferred Compensation and Stock Award Plan, dated March 10, 2005. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.	

10.8	Director Deferred Compensation and Stock Award Plan II, dated December 31, 2004. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited, dated December 31, 2004, filed January 6, 2005.	

10.9	First Amendment to Director Deferred Compensation and Stock Award Plan II, dated March 10, 2005. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.  	
  
10.10	Description of Annual Incentive Arrangements for Chairman, President, Sector Presidents and other Staff Officers of Ingersoll-Rand Company Limited. Filed herewith.	

10.11	Description of Performance Share Program for Chairman, President and Chief Executive Officer and the other Participants of Ingersoll-Rand Company Limited. Filed herewith.	

43

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)
Description

10.12	Amended and Restated Form of Change of Control Agreement with Chairman, dated as of December 1, 2003. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 2003, filed February 27, 2004.	

10.13	Amended and Restated Form of Change of Control Agreement dated as of December 1, 2003, with selected executive officers of Ingersoll-Rand Company other than Chairman. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 2003, filed February 27, 2004.	

10.14	Executive Supplementary Retirement Agreement for selected executive officers of Ingersoll- Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.	

10.15	Executive Supplementary Retirement Agreement for selected executive officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997.	

10.16	Forms of insurance and related letter agreements with certain executive officers of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.	

10.17	Amended and Restated Supplemental Pension Plan, dated January 1, 2003. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2002, filed March 5, 2003.	

10.18	First Amendment to the Amended and Restated Supplemental Pension Plan, dated January 1, 2003. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2003, filed February 27, 2004.	

10.19	Amended and Restated Supplemental Employee Savings Plan, dated January 1, 2003. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2002, filed March 5, 2003.	

10.20	First Amendment to the Amended and Restated Supplemental Employee Savings Plan, dated January 1, 2003. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2003, filed February 27, 2004.	

10.21	Incentive Stock Plan of 1995. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix A of the Proxy Statement dated March 15, 1995.	

44

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)
Description

10.22	Reorganization Amendment to Incentive Stock Plan of 1995, dated December 21, 2001. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2001, filed March 13, 2002.	

10.23	Senior Executive Performance Plan. Incorporated   by reference to the Notice of 2000 Annual Meeting of Shareholders and Proxy Statement of Ingersoll-Rand Company, dated March 7, 2000. See Appendix A of the Proxy Statement, dated March 7, 2000.	

10.24	Amended and Restated Elected Officers Supplemental Plan, dated December 31, 2004. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.	

10.25	Amendment, dated February 1, 2006, to Amended and Restated Elected Officers Supplemental Plan, dated December 31, 2004. Filed herewith.	

10.26	Elected Officers Supplemental Plan II, dated February 1, 2006. Filed herewith.	

10.27	Amended and Restated Executive Deferred Compensation Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 2000, filed March 20, 2001.	

10.28	First Amendment to Executive Deferred Compensation Plan, dated December 31, 2001. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2001, filed March 13, 2002.	

10.29	Second Amendment to Executive Deferred Compensation Plan, dated February 24, 2004. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2003, filed February 27, 2004.	

10.30	Third Amendment to Executive Deferred Compensation Plan, dated December 31, 2004. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited dated December 31, 2004, filed January 6, 2005.	

10.31	Fourth Amendment to Executive Deferred Compensation Plan, dated March 10, 2005. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.	

10.32	Executive Deferred Compensation Plan II, dated December 31, 2004. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited dated December 31, 2004, filed January 6, 2005.	

45

 

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)
Description

10.33	First Amendment to Executive Deferred Compensation Plan II, dated March 10, 2005. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2004, filed March 16, 2005.	

10.34	Amended and Restated Incentive Stock Plan of 1998. Incorporated by reference to Ingersoll-Rand Company Limited’s Form S-8 Registration Statement, filed December 1, 2005.	

10.35	Amendment to the Ingersoll-Rand Company Limited Amended and Restated Incentive Stock Plan of 1998, dated December 7, 2005. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited, dated December 7, 2005, filed December 9, 2005.	

10.36	Composite Employment Agreement with Chief Executive Officer.   Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1999, filed March 30, 2000.	

10.37	Employment Agreement with Timothy McLevish, Senior Vice President and Chief Financial Officer. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2002, filed March 5, 2003.	

10.38	Employment Agreement with Michael Lamach, Senior Vice President. Incorporated by reference to Form 10-K of Ingersoll-Rand Company Limited   for the year ended December 31, 2003, filed February 27, 2004.	

10.39	Addendum, dated June 3, 2005, to Employment Agreement with Timothy R. McLevish. Incorporated by reference to Form 8-K of Ingersoll-Rand Company Limited, dated June 1, 2005, filed June 6, 2005.	

10.40	Employment Agreement with James R. Bolch, Senior Vice President. Filed herewith.	

10.41	Addendum, dated December 8, 2005, to Employment Agreement with James R. Bolch. Filed herewith.	

12	Computations of Ratios of Earnings to Fixed Charges. Filed herewith.	
 
14	Ingersoll-Rand Company Limited Code of Ethics. Filed herewith.	

21	List of Subsidiaries of Ingersoll-Rand Company Limited. Filed herewith.	

23	Consent of Independent Registered Public Accounting Firm. Filed herewith.	

46

INGERSOLL-RAND COMPANY LIMITED
INDEX TO EXHIBITS
(Item 15(a))
(Continued)
Description

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.	

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.	

32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.	

47

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
INGERSOLL RAND COMPANY LIMITED
(Registrant)

 	 	 	By:	/S/ Herbert L. Henkel	
 	 	 	 	(Herbert L. Henkel)	
 	 	 	 	Chief Executive Officer	
 	 	 	Date:	March 1, 2006	
 
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature	 	Title	 	Date	
 	 	 	 	 	
 	 	Chairman, President, Chief	 	 	
/S/ Herbert L. Henkel	 	Executive Officer and Director	 	 	
(Herbert L. Henkel)	 	(Principal Executive Officer)	 	March 1, 2006	
 	 	 	 	 	
 	 	Senior Vice President and	 	 	
/S/ Timothy R. McLevish	 	Chief Financial Officer	 	 	
(Timothy R. McLevish)	 	(Principal Financial Officer)	 	March 1, 2006	
 	 	 	 	 	
/S/ Richard W. Randall	 	Vice President and Controller	 	 	
(Richard W. Randall)	 	(Principal Accounting Officer)	 	March 1, 2006	
 	 	 	 	 	
/S/ Ann C. Berzin	 	 	 	 	
(Ann C. Berzin)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ George W. Buckley	 	 	 	 	
(George W. Buckley)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Peter C. Godsoe	 	 	 	 	
(Peter C. Godsoe)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Constance Horner	 	 	 	 	
(Constance Horner)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ H. William Lichtenberger	 	 	 	 	
(H. William Lichtenberger)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Theodore E. Martin	 	 	 	 	
(Theodore E. Martin)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Patricia Nachtigal	 	 	 	 	
(Patricia Nachtigal)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Orin R. Smith	 	 	 	 	
(Orin R. Smith)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Richard J. Swift	 	 	 	 	
(Richard J. Swift)	 	Director	 	March 1, 2006	
 	 	 	 	 	
/S/ Tony L. White	 	 	 	 	
(Tony L. White)	 	Director	 	March 1, 2006	

48

INGERSOLL-RAND COMPANY LIMITED
Index to Consolidated Financial Statements

 	 	 	 	 	 	 	 	Page	
Report of Independent Registered Public Accounting Firm	 	 	 	 	50-51	
Consolidated Statements of Income	 	 	 	 	52	
Consolidated Balance Sheets	 	 	 	 	 	53	
Consolidated Statements of Shareholders' Equity	 	 	 	 	 	54	
Consolidated Statements of Cash Flows	 	 	 	 	 	55	
Notes to Consolidated Financial Statements	 	 	 	 	 	56-90	
Schedule II - Valuation and Qualifying Accounts	 	 	 	 	 	91	

49

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ingersoll-Rand Company Limited:

We have completed integrated audits of Ingersoll-Rand Company Limited's (successor company to Ingersoll-Rand Company) 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its December 31, 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below .

Consolidated Financial Statements and Financial Statement Schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1)   present fairly, in all material respects, the financial position of Ingersoll-Rand Company Limited and its subsidiaries   at December 31, 2005   and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005   in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2),   presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated   financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule   based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board   (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management's Report on Internal Control Over Financial Reporting, appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005   based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

50

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

As described in Management's Report on Internal Control Over Financial Reporting, management has excluded a number of business acquisitions from its assessment of internal control over financial reporting as of December 31, 2005 because they were acquired by the Company in purchase business combinations during 2005. We have also excluded these acquisitions from our audit of internal control over financial reporting. These subsidiaries are wholly-owned subsidiaries or majority-owned consolidated businesses whose total assets and total revenues represent approximately 8% and 3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2005.

PricewaterhouseCoopers LLP	 	 	
Florham Park, New Jersey	 	 	
February 28, 2006	 	 	

 

51

Ingersoll-Rand Company Limited	 	 	 	 	 	 	 	
Consolidated Statements of Income	 	 	 	 	 	 	 	
In millions, except per share amounts	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
For the years ended December 31,	 	2005	 	2004	 	2003	 	
Net revenues	 	 	$ 10,546.9	 	 	$ 9,393.6	 	 	$ 8,249.3	 	
Cost of goods sold	 	 	7,744.1	 	 	6,854.0	 	 	6,109.0	 	
Selling and administrative expenses	 	 	1,441.0	 	 	1,419.3	 	 	1,355.9	 	
Restructuring reversals	 	 	-	 	 	-	 	 	(3.2	)	
Operating income	 	 	1,361.8	 	 	1,120.3	 	 	787.6	 	
Interest expense	 	 	(144.3	)	 	(153.1	)	 	(175.5	)	
Other income, net	 	 	53.0	 	 	17.0	 	 	10.9	 	
Minority interests	 	 	(12.7	)	 	(16.0	)	 	(14.9	)	
Earnings before income taxes	 	 	1,257.8	 	 	968.2	 	 	608.1	 	
Provision for income taxes	 	 	204.7	 	 	138.4	 	 	75.3	 	
Earnings from continuing operations	 	 	1,053.1	 	 	829.8	 	 	532.8	 	
Discontinued operations, net of tax	 	 	1.1	 	 	388.9	 	 	111.7	 	
Net earnings	 	 	$ 1,054.2	 	 	$ 1,218.7	 	 	$ 644.5	 	
 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per common share:	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	$ 3.12	 	 	$ 2.40	 	 	$ 1.56	 	
Discontinued operations, net of tax	 	 	-	 	 	1.12	 	 	0.32	 	
Net earnings	 	 	$ 3.12	 	 	$ 3.52	 	 	$ 1.88	 	
 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per common share:	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	 	$ 3.09	 	 	$ 2.36	 	 	$ 1.55	 	
Discontinued operations, net of tax	 	 	-	 	 	1.11	 	 	0.32	 	
Net earnings	 	 	$ 3.09	 	 	$ 3.47	 	 	$ 1.87	 	
See accompanying Notes to Consolidated Financial Statements.	 	 	 	 	 	 	 	 	 	 	

52

 

Ingersoll-Rand Company Limited	 	 	 	 	 	
Consolidated Balance Sheets	 	 	 	 	 	
In millions, except share amounts	 	 	 	 	 	
 	 	 	 	 	 	
December 31,	 	2005	 	2004	 	
ASSETS	 	 	 	 	 	
Current assets:	 	 	 	 	 	
Cash and cash equivalents	 	 	$ 880.6	 	 	$ 1,703.1	 	
Marketable securities	 	 	156.5	 	 	0.6	 	
Accounts and notes receivable, less allowance of	 	 	 	 	 	 	 	
$47.6 in 2005 and $70.1 in 2004	 	 	1,679.0	 	 	1,498.4	 	
Inventories	 	 	1,128.8	 	 	1,058.8	 	
Prepaid expenses and deferred income taxes	 	 	403.3	 	 	348.8	 	
Total current assets	 	 	4,248.2	 	 	4,609.7	 	
 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	1,076.0	 	 	1,013.2	 	
Goodwill	 	 	4,433.4	 	 	4,211.0	 	
Intangible assets, net	 	 	798.5	 	 	618.2	 	
Other assets	 	 	1,200.3	 	 	962.5	 	
Total assets	 	 	$ 11,756.4	 	 	$ 11,414.6	 	
 	 	 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable	 	 	$ 812.5	 	 	$ 684.0	 	
Accrued expenses and other current liabilities	 	 	1,053.1	 	 	1,146.6	 	
Accrued compensation and benefits	 	 	401.4	 	 	433.5	 	
Loans payable and current maturities of long-term debt	 	 	932.7	 	 	612.8	 	
Total current liabilities	 	 	3,199.7	 	 	2,876.9	 	
 	 	 	 	 	 	 	 	
Long-term debt	 	 	1,184.3	 	 	1,267.6	 	
Postemployment and other benefit liabilities	 	 	1,000.9	 	 	1,018.1	 	
Other noncurrent liabilities	 	 	609.5	 	 	518.2	 	
Total liabilities	 	 	5,994.4	 	 	5,680.8	 	
 	 	 	 	 	 	 	 	
Commitments and contingencies (Note 8)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Shareholders' equity:	 	 	 	 	 	 	 	
Class A common shares, $1 par value (360,740,316 and	 	 	 	 	 	 	 	
356,754,024 shares issued in 2005 and 2004, respectively,	 	 	 	 	 	 	 	
and net of 19,447,000 and 10,585,378 shares owned by	 	 	 	 	 	 	 	
subsidiary in 2005 and 2004, respectively)	 	 	330.7	 	 	173.1	 	
Capital in excess of par value	 	 	-	 	 	469.6	 	
Retained earnings	 	 	5,558.9	 	 	5,028.3	 	
Accumulated other comprehensive (loss) income	 	 	(127.6	)	 	62.8	 	
Total shareholders' equity	 	 	5,762.0	 	 	5,733.8	 	
Total liabilities and shareholders' equity	 	 	$ 11,756.4	 	 	$ 11,414.6	 	
See accompanying Notes to Consolidated Financial Statements.	 	 	 	 	 	 	 	

53

Ingersoll-Rand Company Limited	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	
Consolidated Statements of Shareholders' Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	
In millions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	

 	 	 	 	 	 	 	 	 	 	Accumulated	 	 	 	
 	 	 	 	  	 	Capital in	 	  	 	other	 	   	 	
 	 	  Total 	 	 	 	 	 	excess	 	 	 	comprehensive	 	 	 	
 	 	shareholders'	 	  Common stock	 	of par	 	Retained	 	 (loss)	 	Comprehensive	 	
     	 	 equity	 	Amount	 	Shares	 	value	 	earnings	 	 income	 	 income	 	
Balance at December 31, 2002	 	 	$ 3,478.2	 	 	$ 169.2	 	 	169.2	 	 	$ 364.7	 	 	$ 3,457.4	 	 	$ (513.1	)	 	 	 	
Net earnings	 	 	644.5	 	 	 	 	 	 	 	 	 	 	 	644.5	 	 	 	 	 	$ 644.5	 	
Currency translation	 	 	302.9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	302.9	 	 	302.9	 	
Change in fair value of derivatives qualifying	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
as cash flow hedges, net of tax of $3.2	 	 	(18.1	)	 	 	 	 	 	 	 	 	 	 	 	 	 	(18.1	)	 	(18.1	)	
Minimum pension liability adjustment, net of tax of $24.4	 	 	(42.2	)	 	 	 	 	 	 	 	 	 	 	 	 	 	(42.2	)	 	(42.2	)	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ 887.1	 	
Shares issued under incentive stock plans	 	 	251.2	 	 	5.3	 	 	5.3	 	 	245.9	 	 	 	 	 	 	 	 	 	 	
Cash dividends	 	 	(123.2	)	 	 	 	 	 	 	 	 	 	 	(123.2	)	 	 	 	 	 	 	
Balance at December 31, 2003	 	 	4,493.3	 	 	174.5	 	 	174.5	 	 	610.6	 	 	3,978.7	 	 	(270.5	)	 	 	 	
Net earnings	 	 	1,218.7	 	 	 	 	 	 	 	 	 	 	 	1,218.7	 	 	 	 	 	$ 1,218.7	 	
Currency translation	 	 	168.7	 	 	 	 	 	 	 	 	 	 	 	 	 	 	168.7	 	 	168.7	 	
Change in fair value of derivatives qualifying	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
as cash flow hedges, net of tax of $0.4	 	 	3.1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3.1	 	 	3.1	 	
Minimum pension liability adjustment, net of tax of $103.7	 	 	161.5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	161.5	 	 	161.5	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ 1,552.0	 	
Shares issued under incentive stock plans	 	 	213.5	 	 	3.9	 	 	3.9	 	 	209.6	 	 	 	 	 	 	 	 	 	 	
Repurchase of common shares by subsidary	 	 	(355.9	)	 	(5.3	)	 	(5.3	)	 	(350.6	)	 	 	 	 	 	 	 	 	 	
Change in fiscal year end of subsidiary, net of tax of $7.3	 	 	(16.5	)	 	 	 	 	 	 	 	 	 	 	(16.5	)	 	 	 	 	 	 	
Cash dividends	 	 	(152.6	)	 	 	 	 	 	 	 	 	 	 	(152.6	)	 	 	 	 	 	 	
Balance at December 31, 2004	 	 	5,733.8	 	 	173.1	 	 	173.1	 	 	469.6	 	 	5,028.3	 	 	62.8	 	 	 	 	
Net earnings	 	 	1,054.2	 	 	 	 	 	 	 	 	 	 	 	1,054.2	 	 	 	 	 	$ 1,054.2	 	
Currency translation	 	 	(267.7	)	 	 	 	 	 	 	 	 	 	 	 	 	 	(267.7	)	 	(267.7	)	
Change in fair value of marketable securities and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
derivatives qualifying as cash flow hedges,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
net of tax of $0.3	 	 	5.7	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.7	 	 	5.7	 	
Minimum pension liability adjustment, net of tax of $60.5	 	 	71.6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	71.6	 	 	71.6	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ 863.8	 	
Shares issued under incentive stock plans	 	 	120.0	 	 	2.3	 	 	2.3	 	 	117.7	 	 	 	 	 	 	 	 	 	 	
Repurchase of common shares by subsidary	 	 	(763.6	)	 	(19.4	)	 	(19.4	)	 	(587.3	)	 	(156.9	)	 	 	 	 	 	 	
Stock split	 	 	-	 	 	174.7	 	 	174.7	 	 	 	 	 	(174.7	)	 	 	 	 	 	 	
Cash dividends	 	 	(192.0	)	 	 	 	 	 	 	 	 	 	 	(192.0	)	 	 	 	 	 	 	
Balance at December 31, 2005	 	 	$ 5,762.0	 	 	$ 330.7	 	 	330.7	 	 	$           -	 	 	$ 5,558.9	 	 	$ (127.6	)	 	 	 	
See accompanying Notes to Consolidated Financial Statements.

54

 

Ingersoll-Rand Company Limited	 	 	 	 	 	
Consolidated Statements of Cash Flows	 	 	 	 	 	
In millions	 	 	 	 	 	

For the years ended December 31,	 	2005	 	2004	 	2003	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
Net earnings	 	 	$ 1,054.2	 	 	$ 1,218.7	 	 	$ 644.5	 	
Income from discontinued operations, net of tax	 	 	1.1	 	 	388.9	 	 	111.7	 	
Income from continuing operations	 	 	1,053.1	 	 	829.8	 	 	532.8	 	
Adjustments to arrive at net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	
Restructure of operations	 	 	-	 	 	-	 	 	(3.2	)	
Depreciation and amortization	 	 	195.7	 	 	174.4	 	 	171.6	 	
Gain on sale of businesses	 	 	(1.5	)	 	-	 	 	-	 	
Gain on sale of property, plant and equipment	 	 	(2.4	)	 	(8.9	)	 	(5.7	)	
Minority interests, net of dividends	 	 	(1.3	)	 	6.3	 	 	4.6	 	
Equity earnings, net of dividends	 	 	0.4	 	 	(8.6	)	 	(0.1	)	
Deferred income taxes	 	 	64.0	 	 	(59.2	)	 	(26.9	)	
Other items	 	 	(42.0	)	 	(16.6	)	 	(46.2	)	
Changes in other assets and liabilities	 	 	 	 	 	 	 	 	 	 	
(Increase) decrease in:	 	 	 	 	 	 	 	 	 	 	
Accounts and notes receivable	 	 	(128.5	)	 	(70.1	)	 	(277.3	)	
Inventories	 	 	0.6	 	 	(174.8	)	 	13.4	 	
Other current and noncurrent assets	 	 	(219.1	)	 	(156.2	)	 	(49.1	)	
Increase (decrease) in:	 	 	 	 	 	 	 	 	 	 	
Accounts and notes payable	 	 	87.8	 	 	91.5	 	 	5.2	 	
Other current and noncurrent liabilities	 	 	(163.6	)	 	145.6	 	 	(180.7	)	
Net cash provided by continuing operating activities	 	 	843.2	 	 	753.2	 	 	138.4	 	
Net cash (used in) provided by discontinued operating activities (revised)	 	 	(34.1	)	 	27.3	 	 	24.8	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(111.8	)	 	(108.6	)	 	(99.3	)	
Proceeds from sale of property, plant and equipment	 	 	19.0	 	 	50.4	 	 	43.1	 	
Acquisitions, net of cash	 	 	(514.7	)	 	(33.7	)	 	(21.3	)	
Proceeds from business dispositions	 	 	11.4	 	 	1,413.2	 	 	751.4	 	
Proceeds from sales and maturities of marketable securities	 	 	-	 	 	0.3	 	 	147.6	 	
Purchase of marketable securities	 	 	(153.2	)	 	-	 	 	-	 	
Cash provided by (invested in) equity companies, net	 	 	7.6	 	 	7.6	 	 	(0.6	)	
Net cash (used in) provided by continuing investing activities	 	 	(741.7	)	 	1,329.2	 	 	820.9	 	
Net cash used in discontinued investing activities (revised)	 	 	-	 	 	(7.4	)	 	(2.7	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	
Decrease in short-term borrowings	 	 	(40.2	)	 	(16.3	)	 	(146.7	)	
Proceeds from long-term debt	 	 	301.7	 	 	-	 	 	-	 	
Payments of long-term debt	 	 	(198.8	)	 	(453.1	)	 	(792.9	)	
Net change in debt	 	 	62.7	 	 	(469.4	)	 	(939.6	)	
Redemption of preferred stock of subsidiaries	 	 	(73.6	)	 	-	 	 	-	 	
Proceeds from exercise of stock options	 	 	90.9	 	 	170.7	 	 	211.1	 	
Dividends paid	 	 	(192.1	)	 	(152.6	)	 	(123.2	)	
Purchase of treasury shares	 	 	(763.6	)	 	(355.9	)	 	-	 	
Net cash used in continuing financing activities	 	 	(875.7	)	 	(807.2	)	 	(851.7	)	
Net cash used in discontinued financing activities (revised)	 	 	-	 	 	(1.0	)	 	(0.3	)	
Effect of change in fiscal year end of businesses	 	 	-	 	 	(23.8	)	 	-	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	(14.2	)	 	16.5	 	 	2.6	 	
Net (decrease) increase in cash and cash equivalents	 	 	(822.5	)	 	1,286.8	 	 	132.0	 	
Cash and cash equivalents - beginning of period	 	 	1,703.1	 	 	416.3	 	 	284.3	 	
Cash and cash equivalents - end of period	 	 	$ 880.6	 	 	$ 1,703.1	 	 	$ 416.3	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the year for:	 	 	 	 	 	 	 	 	 	 	
Interest, net of amounts capitalized	 	 	$ 131.2	 	 	$ 124.2	 	 	$ 190.2	 	
Income taxes, net of refunds	 	 	$ 270.0	 	 	$ 170.8	 	 	$ 73.5	 	
See accompanying Notes to Consolidated Financial Statements.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies used in the preparation of the accompanying financial statements follows:

Basis of Presentation: The consolidated financial statements of Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited or the Company), have been prepared in accordance with generally accepted accounting principles in the United States. IR-Limited is the successor to Ingersoll-Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization (the reorganization) that became effective on December 31, 2001. The reorganization was accomplished through a merger of a newly formed merger subsidiary of IR-Limited. IR-Limited and its subsidiaries continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries. The reorganization has been accounted for as a reorganization of entities under common control and accordingly it did not result in any changes to the consolidated amounts of assets, liabilities and shareholders’ equity.

The results for Hussmann International, Inc. and its majority-owned affiliates had been on a 15-day lag for U.S. operations and a one-month lag for non-U.S. operations, since its acquisition in 2000. During the first quarter of 2004, these lags were eliminated, and the financial results were recorded on a current basis. The result of this action was a net loss of $16.5 million, which was recorded directly to retained earnings on the Consolidated Balance Sheet, and a resulting cash outflow of $23.8 million, which was shown as a separate line item on the Consolidated Statement of Cash Flows.

On August 3, 2005, the Company’s Board of Directors declared a two-for-one stock split, effected in the form of a stock distribution, payable on September 1, 2005, to shareholders of record on August 16, 2005. The Company retained the current par value of $1.00 per share for all common shares. All references in the financial statements and notes to the number of shares outstanding, per share amounts, and stock option data of the Company’s common shares have been restated to reflect the effect of the stock split for all periods presented. Shareholders’ equity reflects the stock split by reclassifying from “retained earnings” to “Class A common shares” an amount equal to the par value of the additional shares arising from the split as of the distribution date.

Use of Estimates: In conformity with generally accepted accounting principles, management has used estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Significant estimates include accounting for doubtful accounts, depreciation and amortization, inventory reserves, valuation of assets including goodwill and other intangible assets, products warranties, sales allowances, taxes, environmental, product liability, asbestos and other contingencies. Actual results could differ from those estimates.

Principles of Consolidation: The Company’s consolidated financial statements include all wholly owned and majority owned subsidiaries. Partially owned equity affiliates are accounted for under the equity method. The Company is also required to include variable interest entities in which it bears a majority of the risk to the entities’ potential losses or stands to gain from a majority of the entities’ expected returns. Intercompany transactions and balances have been eliminated.

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Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation.

Cash Flow Revision: The Company has revised its 2004 and 2003 consolidated statements of cash flows to separately disclose the operating, investing and financing portions of the cash flows attributable to its discontinued operations. The Company had previously reported these amounts on a combined basis.
 
Cash Equivalents: The Company considers all highly liquid investments, consisting primarily of time deposits and commercial paper with maturities of three months or less when purchased, to be cash equivalents. Cash equivalents were $498.5 million and $1,517.6 million at December 31, 2005 and 2004, respectively.

Marketable Securities: The Company invests in marketable securities and classifies the securities as available-for-sale under Statement of Financial Accounting Standard (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” In accordance with SFAS 115, available-for-sale marketable securities are accounted for at market prices, with the unrealized gain or loss, less applicable deferred income taxes, shown as a separate component of stockholders’ equity.

Included in short-term marketable securities are auction rate securities which are highly liquid, variable-rate debt securities. While the underlying security has a long-term nominal maturity, the interest rate is reset through Dutch auctions that are typically held every 7, 28, or 35 days, creating a short-term instrument. The securities trade at par and are callable at par on any interest payment date at the option of the issuer. Interest is paid at the end of the each auction period.

Inventories: Inventories are stated at cost, which is not in excess of market. Most U.S. manufactured inventories, excluding the Climate Control Technologies segment, are valued using the last-in, first-out (LIFO) method. All other inventories are valued using the first-in, first-out (FIFO) method.

Allowance for Doubtful Accounts and Inventory Reserves : The Company has provided an allowance for doubtful accounts receivable and inventory reserves using a Company policy formula based upon its knowledge of its end markets, customer base and products.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. The Company principally uses accelerated depreciation methods for assets placed in service prior to December 31, 1994. Fixed assets, excluding leasehold improvements, acquired subsequent to that date are depreciated using the straight-line method over their estimated useful lives. Leasehold improvements are depreciated using the shorter of their economic life or the lease term. Useful lives range from 10 to 50 years for buildings and improvements and from 3 to 12 years for machinery and equipment. At December 31, 2005 and 2004, gross land and buildings totaled $603.3 million and $570.4 million, respectively, while gross machinery and equipment totaled $1,391.5 million and $1,288.1 million, respectively. Accumulated depreciation at December 31, 2005 and 2004, was $918.8 million and $845.3 million, respectively. Depreciation expense was $135.5 million, $134.1 million and $133.0 million in 2005, 2004 and 2003, respectively.

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Goodwill and Other Intangible Assets: Goodwill and other intangible assets deemed to have indefinite lives are tested at least annually for impairment during the fourth quarter. The carrying value of goodwill and other intangibles is also reviewed if the facts and circumstances, such as a significant decline in sales, earnings or cash flows or material adverse changes in the business climate, suggest that it may be impaired. If this review indicates that goodwill will not be recoverable as determined based on the estimated discounted cash flows of the reporting unit, impairment is measured by comparing the carrying value of goodwill to fair value. Fair value is determined based on quoted market values, discounted cash flows or appraisals. The Company amortizes finite-lived intangible assets over their estimated useful lives on a straight-line basis, unless the economic benefits of the intangible are otherwise consumed.

Long-lived Assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment in the carrying value of an asset would be recognized whenever anticipated future undiscounted cash flows from an asset are less than its carrying value. The impairment is measured as the amount by which the carrying value exceeds the fair value of the asset as determined by an estimate of discounted cash flows.
 
Income Taxes: Deferred taxes are provided on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. A valuation allowance is established for deferred tax assets for which realization is not likely.

Product Warranties: Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. Warranty accruals are adjusted for known or anticipated warranty claims as new information becomes available.

Environmental Costs: Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not contribute to current or future revenues, are expensed. Costs to prepare environmental site evaluations and feasibility studies are accrued when the Company commits to perform them. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company's commitment to a plan of action. The assessment of this liability, which is calculated based on existing technology, does not reflect any offset for possible recoveries from insurance companies, and is not discounted.

Revenue Recognition: Revenue is generally recognized and earned when all of the following criteria are satisfied: (a) persuasive evidence of a sales arrangement exists; (b) price is fixed or determinable; and (c) collectibility is reasonably assured; and (d) delivery has occurred or service has been rendered. Delivery generally occurs when the title and the risks and rewards of ownership have substantially transferred to the customer. Revenue from maintenance contracts or extended warranties is recognized on a straight-line basis over the life of the contract, unless another method is more representative of the costs incurred. The Company enters into agreements that contain multiple elements, such as equipment, installation and service. For multiple-element arrangements, the Company recognizes revenue for delivered elements when the delivered item has stand-alone value to the customer, fair values or undelivered elements are known, customer acceptance has occurred, and there are only customary refund or return rights related to the delivered elements.

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Research and Development Costs: Research and development expenditures, including qualifying engineering costs, are expensed when incurred and amounted to $162.4 million in 2005, $149.2 million in 2004 and $164.5 million in 2003. The Company also incurs engineering costs that are not considered research and development expenditures.

Comprehensive Income: Comprehensive income includes net income, currency translation adjustments, amounts relating to cash flow hedges, additional minimum pension liability adjustments and unrealized holding gains and losses on marketable securities, net of taxes. The balances at December 31, 2005 and 2004, for the components of accumulated other comprehensive income were currency translation adjustment of $5.1 million and $272.9 million, unrealized gains on cash flow hedges of $(6.7) million and $(12.2) million, and minimum pension liability adjustments of $(126.2) million and $(197.9) million, respectively. The balance at December 31, 2005, also includes unrealized holding gains on marketable securities of $0.2 million.

Currency Translation: Assets and liabilities of non-U.S. entities, where the local currency is the functional currency, have been translated at year-end exchange rates, and income and expenses have been translated using average-for-the-year exchange rates. Adjustments resulting from translation have been recorded in accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying investment.

For non-U.S. entities where the U.S. dollar is the functional currency, inventory and property balances and related income statement accounts have been translated using historical exchange rates, and resulting gains and losses have been credited or charged to net earnings.

Net currency transaction gains (losses) recorded in “Other income, net” were, $2.2 million, $(9.6) million and $(6.3) million in 2005, 2004 and 2003, respectively.

Earnings Per Share: Basic earnings per share is based on the weighted-average number of Class A common shares outstanding. Diluted earnings per share is based on the weighted-average number of Class A common shares outstanding, as well as potentially dilutive common shares, which in the Company’s case include shares issuable under stock-based compensation plans. The weighted-average number of Class A common shares outstanding for basic earnings per share calculations was 337.6 million, 346.5 million and 342.2 million for 2005, 2004 and 2003, respectively. For diluted earnings per share purposes, these balances increased by 3.7 million, 4.4 million and 2.6 million shares for 2005, 2004 and 2003, respectively. For the years ended December 31, 2005 and 2003, 0.1 million and 3.8 million, respectively, were excluded because the effect would be anti-dilutive. There were no anti-dilutive shares for the year ended December 31, 2004.

Stock-based Compensation: Under the Company’s Incentive Stock Plans, approved in 1990, 1995, and 1998, key employees have been granted options to purchase Class A common shares. The Company accounts for these plans under the recognition and measurement principles of APB No. 25, “Accounting for Stock Issued to Employees.” Accordingly, no compensation expense is recognized for employee stock options since options granted are at prices not less than fair market value at the date of grant. The plans also authorize stock appreciation rights (SARs) and stock awards, which result in compensation expense. Additionally, the Company maintains a shareholder-approved Management Incentive Unit Award Plan, which results in compensation expense. All plans are described more fully in Note 10, Incentive Stock Plans.

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On December 7, 2005, the Compensation Committee of the Board of Directors of the Company approved the acceleration of the vesting of all outstanding and unvested stock options under the Company’s stock plans for active employees, effective December 31, 2005. This acceleration facilitates the transition to the new accounting standard, SFAS 123(R), “Share Based Payments,” by providing a consistent application of the accounting rules for stock-based compensation for the Company’s 2006 and future SFAS 123(R) compensation expense. As a result of the acceleration, 9.7 million stock options became exercisable, with exercise prices ranging from $19.53 to $39.85 and a weighted average exercise price of $34.95. Options issued on or prior to December 31, 2002, were fully vested as of December 31, 2005. In addition to the acceleration of the vesting date, the terms and conditions of the stock option agreements governing the stock options were changed to prohibit transfers (including sales, gifts, pledges or other transfers of any kind) of any shares acquired through the exercise of these accelerated options until the earlier of (i) the original vesting date of the option or (ii) termination of employment, retirement, death or disability.

In connection with the modification of the terms of these options to accelerate their vesting, approximately $41.9 million, net of tax, is included in the pro forma table below for the fiscal year ended December 31, 2005, representing the remaining unamortized value of the newly vested options. In accordance with FIN 44, “Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB 25”, the company recognized $1.0 million (pre-tax) as compensation expense in the income statement upon acceleration of the vesting of the options. The compensation expense represents the intrinsic value for the estimated number of stock options that would have been forfeited had the acceleration not occurred.

The following table is presented in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” and illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

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 	 	For the years ended December 31,	 	
In millions, except per share amounts	 	2005	 	2004	 	2003	 	
Net earnings, as reported	 	 	$ 1,054.2	 	 	$ 1,218.7	 	 	$ 644.5	 	
Add: Stock-based employee compensation expense included in reported net income, net of tax	 	5.8	 	 	34.0	 	 	34.4	 	
Deduct: Total stock-based employee compensation expense determined under	 	 	 	 	 	 	 	 	 	 	
fair value based method for all awards, net of tax	 	 	79.8	 	 	63.9	 	 	60.5	 	
Pro forma net earnings	 	 	$ 980.2	 	 	$ 1,188.8	 	 	$ 618.4	 	
 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share:	 	 	 	 	 	 	 	 	 	 	
As reported	 	 	$ 3.12	 	 	$ 3.52	 	 	$ 1.88	 	
Pro forma	 	 	2.90	 	 	3.43	 	 	1.81	 	
 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share:	 	 	 	 	 	 	 	 	 	 	
As reported	 	 	$ 3.09	 	 	$ 3.47	 	 	$ 1.87	 	
Pro forma	 	 	2.87	 	 	3.39	 	 	1.80	 	

New Accounting Standards: In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (SFAS 151). SFAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS 151 is effective for the Company on January 1, 2006. The adoption of SFAS 151 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share Based Payment” (SFAS 123(R)). SFAS 123(R) is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” which supersedes Accounting Principles Board (APB) No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123(R) requires companies to recognize compensation expense in the income statement for an amount equal to the fair value of the share-based payment issued. This applies to all transactions involving the issuance of equity by a company in exchange for goods and services, including employees. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) outlining the SEC Staff’s interpretation of SFAS 123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. Subsequently in August, October and November 2005, the FASB released Financial Staff Position (FSP) 123(R)-1, “Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R),” FSP 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R)” and FSP 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” Additionally on February 1, 2006, the FASB agreed to issue FSP 123(R)-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event.” The FSPs clarify certain accounting provisions set forth in SFAS 123(R). The Company will adhere to the requirements and guidance prescribed in SFAS 123(R), SAB 107 and the FSPs in connection with its adoption in the first quarter of 2006. The Company estimates that the impact on 2006 earnings will approximate $0.03 to $0.04 of cost per share for the year.

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In December 2004, the FASB released Financial Staff Position 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (FSP 109-2). The American Jobs Creation Act (AJCA) provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated in either an enterprise’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. FSP 109-2 allows time for enterprises beyond the financial reporting period of enactment to evaluate the effect of the AJCA on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. We have completed our review of the foreign earnings repatriation provision of the AJCA. We concluded that, given the effective foreign tax rates applicable to our unrepatriated earnings, as well as certain restrictions in the AJCA and in the laws of other jurisdictions, and the composition of other tax attributes, the foreign earnings repatriation provision of the AJCA does not provide a material financial benefit to the Company. Based on that analysis, we do not plan to change our existing repatriation practices as a result of the AJCA.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 requires an entity to recognize a liability for a conditional asset retirement obligation when incurred if the liability can be reasonably estimated. The Interpretation also clarifies that the term Conditional Asset Retirement Obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 was effective for the Company on December 31, 2005, and the adoption did not have a material impact on its consolidated financial position, results of operations and cash flows.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (SFAS 154), which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes a retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of SFAS 154 to have a material impact on its consolidated financial position and results of operations.

NOTE 2 - DISCONTINUED OPERATIONS
The Company has continued its transition to become a more diversified company with strong growth prospects by divesting cyclical, low-growth, asset intensive businesses. In 2004, the Company sold its Dresser-Rand and Drilling Solutions businesses. Dresser-Rand was engaged in the design, manufacture, sale, and service of gas compressors, gas and steam turbines, and generators. Dresser-Rand had 2003 revenues of approximately $1.3 billion and employed approximately 4,500 people, with manufacturing and service facilities worldwide. Drilling Solutions manufactured drilling equipment and accessories for the worldwide construction, mining, quarrying, and water-well drilling industries. Drilling Solutions had 2003 revenues of approximately $300 million and employed approximately 950 people. During 2003, the Company sold its Engineered Solutions, Laidlaw and Waterjet businesses. In 2000, the Company sold its Ingersoll-Dresser Pump Company (IDP) business. Discontinued operations include the operating results, gains and on-going costs for each of these businesses during the respective periods.

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Discontinued operations for the year ended December 31, 2005, amounted to income of $1.1 million, net of tax benefits of $48.2 million. This total includes net after tax gains of $35.2 million, mainly due to Ingersoll-Dresser Pump Company (IDP) ($12.0 million), Dresser-Rand ($10.3 million) and Waterjet ($12.2 million), primarily from the resolution of tax matters regarding these divestitures. The after-tax loss from on-going discontinued operations costs amounted to $34.1 million. These costs are mainly due to Engineered Solutions ($7.7 million), IDP ($18.3 million) and Dresser-Rand ($6.3 million), and include product liability costs, primarily related to asbestos liability claims, environmental costs and employee benefit costs.

Discontinued operations for the year ended December 31, 2004, amounted to income of $388.9 million, net of tax provisions of $343.5 million. This total includes net after tax gains of $334.9 million, primarily comprised of gains from the sales of Dresser-Rand ($282.5 million) and Drilling Solutions ($38.6 million). After-tax income from discontinued operations amounted to $54.0 million. This income mainly includes profit from Dresser-Rand ($45.0 million) and Engineered Solutions ($20.9 million), which includes an antidumping subsidy net of tax of $29.5 million. This income is partially offset by retained costs related to IDP ($14.9 million), which mostly include product liability costs, primarily related to asbestos liability claims, and employee benefit costs.

Discontinued operations for the year ended December 31, 2003, amounted to income of $111.7 million, net of tax provisions of $58.6 million. This total includes net after tax gains of $68.8 million, comprised of gains from the sales of Engineered Solutions ($58.2 million) and Waterjet ($18.2 million), offset by a loss from the sale of Laidlaw ($7.6 million). After-tax income from discontinued operations amounted to $42.9 million. This income principally includes profit from Dresser-Rand ($41.1 million) and Drilling Solutions ($19.6 million), partially offset by retained costs related to IDP ($19.8 million), which include product liability costs, primarily related to asbestos liability claims, and employee benefit costs.
 
Net revenues and pretax earnings for discontinued operations are as follows:

In millions	 	2005	 	2004	 	2003	 	
Net revenues	 	 	$        -	 	 	$ 882.0	 	 	$ 1,822.2	 	
Pretax (loss) earnings	 	 	(51.4	)	 	64.0	 	 	30.2	 	

NOTE 3 - INVENTORIES
At December 31, inventories were as follows:

In millions	 	2005	 	2004	 	
Raw materials and supplies	 	 	$ 436.3	 	 	$ 359.4	 	
Work-in-process	 	 	193.4	 	 	190.1	 	
Finished goods	 	 	622.4	 	 	612.3	 	
 	 	 	1,252.1	 	 	1,161.8	 	
Less - LIFO reserve	 	 	123.3	 	 	103.0	 	
Total	 	 	$ 1,128.8	 	 	$ 1,058.8	 	
 
At December 31, 2005 and 2004, LIFO inventories were approximately 37% and 38%, respectively, of inventories. During 2005, 2004 and 2003, certain LIFO inventory quantities were reduced, which resulted in a liquidation of LIFO inventory layers carried at lower costs than in prior years. The effect of the liquidation was to decrease cost of goods sold by $3.0 million, $1.7 million and $7.2 million, respectively, and to increase after-tax earnings by $1.8 million, $1.0 million and $4.4 million, respectively.

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets deemed to have indefinite lives are no longer subject to amortization, but rather are tested at least annually for impairment during the fourth quarter. All finite-lived intangible assets are amortized over their estimated useful lives.

The changes in the carrying amount of goodwill are as follows:

 	 	Climate	 	Compact	 	 	 	 	 	 	 	 	 	
 	 	Control	 	Vehicle	 	Construction	 	Industrial	 	Security	 	 	 	
In millions	 	Technologies	 	Technologies	 	Technologies	 	Technologies	 	Technologies	 	Total	 	
Balance at December 31, 2003	 	 	$ 2,577.6	 	 	$ 798.3	 	 	$ 103.3	 	 	$ 112.2	 	 	$ 571.2	 	 	$ 4,162.6	 	
Acquisitions	 	 	0.2	 	 	-	 	 	-	 	 	3.5	 	 	1.6	 	 	5.3	 	
Dispositions	 	 	(0.6	)	 	-	 	 	(3.3	)	 	-	 	 	(1.4	)	 	(5.3	)	
Translation and adjustments*	 	 	41.5	 	 	3.1	 	 	1.3	 	 	3.7	 	 	(1.2	)	 	48.4	 	
Balance at December 31, 2004	 	 	2,618.7	 	 	801.4	 	 	101.3	 	 	119.4	 	 	570.2	 	 	4,211.0	 	
Acquisitions	 	 	3.9	 	 	0.3	 	 	10.8	 	 	23.0	 	 	371.1	 	 	409.1	 	
Dispositions	 	 	(0.3	)	 	-	 	 	-	 	 	-	 	 	-	 	 	(0.3	)	
Translation and adjustments*	 	 	(108.1	)	 	(7.2	)	 	(0.4	)	 	(5.0	)	 	(65.7	)	 	(186.4	)	
Balance at December 31, 2005	 	 	$ 2,514.2	 	 	$ 794.5	 	 	$ 111.7	 	 	$ 137.4	 	 	$ 875.6	 	 	$ 4,433.4	 	
* Includes current year adjustments related to income taxes and final purchase price allocations.

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The Company initially records to goodwill the excess of the purchase price over the preliminary valuation of the net assets acquired. Once the final valuation has been performed for each acquisition, the Company may record an adjustment to goodwill. The Company made several acquisitions during 2005.

The following table sets forth the gross amount and accumulated amortization of the Company’s intangible assets at December 31:

 	 	2005	 	2004	 	
 	 	Gross	 	  Accumulated	 	Gross	 	  Accumulated	 	
In millions	 	amount	 	  amortization	 	amount	 	  amortization	 	
Customer relationships	 	 	$ 484.0	 	 	$ 58.6	 	 	$ 384.9	 	 	$ 44.5	 	
Software	 	 	169.6	 	 	88.0	 	 	141.6	 	 	61.3	 	
Trademarks	 	 	93.7	 	 	5.3	 	 	12.1	 	 	6.5	 	
Patents	 	 	36.6	 	 	23.5	 	 	26.5	 	 	21.2	 	
Other	 	 	55.4	 	 	20.8	 	 	45.1	 	 	13.9	 	
Total amortizable intangible assets	 	 	839.3	 	 	196.2	 	 	610.2	 	 	147.4	 	
Total indefinite-lived intangible assets - trademarks	 	 	155.4	 	 	-	 	 	155.4	 	 	-	 	
Total	 	 	$ 994.7	 	 	$ 196.2	 	 	$ 765.6	 	 	$ 147.4	 	
 
The Company follows the guidance outlined in Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” for all software developed or obtained for internal use, which requires companies to capitalize certain internal-use software costs once specific criteria are met. Software amortization expense was $28.1 million, $25.0 million and $21.6 million for 2005, 2004 and 2003, respectively. Other intangible asset amortization expense for 2005, 2004 and 2003 was $30.5 million, $14.4 million and $14.2 million, respectively.

Estimated intangible asset amortization expense for each of the next five fiscal years is expected to be $35.6 million in 2006, $33.4 million in 2007, $27.9 million in 2008, $19.9 million in 2009 and $16.2 million in 2010.
 
NOTE 5 - MARKETABLE SECURITIES
At December 31, 2005, available-for-sale marketable securities consisted of the following:
 
In millions	 	Amortized
Cost or Cost	 	Gross
Unrealized
Gains	 	 
Fair Value	 	
Short-term marketable securities:	 	 	 	 	 	 	 	
Equity securities	 	 	$ 0.6	 	 	$    -	 	 	$ 0.6	 	
Commercial paper	 	 	4.5	 	 	-	 	 	4.5	 	
Municipal bonds	 	 	151.4	 	 	-	 	 	151.4	 	
Total	 	 	$ 156.5	 	 	$   -	 	 	$ 156.5	 	
 	 	 	 	 	 	 	 	 	 	 	
Long-term marketable securities:	 	 	 	 	 	 	 	 	 	 	
Equity securities	 	 	$ 20.6	 	 	$ 0.3	 	 	$ 20.9	 	
Total	 	 	$ 20.6	 	 	$ 0.3	 	 	$ 20.9	 	

Long-term marketable securities are included in “Other Assets” on the Consolidated Balance Sheet as of December 31, 2005. At December 31, 2004, the Company had $0.6 million of short-term equity securities with minimal unrealized gain.

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NOTE 6 - FINANCIAL INSTRUMENTS
The Company, as a large multinational company, maintains significant operations in countries other than the United States. As a result of these global activities, the Company is exposed to changes in currency exchange rates, which affect the results of operations and financial condition. The Company manages exposure to changes in currency exchange rates through its normal operating and financing activities, as well as through the use of financial instruments. Generally, the only financial instruments the Company utilizes are forward exchange contracts.

The purpose of the Company's currency hedging activities is to mitigate the impact of changes in currency exchange rates. The Company attempts to hedge transaction exposures through natural offsets. To the extent that this is not practicable, major exposure areas considered for hedging include non-U.S. denominated receivables and payables, intercompany loans, firm-committed transactions, and forecasted sales and purchases. The estimated fair value of currency forward contracts outstanding was a projected gain of $3.0 million and a projected loss of $16.6 million at December 31, 2005 and 2004, respectively. The notional amount of the currency forward contracts was $252.1 million and $282.7 million at December 31, 2005 and 2004, respectively.
 
The Company purchases, on a limited basis, commodity derivatives to hedge the variable portion in supplier contracts of the costs of metals used in its products. Gains and losses on the derivatives are included in cost of sales in the same period as the hedged transaction. During 2004, fixed-priced supplier agreements replaced maturing commodity forward contracts, which decreased the number of outstanding contracts at December 31, 2004. The fair value of outstanding commodity contracts at December 31, 2005 and 2004, were minimal. The notional amount of the outstanding commodity contracts was $0.7 million and $1.2 million at December 31, 2005 and 2004, respectively.
 
The Company entered into interest rate locks for the second quarter issuance of $300 million of its Senior Notes due 2015. These interest rate locks met the criteria to be accounted for as cash flow hedges of a forecasted transaction. Consequently, the changes in fair value of the interest rate locks were deferred in accumulated other comprehensive income and will be recognized into interest expense over the life of the debt.

Included in accumulated other comprehensive income at December 31, 2005, is $3.4 million related to the fair value of currency derivatives qualifying as cash flow hedges and $0.3 million related to an interest rate swap qualified as a cash flow hedge of a forecasted issuance of debt, both of which are expected to be reclassified to earnings over the next twelve months. Additionally a $10.4 million loss, related to interest rate locks qualified as cash flow hedges, is included in accumulated other comprehensive income. During the next twelve months, $0.9 million is expected to be reclassified to earnings, with the remaining loss reclassified over the next 10 years. The actual amounts that will be reclassified to earnings may vary from this amount as a result of changes in market conditions. No material amounts were reclassified to earnings during 2005 in connection with forecasted transactions that were no longer considered probable of occurring. Fair values of forward contracts are based on dealer quotes at the respective reporting dates. At December 31, 2005, the maximum term of derivative instruments that hedge forecasted transactions was 12 months.

The counterparties to the Company's forward contracts consist of a number of major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, credit ratings and concentration of risk of these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.

The carrying value of cash and cash equivalents, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments.

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NOTE 7 - DEBT AND CREDIT FACILITIES
At December 31, loans payable consisted of the following:

In millions	 	2005	 	2004	 	
Current portion of long-term debt	 	 	$ 856.6	 	 	$ 551.0	 	
Other short-term borrowings	 	 	76.1	 	 	61.8	 	
Total	 	 	$ 932.7	 	 	$ 612.8	 	

Excluding current maturities of long-term debt, the weighted-average interest rate for short-term debt at December 31, 2005 and 2004, was 12.6% and 11.2%, respectively.
 
At December 31, long-term debt consisted of:

In millions	 	2005	 	2004	 	
6.25% Notes Due 2006	 	 	$          -	 	 	$ 529.8	 	
6.57% Medium-term Note Due 2007	 	 	40.0	 	 	40.0	 	
6.75% Senior Notes Due 2008	 	 	124.8	 	 	124.7	 	
4.75% Senior Notes Due 2015	 	 	298.9	 	 	-	 	
9.00% Debentures Due 2021	 	 	125.0	 	 	125.0	 	
7.20% Debentures Due 2007-2025	 	 	142.5	 	 	150.0	 	
6.48% Debentures Due 2025	 	 	149.7	 	 	-	 	
6.44% Debentures Due 2027	 	 	200.0	 	 	200.0	 	
Medium-term Notes Due 2023, at an average rate of 8.22%	 	 	50.3	 	 	50.3	 	
Other loans and notes, at end-of-year average interest rates of 3.06%	 	 	 	 	 	 	 	
in 2005 and 2.70% in 2004, maturing in various amounts to 2016	 	 	53.1	 	 	47.8	 	
Total	 	 	$ 1,184.3	 	 	$ 1,267.6	 	

The fair value of long-term debt, including current maturities of long-term debt, at December 31, 2005 and 2004, was $2,191.5 million and $1,990.8 million, respectively. The fair value of long-term debt was determined by reference to the December 31, 2005, and 2004, market values of comparably rated debt instruments.

During the second quarter of 2005, the Company issued $300 million aggregate principal amount of its 4.75% Senior Notes due in 2015. The Company's public debt has no financial covenants and its $2.0 billion revolving credit lines have a debt-to-total capital covenant of 65%, which is calculated excluding non-cash items. As of December 31, 2005, the Company’s debt-to-total capital ratio was significantly beneath this limit.

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During 2005 the company retired approximately $145.5 million of long-term debt prior to its scheduled maturity. Debt retirements for the next five years are as follows: $856.6 million in 2006, $282.7 million in 2007, $136.5 million in 2008, $10.5 million in 2009 and $10.5 million in 2010. Long-term debt retirements include $349.1 million for 2006 and $200.0 million for 2007, which only requires repayment at the option of the holder. If these options are not exercised, the final maturity dates of the instruments would range between 2025 and 2028.

At December 31, 2005, the Company’s committed revolving credit lines consisted of two five-year lines totaling $2.0 billion of which $750 million expires in June 2009 and $1.25 billion expires in August 2010. These lines were unused and provide support for commercial paper and indirectly provide support for other financing instruments, such as letters of credit and comfort letters, as required in the normal course of business. The Company compensates banks for these lines with fees equal to a weighted average of .0775% per annum. Available non-U.S. lines of credit were $667.8   million, of which $510.9 million were unused at December 31, 2005. These lines provide support for bank guarantees, letters of credit and other working capital purposes.

Capitalized interest on construction and other capital projects amounted to $2.9 million, $2.2 million and $3.1 million in 2005, 2004 and 2003, respectively. Interest income, included in other income, net, was $29.6 million, $12.3 million and $2.5 million for 2005, 2004 and 2003, respectively.
 
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigations, claims and administrative proceedings, including environmental and product liability matters. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that the liability which may result from these legal matters would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.

Environmental remediation costs are determined on a site-by-site basis and accruals are made when it is probable a liability exists and the cost can be estimated reasonably. The Company estimates the amount of recurring and non-recurring costs at each site using internal and external experts. In arriving at cost estimates the following factors are considered: the type of contaminant, the stage of the clean-up, applicable law and existing technology. These estimates, and the resultant accruals, are reviewed and updated quarterly to reflect changes in facts and law. The Company does not discount its liability or assume any insurance recoveries when environmental liabilities are recorded.

Certain wholly owned subsidiaries of the Company are named as defendants in asbestos-related lawsuits in state and federal courts. In virtually all of the suits, a large number of other companies have also been named as defendants. The vast majority of those claims have been filed against IR-New Jersey and generally allege injury caused by exposure to asbestos contained in certain of IR-New Jersey’s products. Although IR-New Jersey was neither a producer nor a manufacturer of asbestos, some of its formerly manufactured products utilized asbestos-containing components, such as gaskets purchased from third-party suppliers.

All asbestos-related claims resolved to date have been dismissed or settled. For the year ended December 31, 2005, total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $16.8 million, compared with $16.5 million for the year ended December 31, 2004. With the assistance of independent advisors, the Company performs a thorough analysis, updated periodically, of its actual and anticipated future asbestos liabilities projected seven years in the future. Based upon such analysis, the Company believes that its reserves and insurance are adequate to cover its asbestos liabilities, and that these asbestos liabilities are not likely to have a material adverse effect on its financial position, results of operations, liquidity or cash flows.

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Legislation currently under consideration in Congress concerns pending and future asbestos-related personal injury claims. Whether and when such legislation will become law, and the final provisions of such legislation, are unknown. Consequently, the Company cannot predict with any reasonable degree of certainty what effect, if any, such legislation would have upon the Company’s financial position, results of operations or cash flows.

The Company sells products on a continuous basis under various arrangements through institutions that provide leasing and product financing alternatives to retail and wholesale customers. Under these arrangements, the Company is contingently liable for loan guarantees and residual values of equipment of approximately $7.7 million, including consideration of ultimate net loss provisions. The risk of loss to the Company is minimal, and historically, only immaterial losses have been incurred relating to these arrangements since the fair value of the underlying equipment that serves as collateral is generally in excess of the contingent liability. Management believes these guarantees will not adversely affect the consolidated financial statements.
 
The Company has remained contingently liable for approximately $25.7 million relating to performance bonds associated with prior sale of products of IDP, which the Company divested in 2000. The acquirer of IDP is the primary obligor under these performance bonds; however, should the acquirer default under these arrangements the Company would be required to satisfy these financial obligations. The Company estimates that $24.6 million of the obligation will expire during 2006. The remainder extends through 2008.

The Company is contingently liable for customs duties in certain non-U.S. countries which totaled $7.0 million at December 31, 2005. These amounts are not accrued as the Company intends on exporting the product to another country for final sale.

In connection with the disposition of certain businesses and facilities, the Company has indemnified the purchasers for the expected cost of remediation of environmental contamination, if any, existing on the date of disposition. Such expected costs are accrued when environmental assessments are made or remedial efforts are probable and the costs can be reasonably estimated.

The following table represents the changes in the product warranty liability for 2005 and 2004:

In millions	 	2005	 	2004	 	
Balance at beginning of year	 	 	$ 190.5	 	 	$ 160.3	 	
Reductions for payments	 	 	(85.4	)	 	(74.2	)	
Accruals for warranties issued during the current period	 	 	70.2	 	 	94.7	 	
Changes for accruals related to preexisting warranties	 	 	11.9	 	 	1.5	 	
Acquisitions	 	 	1.1	 	 	-	 	
Translation	 	 	(4.8	)	 	8.2	 	
Balance at end of the year	 	 	$ 183.5	 	 	$ 190.5	 	
 
Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased. Total rental expense was $61.9 million in 2005, $62.7 million in 2004 and $64.3 million in 2003. Minimum lease payments required under noncancellable operating leases with terms in excess of one year for the next five years and thereafter, are as follows: $58.5 million in 2006, $47.0 million in 2007, $35.1 million in 2008, $21.1 million in 2009, $13.7 million in 2010 and $14.7 million thereafter.

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NOTE 9 - COMMON SHARES
In August 2005, the Board of Directors declared a two-for-one stock split of the Company’s Class A common shares to be effected in the form of a stock distribution. The additional shares of stock were distributed to shareholders on September 1, 2005. All share and per share amounts presented have been retroactively restated for the stock split. Shareholders’ equity reflects the stock split by reclassifying from “Retained earnings” to “Class A common shares” an amount equal to the par value of the additional shares arising from the split as of the distribution date.
 
Effective December 31, 2001, IR-Limited became the successor to IR-New Jersey, following a corporate reorganization. The reorganization was accomplished through a merger of a newly formed merger subsidiary into IR-New Jersey. Upon consummation of the merger the shares of IR-New Jersey common stock automatically became IR-Limited Class A common shares. As part of the reorganization, IR-New Jersey and certain of its subsidiaries, immediately prior to the merger transferred shares of certain IR-New Jersey subsidiaries and issued certain debt in exchange for which IR-Limited issued 270,500,006 Class B common shares. The Class B common shares are non-voting and pay comparable dividends to the Class A common shares. The authorized share capital of IR-Limited is $1,175,010,000, consisting of (1) 1,175,000,000 common shares, par value $1.00 per share, which common shares consist of (a) 600,000,000 Class A common shares and (b) 575,000,000 Class B common shares, and (2) 10,000,000 preference shares, par value $0.001 per share. Class A common shares (and associated preference share purchase rights) were issued to holders of IR-New Jersey common stock in the merger. No preference shares were outstanding at December 31, 2005 or 2004.

On August 3, 2005, the Board of Directors of the Company expanded the Company’s existing share repurchase program to allow the repurchase of up to a total of $2 billion worth of Class A common shares. The plan was established on August 4, 2004, and initially authorized the Company to repurchase up to 20 million Class A common shares. During 2005, the Company repurchased 19.4 million Class A common shares at a cost of $763.6 million. Total purchases under the program as of December 31, 2005, have been 23.4 million Class A common shares at a cost of $903.7 million. Based on market conditions, share repurchases will be made from time to time in the open market and in privately negotiated transactions at the discretion of management. This long-term repurchase program will serve primarily to offset dilution from the Company’s incentive stock plan. Class A common shares owned by a subsidiary are treated as treasury shares and are recorded at cost.

The Company has adopted a shareholder rights plan to protect shareholders from attempts to acquire control of the Company at an inadequate price. The plan will expire on December 22, 2008, unless redeemed or exchanged earlier by the Company, as provided in the rights plan. Under the rights plan, one preference share purchase right was distributed for each Class A common share. As a result of the two-for-one stock split in September 2005, the rights were adjusted so that each issued share of Class A common share now has associated with it one-half of a right. The rights only become exercisable, and will trade separately from the Class A common shares, 10 days after the first public announcement that any person or group has acquired at least 15% of the Company’s outstanding Class A common shares or on the 10 th day following the commencement or the announcement of an intention to commence a tender offer, which would result in that person or group acquiring a beneficial ownership of at least 15% of the outstanding Class A common shares. Each right entitles a holder to purchase one-thousandth of a share of Series A preferred stock at an exercise price of $200.

69

If any person or group acquires 15% or more of the Company’s Class A common shares, the rights not held by the 15% shareholder would become exercisable to purchase the Company’s Class A common shares at a 50% discount. The plan provides that, at any time after a person or group becomes an acquiring person and prior to the acquisition by that person or group of 50% or more of the outstanding Class A common shares, the Board may exchange the rights (other than the rights held by the acquiring person, which will have become void), at an exchange ratio of one Class A common share per two rights. The Company may elect to redeem the rights at $0.01 per right.

Annual dividends per common share were $0.57, $0.44, and $0.36, for 2005, 2004 and 2003, respectively.

NOTE 10 - INCENTIVE STOCK PLANS
Under the Company's Incentive Stock Plans, key employees have been granted options to purchase Class A common shares at prices not less than the fair market value at the date of the grant. Options issued before December 31, 1998, became exercisable one year after the date of the grant and expire at the end of 10 years. Options issued after January 1, 1999, generally become exercisable ratably over a three-year period from their date of grant and expire at the end of 10 years. On December 7, 2005, the Compensation Committee of the Board of Directors of the Company approved the acceleration of the vesting of all outstanding and unvested stock options under the Company’s stock plans for active employees effective December 31, 2005. The terms and conditions of the stock option agreements governing the stock options were changed to prohibit transfers (including sales, gifts, pledges or other transfers of any kind) of any shares acquired through the exercise of these accelerated options until the earlier of (i) the original vesting date of the option or (ii) termination of employment, retirement, death or disability. The plans, approved by shareholders in 1990, 1995 and 1998, also authorize stock appreciation rights (SARs) and stock awards, which result in compensation expense. The total number of stock incentives authorized by the 1998 amended plan is 60,000,000.

The average fair values of the options granted during 2005, 2004 and 2003 were estimated at $12.67, $11.39, and $6.58, respectively, on the date of grant, using the Black-Scholes option-pricing model, which included the following assumptions:

 	 	2005	 	2004	 	2003	 	
Dividend yield	 	 	1.30	%	 	1.19	%	 	1.75	%	
Volatility	 	 	35.57	%	 	39.31	%	 	39.83	%	
Risk-free interest rate	 	 	3.60	%	 	3.29	%	 	3.12	%	
Expected life	 	 	5 years	 	 	5 years	 	 	5 years	 	

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Changes in options outstanding under the plans were as follows:
 	 	Shares	 	 	 	 	 	 	 	Weighted-	 	
 	 	subject	 	Option price	 	average	 	
 	 	to option	 	range per share	 	exercise price	 	
December 31, 2002	 	 	26,846,102	 	 	$ 10.82	 	 	-	 	$ 34.88	 	 	$ 21.70	 		
Granted	 	 	6,206,642	 	 	19.53	 	 	-	 	31.56	 	 	19.61	 		
Exercised	 	 	(10,331,678	)	 	10.82	 	 	-	 	26.52	 	 	20.28	 		
Cancelled	 	 	(1,424,072	)	 	19.53	 	 	-	 	32.71	 	 	21.83	 		
December 31, 2003	 	 	21,296,994	 	 	$ 12.04	 	 	-	 	$ 34.88	 	 	$ 21.77	 		
Granted	 	 	6,555,680	 	 	32.18	 	 	-	 	37.96	 	 	32.24	 		
Exercised	 	 	(7,847,656	)	 	12.04	 	 	-	 	32.71	 	 	21.85	 		
Cancelled	 	 	(1,151,544	)	 	18.43	 	 	-	 	32.19	 	 	25.38	 		
December 31, 2004	 	 	18,853,474	 	 	$ 13.11	 	 	-	 	$ 37.96	 	 	$ 25.19	 		
Granted	 	 	6,091,600	 	 	38.47	 	 	-	 	39.85	 	 	38.70	 		
Exercised	 	 	(3,921,949	)	 	13.10	 	 	-	 	38.69	 	 	23.10	 		
Cancelled	 	 	(1,140,649	)	 	18.42	 	 	-	 	38.69	 	 	33.77	 		
December 31, 2005	 	 	19,882,476	 	 	$ 16.83	 	 	-	 	$ 39.85	 	 	$ 29.26	 		

At December 31, 2005, there were 1,766,934 SARs outstanding with no stock options attached. The Company has reserved 20,457,789 shares for future incentive stock awards at December 31, 2005.

The following table summarizes information concerning currently outstanding and exercisable options:
 
 	 	 	 	 	Options outstanding  	 	  Options exercisable  	 	
Range of
 exercise price	 	Number
 outstanding
 at 12/31/05	 	  Weighted-
 average
 remaining life	 	Weighted-
average
 exercise price	 	  Number
 exercisable
 at 12/31/05	 	Weighted-
 average
 exercise price	 	
$ 15.01	 	-	$ 20.00	 	3,182,959	 	5.9	 	$ 19.50	 	3,182,959	 	$ 19.50	 	
 	20.01	 	-	 	25.00	 	4,083,116	 	4.4	 	 	21.57	 	4,083,116	 	 	21.57	 	
 	25.01	 	-	 	30.00	 	1,831,050	 	3.3	 	 	26.21	 	1,831,050	 	 	26.21	 	
 	30.01	 	-	 	35.00	 	5,245,317	 	7.1	 	 	32.25	 	5,245,317	 	 	32.25	 	
 	35.01	 	-	 	40.00	 	5,540,034	 	8.9	 	 	38.70	 	5,540,034	 	 	38.70	 	
 	 	 	 	 	 	 	19,882,476	 	6.5	 	$ 29.26	 	19,882,476	 	$ 29.26	 	
 
The number of shares exercisable and the weighted-average exercise prices were 8,968,204 shares at a price of $23.00 for December 31, 2004, and 10,968,880 shares at a price of $23.11 for December 31, 2003.

The Company also maintains a shareholder-approved Management Incentive Unit Award Plan. Under the plan, participating executives are awarded incentive units. When dividends are paid on Class A common shares, dividends are awarded to unit holders, one-half of which is paid in cash, the remaining half of which is credited to the participant's account in the form of so-called Class A common share equivalents. The fair value of accumulated common share equivalents is paid in cash upon the participant's retirement. The number of common share equivalents credited to participants’ accounts at December 31, 2005 and 2004 are 316,165 and 396,062, respectively.

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NOTE 11 - INCOME TAXES
Earnings before income taxes for the years ended December 31, were taxed within the following jurisdictions:
 
In millions	 	2005	 	2004	 	2003	 	
United States	 	 	$ 337.2	 	 	$ 199.9	 	 	$ (33.3	)	
Non-U.S.	 	 	920.6	 	 	768.3	 	 	641.4	 	
Total	 	 	$ 1,257.8	 	 	$ 968.2	 	 	$ 608.1	 	

The provision was as follows:

In millions	 	2005	 	2004	 	2003	 	
Current tax expense:	 	 	 	 	 	 	 	 	 	 	
United States	 	 	$ 63.8	 	 	$ 132.6	 	 	$ 53.9	 	
Non-U.S.	 	 	76.9	 	 	65.0	 	 	48.3	 	
Total current	 	 	140.7	 	 	197.6	 	 	102.2	 	
Deferred tax (benefit) expense:	 	 	 	 	 	 	 	 	 	 	
United States	 	 	23.7	 	 	(78.9	)	 	(25.0	)	
Non-U.S.	 	 	40.3	 	 	19.7	 	 	(1.9	)	
Total deferred	 	 	64.0	 	 	(59.2	)	 	(26.9	)	
Total provision for income taxes	 	 	$ 204.7	 	 	$ 138.4	 	 	$ 75.3	 	

The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory income tax rate to pretax income, as a result of the following differences:
 
 	  Percent of pretax income	
 	 	2005	 	2004	 	2003	 	
Statutory U.S. rate	 	 	35.0	%	 	35.0	%	 	35.0	%	
Increase (decrease) in rates resulting from:	 	 	 	 	 	 	 	 	 	 	
Non-U.S. operations	 	 	(17.6	)	 	(19.0	)	 	(22.9	)	
Extraterritorial income / foreign sales corporation	 	 	(0.7	)	 	(2.4	)	 	(2.4	)	
State and local income taxes, net of U.S. tax	 	 	0.7	 	 	0.7	 	 	0.1	 	
Puerto Rico - Sec 936 Credit	 	 	(0.9	)	 	(1.2	)	 	(1.9	)	
Other	 	 	(0.2	)	 	1.2	 	 	4.5	 	
Effective tax rate	 	 	16.3	%	 	14.3	%	 	12.4	%	

 

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At December 31, a summary of the deferred tax accounts follows:
In millions	 	2005	 	2004	 	
Current deferred assets and (liabilities)	 	 	 	 	 	
Difference between book and tax bases	 	 	 	 	 	
of inventories and receivables	 	 	$ 23.4	 	 	$ 12.8	 	
Difference between book and tax expense for	 	 	 	 	 	 	 	
other employee-related benefits and allowances	 	 	70.6	 	 	64.2	 	
Other reserves and valuation allowances	 	 	 	 	 	 	 	
in excess of tax deductions	 	 	233.3	 	 	199.4	 	
Other differences between tax and	 	 	 	 	 	 	 	
financial statement values	 	 	(14.8	)	 	(70.5	)	
Gross current deferred net tax assets	 	 	312.5	 	 	205.9	 	
Noncurrent deferred assets and (liabilities)	 	 	 	 	 	 	 	
Postretirement and postemployment benefits	 	 	 	 	 	 	 	
other than pensions in excess of tax deductions	 	 	321.1	 	 	300.8	 	
Tax benefit of operating losses and credit	 	 	 	 	 	 	 	
carryforwards	 	 	484.1	 	 	338.0	 	
Other reserves in excess of tax expense	 	 	77.7	 	 	(9.5	)	
Tax depreciation / amortization in excess of	 	 	 	 	 	 	 	
book depreciation / amortization	 	 	(408.4	)	 	(327.6	)	
Pension contributions in excess of book expense	 	 	(148.5	)	 	(23.4	)	
Taxes provided on undistributed accumulated	 	 	 	 	 	 	 	
subsidiary earnings	 	 	-	 	 	(2.4	)	
Gross noncurrent deferred net tax	 	 	 	 	 	 	 	
assets	 	 	326.0	 	 	275.9	 	
Less: deferred tax valuation allowances	 	 	(107.9	)	 	(68.5	)	
Total net deferred tax assets	 	 	$ 530.6	 	 	$ 413.3	 	

Included in “Accrued expenses and other current liabilities” on the Consolidated Balance Sheet are $376.8 million and $352.9 million of current income taxes payable at December 31, 2005 and 2004, respectively. Included in “Prepaid expenses and deferred income taxes” on the Consolidated Balance Sheet are $309.2 million and $249.2 million of current deferred tax assets at December 31, 2005 and 2004, respectively.

At December 31, 2005, net U.S and non-U.S. federal operating loss carryforwards of $904.1 million are available to offset taxable income in future years. The U.S. federal carryforwards will begin to expire in 2022, while the non-U.S. generally have unlimited carryforward periods. The net operating loss carryforwards were incurred in various jurisdictions, predominantly the United States, the United Kingdom, Germany and Switzerland. State net operating loss carryforwards at December 31, 2005 of $2,863.5 million are available to offset taxable income in future periods. The state carryforwards will expire in future years generally through 2025. A valuation allowance of $107.9 million has been recorded for certain state and non-U.S. carryforwards, which will likely not be realized. The change in the valuation allowance is predominantly attributable to increases in state net operating loss carryforwards, a reclassification of state deferred income taxes, increases in certain non-U.S. valuation allowances and the strengthening of the U.S. dollar against European currencies, partially offset by the utilization of net operating losses with full valuation allowances. Approximately $9.2 million of the valuation allowance was acquired in prior year business combination transactions and any tax benefit, when realized, will reduce goodwill rather than the income tax provision.

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At December 31, 2005, no deferred taxes have been provided for any portion of the $5.5 billion of undistributed earnings of the Company’s subsidiaries, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries, and it is not practicable to estimate the amount of additional taxes which may be payable upon distribution. At December 31, 2004, the Company had provided $2.4 million of noncurrent deferred taxes and $47.3 million of current income taxes payable for a portion of the undistributed earnings. The American Jobs Creation Act (the AJCA) replaces an export incentive with a deduction from domestic manufacturing income. This provision of the AJCA did not have a material impact on the Company's income tax provision for 2005.

Tax incentives have been provided in certain jurisdictions to encourage industrial development. The expiration of these tax holidays varies by country. The most significant tax holidays relate to the Company’s locations in China, which have generally received a 2-year full holiday followed by a 3-year 50% exemption, and the Company’s qualifying locations in Ireland, which were granted a 10% tax rate through 2010. The 2005 benefit for all tax holidays was approximately $4.4 million, or $0.01 of income per share.

As part of the audit of the tax years 2000-2002, the Company is actively engaged in discussion with the Internal Revenue Service regarding issues related to its reincorporation in Bermuda in 2001. The Company has provided for reasonably foreseeable resolution of all tax disputes,   but will adjust its estimate if significant events so dictate. In the event that the ultimate resolution of an issue differs materially from the original or adjusted estimate of the Company, the effect will be recorded in the provision for income taxes in the period that the matter is finally resolved.
 
NOTE 12 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors several postretirement plans that cover certain eligible employees. These plans provide for health care benefits, and in some instances, life insurance benefits. Postretirement health plans generally are contributory and contributions are adjusted annually. Life insurance plans for retirees are primarily noncontributory. The Company funds the postretirement benefit costs principally on a pay-as-you-go basis.

As of January 1, 2003, postretirement health care benefits are no longer available for new non-bargaining employees. These benefits were also curtailed for existing non-bargaining employees not meeting minimum eligibility requirements. Hourly bargaining employees are eligible if they attain normal retirement age with the required years of service. When eligible employees retire from the Company between ages 55 and 65, they receive, at a cost to the retiree, certain health care benefits. After attaining age 65, an eligible retiree’s health care benefit coverage becomes coordinated with Medicare. Postretirement health care benefits for eligible non-bargaining employees and retirees have their benefits subsidized to a flat dollar cap with cost escalation equally shared between the Company and the retiree. When the cap is reached, the retiree becomes responsible for all additional cost escalation.

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Summary information on the Company’s plans at December 31 was as follows:
 
In millions	 	2005	 	2004	 	
Change in benefit obligations:	 	 	 	 	 	
Benefit obligation at beginning of year	 	 	$ 964.6	 	 	$ 1,019.7	 	
Service cost	 	 	9.3	 	 	10.2	 	
Interest cost	 	 	54.9	 	 	57.3	 	
Plan participants' contributions	 	 	10.2	 	 	10.1	 	
Actuarial losses (gains)	 	 	52.4	 	 	(49.8	)	
Benefits paid	 	 	(81.7	)	 	(84.4	)	
Other	 	 	(0.4	)	 	1.5	 	
Benefit obligation at end of year	 	 	$ 1,009.3	 	 	$ 964.6	 	
 	 	 	 	 	 	 	 	
Funded status:	 	 	 	 	 	 	 	
Plan assets less than benefit obligations	 	 	$ (1,009.3	)	 	$ (964.6	)	
Unrecognized:	 	 	 	 	 	 	 	
Prior service gains	 	 	(26.4	)	 	(51.4	)	
Plan net losses	 	 	295.4	 	 	277.6	 	
Accrued costs in the balance sheet	 	 	$ (740.3	)	 	$ (738.4	)	

The components of net periodic postretirement benefits cost for the years ended December 31, were as follows:
 
In millions	 	2005	 	2004	 	2003	 	
Service cost	 	 	$ 9.3	 	 	$ 10.2	 	 	$ 10.1	 	
Interest cost	 	 	54.9	 	 	57.3	 	 	60.4	 	
Net amortization and deferral losses	 	 	9.8	 	 	9.4	 	 	6.6	 	
Net periodic postretirement benefit costs	 	 	74.0	 	 	76.9	 	 	77.1	 	
Curtailment gains	 	 	-	 	 	-	 	 	(6.9	)	
Net postretirement benefit cost	 	 	$ 74.0	 	 	$ 76.9	 	 	$ 70.2	 	

The Company uses an annual measurement date of November 30 for all of its postretirement benefit plans for all years presented. The sale of Engineered Solutions in February 2003 was deemed to be a significant event and required a remeasurement of the postretirement benefit plan. The weighted-average assumptions used in the February 2003 remeasurement due to the sale were a discount rate of 6.50% and increases in per capita cost of covered health care benefits of 11.00%, gradually reducing to 5.25% by 2009.

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Assumptions:	 	2005	 	2004	 	2003	 	
Weighted-average discount rate assumption used to determine:	 	 	 	 	 	 	 	
Benefit obligations at December 31	 	 	5.50	%	 	5.75	%	 	6.00	%	
Net periodic benefit cost*	 	 	5.75	%	 	6.00	%	 	6.50	%	
Assumed health care cost trend rates at December 31:	 	 	 	 	 	 	 	 	 	 	
Current year medical inflation	 	 	11.00	%	 	11.00	%	 	11.00	%	
Ultimate inflation rate	 	 	5.25	%	 	5.25	%	 	5.25	%	
Year that the rate reaches the ultimate trend rate	 	 	2012	 	 	2011	 	 	2010	 	
* The assumptions used for the first quarter of 2004 were determined to be appropriate as of April 1, 2004 when the postretirement plan was remeasured to reflect the federal subsidy. In 2003, the postretirement plan was measured as of the date of the sale of Engineered Solutions and the discount rate used was decreased from 6.75% to 6.50%, while the health care cost trend rate remained at 11.00%, gradually reducing to 5.25%.

A 1% change in the medical trend rate assumed for postretirement benefits would have the following effects at December 31, 2005:

In millions	 	1% Increase	 	1% Decrease	 	
Effect on total of service and interest cost components	 	 	$ 5.2	 	 	$ 4.3	 	
Effect on postretirement benefit obligation	 	 	73.9	 	 	62.5	 	

Benefit payments for postretirement benefits, which reflect future service and are net of expected Medicare Part D subsidy, as appropriate, are expected to be paid as follows: $71.1 million in 2006, $73.1 million in 2007, $75.1 million in 2008, $76.2 million in 2009, $77.2 million in 2010 and $372.7 million for the years 2011 to 2015.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was enacted. The Act introduced a government-provided subsidy based on the percentage of a beneficiary’s annual prescription drug benefits, within defined limits, and the opportunity for a retiree to obtain prescription drug benefits under Medicare. The Company adopted FASB Staff Position 106-2 as of April 1, 2004. The Company and its actuarial advisors determined that many benefits provided by the plan were at least actuarially equivalent to Medicare Part D. The Company remeasured the accumulated postretirement benefit obligation effects of the Act as of April 1, 2004. The effect of the federal subsidy to which the Company is entitled has been accounted for as an actuarial gain of $86.3 million, which is amortized and reduces current and future benefit costs. The subsidy had the effect of reducing postretirement benefit expense for 2005 and 2004 by $18.5 million and $9.2 million, respectively. The components of the reduction in expense were a decrease in the amortization of the actuarial loss of $9.7 million and $5.0 million, a reduction in service cost of $0.5 million and $0.3 million and a reduction in the interest cost on the benefit obligation of $8.3 million and $3.9 million for 2005 and 2004, respectively.

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NOTE 13 - PENSION PLANS
The Company has noncontributory pension plans covering substantially all U.S. employees. In addition, certain non-U.S. employees in other countries are covered by pension plans. The Company’s pension plans for U.S. non-collectively bargained employees provided benefits on a modest final average pay formula. The Company’s U.S. collectively bargained pension plans principally provide benefits based on a flat benefit formula. Non-U.S. plans provide benefits based on earnings and years of service. The Company maintains additional other supplemental benefit plans for officers and other key employees.

Information regarding the Company's pension plans at December 31 was as follows:
 
In millions	 	2005	 	2004	 	
Change in benefit obligations:	 	 	 	 	 	
Benefit obligation at beginning of year	 	 	$ 2,942.4	 	 	$ 3,080.1	 	
Service cost	 	 	52.9	 	 	46.7	 	
Interest cost	 	 	161.3	 	 	173.0	 	
Employee contributions	 	 	2.8	 	 	3.2	 	
Acquisitions	 	 	18.4	 	 	-	 	
Amendments	 	 	(2.0	)	 	7.6	 	
Expenses paid	 	 	(2.7	)	 	(4.9	)	
Actuarial losses	 	 	121.7	 	 	72.9	 	
Benefits paid	 	 	(208.0	)	 	(214.2	)	
Currency exchange impact	 	 	(87.0	)	 	57.7	 	
Curtailments and settlements	 	 	(3.3	)	 	(293.4	)	
Other	 	 	36.7	 	 	13.7	 	
Benefit obligation at end of year	 	 	$ 3,033.2	 	 	$ 2,942.4	 	
 	 	 	 	 	 	 	 	
Change in plan assets:	 	 	 	 	 	 	 	
Fair value at beginning of year	 	 	$ 2,647.5	 	 	$ 2,637.9	 	
Actual return on assets	 	 	232.3	 	 	277.3	 	
Company contributions	 	 	119.4	 	 	174.6	 	
Employee contributions	 	 	2.8	 	 	3.2	 	
Expenses paid	 	 	(2.7	)	 	(4.9	)	
Benefits paid	 	 	(208.0	)	 	(214.2	)	
Currency exchange impact	 	 	(68.0	)	 	45.2	 	
Settlements	 	 	(3.2	)	 	(244.3	)	
Other	 	 	6.9	 	 	(27.3	)	
Fair value of assets end of year	 	 	$ 2,727.0	 	 	$ 2,647.5	 	

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In millions	 	2005	 	2004	 	
Funded status:	 	 	 	 	 	
Plan assets less than the benefit obligations	 	 	$ (306.2	)	 	$ (294.9	)	
Unrecognized:	 	 	 	 	 	 	 	
Net transition asset	 	 	2.9	 	 	3.9	 	
Prior service costs	 	 	53.5	 	 	64.7	 	
Plan net losses	 	 	672.1	 	 	619.7	 	
Net amount recognized	 	 	$ 422.3	 	 	$ 393.4	 	
 	 	 	 	 	 	 	 	
Costs included in the balance sheet:	 	 	 	 	 	 	 	
Long-term prepaid expenses	 	 	$ 435.1	 	 	$ 305.4	 	
Accrued current and non-current liabilities	 	 	(212.6	)	 	(222.0	)	
Pension intangible included in other assets	 	 	13.2	 	 	16.1	 	
Accumulated other comprehensive income	 	 	186.6	 	 	293.9	 	
Net amount recognized	 	 	$ 422.3	 	 	$ 393.4	 	
 	 	 	 	 	 	 	 	
Weighted-average assumptions used:	 	 	 	 	 	 	 	
Benefit obligations at December 31	 	 	2005	 	 	2004	 	
Discount rate:	 	 	 	 	 	 	 	
U.S. plans	 	 	5.50	%	 	5.75	%	
Non-U.S. plans	 	 	5.00	%	 	5.25	%	
Rate of compensation increase:	 	 	 	 	 	 	 	
U.S. plans	 	 	4.00	%	 	4.00	%	
Non-U.S. plans	 	 	4.00	%	 	4.00	%	

The accumulated benefit obligation for all defined benefit pension plans was $2,868.6 million and $2,799.7 million at December 31, 2005 and 2004, respectively. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations more than plan assets were $1,053.4 million, $953.1 million and $746.6 million respectively, as of December 31, 2005, and $1,316.7 million, $1,227.1 million and $1,008.4 million, respectively, as of December 31, 2004.

Pension benefit payments, which reflect future service, as appropriate, are expected to be paid as follows: $180.9 million in 2006, $184.5 million in 2007, $184.8 million in 2008, $195.7 million in 2009, $219.5 million in 2010 and $1,049.9 million for the years 2011 to 2015.

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The components of the Company’s pension related costs for the years ended December 31, include the following:

In millions	 	2005	 	2004	 	2003	 	
Service cost	 	 	$ 52.9	 	 	$ 46.7	 	 	$ 45.4	 	
Interest cost	 	 	161.3	 	 	173.0	 	 	174.8	 	
Expected return on plan assets	 	 	(213.9	)	 	(221.1	)	 	(179.0	)	
Net amortization of unrecognized:	 	 	 	 	 	 	 	 	 	 	
Prior service costs	 	 	8.8	 	 	8.8	 	 	8.9	 	
Transition amount	 	 	0.9	 	 	0.9	 	 	0.9	 	
Plan net losses	 	 	22.4	 	 	18.2	 	 	32.0	 	
Net pension cost	 	 	32.4	 	 	26.5	 	 	83.0	 	
Curtailment/settlement losses (gains)	 	 	4.0	 	 	41.1	 	 	(10.1	)	
Net pension cost after curtailments/settlements	 	 	$ 36.4	 	 	$ 67.6	 	 	$ 72.9	 	

Settlement losses were recorded in 2005 as a result of lump sum distributions under supplemental benefit plans for officers and other key employees. The curtailment and settlement losses in 2004 are associated primarily with the sale of Dresser-Rand and Drilling Solutions. The curtailment and settlement gains in 2003 are associated primarily with the sale of Engineered Solutions.

The Company uses an annual measurement date of November 30 for substantially all of its pension plans for the years presented. The sale of Engineered Solutions in February 2003 was a significant event. The Engineered Solutions employees participated in the Company’s largest U.S. pension plan and a remeasurement of that pension plan was required as of the date of sale.

Pension expense for 2006 is projected to be approximately $37.1 million, utilizing the assumptions for calculating the pension benefit obligations at 2005 year end.
 
Weighted-average assumption used:	 	 	 	 	 	 	 	
Net periodic pension cost for the year ended December 31,	 	2005	 	2004	 	2003	 	
Discount rate:	 	 	 	 	 	 	 	
U.S. plans*	 	 	5.75	%	 	6.00	%	 	6.50	%	
Non-U.S. plans	 	 	5.25	%	 	5.75	%	 	5.75	%	
Rate of compensation increase:	 	 	 	 	 	 	 	 	 	 	
U.S. plans	 	 	4.00	%	 	4.00	%	 	4.00	%	
Non-U.S. plans	 	 	4.00	%	 	3.75	%	 	3.00	%	
Expected return on plan assets:	 	 	 	 	 	 	 	 	 	 	
U.S. plans	 	 	8.75	%	 	8.75	%	 	8.75	%	
Non-U.S. plans	 	 	7.50	%	 	7.50	%	 	7.50	%	
*Prior to the remeasurement date of February 15, 2003, the discount rate used for 2003 was 6.75%. The rate for the smaller U.S. plans not requiring remeasurement during the year was 6.75% for all of 2003. There was no change to the rate of compensation increase and the expected return on plan assets upon remeasurement.
 
The expected long-term rates of return on plan assets are determined as of the measurement date. The expected long-term rates of return are projected to be the rates of return to be earned over the period until the benefits are paid. Accordingly, the long-term rates of return should reflect the rates of return on present investments, expected contributions to be received during the current year and on reinvestments over the period. The rates of return utilized reflect the expected rates of return during the periods for which the payment of benefits is deferred. The expected long-term rate of return on plan assets is based on what is achievable given the plan’s investment policy and the types of assets held. Historical assets return trends for the larger plans are reviewed over fifteen, ten and five-year periods. The actual rate of return for plan assets over the last ten- and fifteen-year periods has exceeded the expected rate of return used. The Company reviews each plan and its historical returns and asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used.

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The Company’s pension plans weighted-average asset allocations at December 31, 2005 and 2004, by asset category are as follows:
 
Asset category	 	2005	 	2004	 	
Equity securities	 	 	58.4	%	 	61.2	%	
Debt securities	 	 	33.5	%	 	30.4	%	
Real estate	 	 	0.3	%	 	0.4	%	
Other (including cash)	 	 	7.8	%	 	8.0	%	
Total	 	 	100.0	%	 	100.0	%	

The Company’s investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long term, minimizes the present value of required company contributions, at the appropriate levels of risk; and meet any statutory requirements, laws and local regulatory agencies’ requirements. Key investment management decisions reviewed regularly are asset allocations, investment manager performance, investment advisors and trustees or custodians. An asset/liability modeling (ALM) study is used as the basis for global asset allocation decisions and updated approximately every five years or as required. The Company’s current strategic global asset allocation for its pension plans is 60% in equity securities and 40% in debt securities and cash. The Company sets upper limits and lower limits of plus or minus 5%. The asset allocations are reviewed at least quarterly and any appropriate adjustments are reflected quarterly.

The Company made required and discretionary contributions of $33.0 million and $86.4 million, respectively, to its pension plans in 2005. The Company currently projects that it will be required to contribute approximately $25 million to its plans worldwide in 2006. The Company’s policy allows it to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current tax regulations. While the Company anticipates funding the plans in 2006 in accordance with contributions required by funding regulations or the laws of each jurisdiction, most of the non-U.S. plans require employer contributions based on the employees’ earnings.

Most of the Company’s U.S. employees are covered by savings and other defined contribution plans. Employer contributions are determined based on criteria specific to the individual plans and amounted to approximately $46.8 million, $52.6 million and $51.8 million in 2005, 2004 and 2003, respectively. The Company's contributions relating to non-U.S. defined contribution plans, insured plans and other non-U.S. benefit plans were $8.1 million, $11.1 million and $9.3 million in 2005, 2004 and 2003, respectively.

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NOTE 14 - BUSINESS SEGMENT INFORMATION
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that the operating segments’ results are prepared on a management basis that is consistent with the manner in which the Company disaggregates financial information for internal review and decision making. The Company evaluates performance based on operating income and operating margins. Intercompany sales between segments are considered immaterial.

The Company has divested various businesses over the past few years as it moves to being a leading global diversified industrial enterprise. During 2004, the Company sold its Drilling Solutions and Dresser-Rand businesses. During 2003, the Company sold its Engineered Solutions, Waterjet and Laidlaw businesses. The results of these divested businesses have been excluded from their previous reportable segments for business segment reporting and have been shown separately in “Discontinued operations, net of tax” in the financial statements.

During the first quarter of 2005, the Company realigned its internal organization and operating segments to reflect its market focus and to promote greater transparency of results. The former Infrastructure segment was disaggregated into two segments - the Compact Vehicle Technologies segment and the Construction Technologies segment. The prior year segment results have been restated to conform to this change.

Each reportable segment is based primarily on the types of products it generates. The operating segments have been aggregated based on the aggregation criteria and quantitative thresholds as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” A description of the Company’s reportable segments is as follows:

Climate Control Technologies provides solutions to transport, preserve, store and display temperature-sensitive products by engaging in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers. The segment includes the Thermo King and Hussmann brands.

The Compact Vehicle Technologies segment is engaged in the design, manufacture, sale and service of skid-steer loaders, all-wheel steer loaders, compact truck loaders, compact excavators, attachments and golf and utility vehicles. The segment includes the Bobcat and Club Car brands.

Construction Technologies is engaged in the design, manufacture, sale and service of road construction and repair equipment, portable power products, general-purpose construction equipment, attachments and portable light towers and compressors. The segment is comprised of the Utility Equipment and Road Development businesses.

Industrial Technologies is focused on providing solutions to enhance customers’ industrial and energy efficiency, mainly by engaging in the design, manufacture, sale and service of compressed air systems, tools, fluid and material handling and energy generation systems. The segment includes the Air Solutions and Productivity Solutions businesses.

Security Technologies is engaged in the design, manufacture, sale and service of mechanical and electronic security products, biometric access control systems, and security and scheduling software. The segment includes the Schlage, LCN and Von Duprin brands.

81

 
A summary of operations by reportable segments for the years ended December 31, were as follows:

Dollar amounts in millions	 	2005	 	2004	 	2003	 	
Climate Control Technologies	 	 	 	 	 	 	 	
Revenues	 	 	$ 2,853.6	 	 	$ 2,793.7	 	 	$ 2,648.9	 	
Operating income	 	 	315.1	 	 	309.1	 	 	219.1	 	
Operating income as a percentage of sales	 	 	11.0	%	 	11.1	%	 	8.3	%	
Depreciation and amortization	 	 	53.7	 	 	59.2	 	 	57.0	 	
Capital expenditures	 	 	9.7	 	 	13.5	 	 	18.1	 	
 	 	 	 	 	 	 	 	 	 	 	
Compact Vehicle Technologies	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	2,681.1	 	 	2,261.7	 	 	1,827.6	 	
Operating income	 	 	415.2	 	 	332.0	 	 	244.3	 	
Operating income as a percentage of sales	 	 	15.5	%	 	14.7	%	 	13.4	%	
Depreciation and amortization	 	 	31.8	 	 	28.1	 	 	28.4	 	
Capital expenditures	 	 	40.4	 	 	28.3	 	 	23.0	 	
 	 	 	 	 	 	 	 	 	 	 	
Construction Technologies	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	1,168.6	 	 	1,007.1	 	 	804.2	 	
Operating income	 	 	103.8	 	 	105.2	 	 	48.6	 	
Operating income as a percentage of sales	 	 	8.9	%	 	10.4	%	 	6.0	%	
Depreciation and amortization	 	 	14.3	 	 	15.5	 	 	15.2	 	
Capital expenditures	 	 	18.5	 	 	11.3	 	 	12.3	 	
 	 	 	 	 	 	 	 	 	 	 	
Industrial Technologies	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	1,743.9	 	 	1,552.8	 	 	1,363.6	 	
Operating income	 	 	224.9	 	 	180.5	 	 	104.1	 	
Operating income as a percentage of sales	 	 	12.9	%	 	11.6	%	 	7.6	%	
Depreciation and amortization	 	 	19.6	 	 	23.2	 	 	23.4	 	
Capital expenditures	 	 	16.1	 	 	12.2	 	 	19.0	 	
 	 	 	 	 	 	 	 	 	 	 	
Security Technologies	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	2,099.7	 	 	1,778.3	 	 	1,605.0	 	
Operating income	 	 	380.7	 	 	304.8	 	 	316.6	 	
Operating income as a percentage of sales	 	 	18.1	%	 	17.1	%	 	19.7	%	
Depreciation and amortization	 	 	44.6	 	 	21.9	 	 	22.9	 	
Capital expenditures	 	 	22.8	 	 	12.2	 	 	14.0	 	
Total revenues	 	 	$ 10,546.9	 	 	$ 9,393.6	 	 	$ 8,249.3	 	
 	 	 	 	 	 	 	 	 	 	 	
Operating income from reportable segments	 	 	1,439.7	 	 	1,231.6	 	 	932.7	 	
Unallocated corporate expense	 	 	(77.9	)	 	(111.3	)	 	(145.1	)	
Total operating income	 	 	$ 1,361.8	 	 	$ 1,120.3	 	 	$ 787.6	 	
Total operating income as a percentage of sales	 	 	12.9	%	 	11.9	%	 	9.5	%	
 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization from reportable segments	 	 	164.0	 	 	147.9	 	 	146.9	 	
Unallocated depreciation and amortization	 	 	31.7	 	 	26.5	 	 	24.7	 	
Total depreciation and amortization	 	 	$ 195.7	 	 	$ 174.4	 	 	$ 171.6	 	
 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures from reportable segments	 	 	107.5	 	 	77.5	 	 	86.4	 	
Corporate capital expenditures	 	 	4.3	 	 	31.1	 	 	12.9	 	
Total capital expenditures	 	 	$ 111.8	 	 	$ 108.6	 	 	$ 99.3	 	

82

Revenues by destination and long-lived assets by geographic area for the years ended December 31 were as follows:

In millions	 	2005	 	2004	 	2003	 	
Revenues	 	 	 	 	 	 	 	
United States	 	 	$ 6,305.7	 	 	$ 5,775.1	 	 	$ 5,047.0	 	
Non-U.S.	 	 	4,241.2	 	 	3,618.5	 	 	3,202.3	 	
Total	 	 	$ 10,546.9	 	 	$ 9,393.6	 	 	$ 8,249.3	 	
 
In millions	 	2005	 	2004	 	
Long-lived assets	 	 	 	 	 	
United States	 	 	$ 1,376.2	 	 	$ 1,239.6	 	
Non-U.S.	 	 	509.1	 	 	408.8	 	
Total	 	 	$ 1,885.3	 	 	$ 1,648.4	 	
 
NOTE 15 - IR-NEW JERSEY
As part of the reorganization, IR-Limited guaranteed all of the issued public debt securities of IR-New Jersey. The subsidiary issuer, IR-New Jersey, is 100% owned by the parent, IR-Limited, the guarantees are full and unconditional, and no other subsidiary of the Company guarantees the securities. The following condensed consolidated financial information for IR-Limited, IR-New Jersey, and all their other subsidiaries is included so that separate financial statements of IR-New Jersey are not required to be filed with the U.S. Securities and Exchange Commission.
 
As part of the reorganization of December 31, 2001, IR-Limited issued Class B common shares to IR-New Jersey in exchange for a $3.6 billion note and shares of certain IR-New Jersey subsidiaries. The note, which is due in 2011, has a fixed rate of interest of 11% per annum payable semi-annually and imposes certain restrictive covenants upon IR-New Jersey. The Class B common shares are non-voting and pay dividends comparable to the Class A common shares. In 2002, IR-Limited contributed the note to a wholly owned subsidiary, which subsequently transferred portions of the note to several other subsidiaries all of which are included in the “Other Subsidiaries” below. Accordingly, the subsidiaries of IR-Limited remain creditors of IR-New Jersey.

IR-New Jersey has unconditionally guaranteed payment of the principal, premium, if any, and interest on the Company’s 4.75% Senior Notes due in 2015 in aggregate principal amount of $300 million. The guarantee is unsecured and provided on an unsubordinated basis. The guarantee ranks equally in right of payment with all of the existing and future unsecured and unsubordinated debt of IR-New Jersey.

The condensed consolidating financial statements present IR-Limited and IR-New Jersey investments in their subsidiaries using the equity method of accounting. Intercompany investments in the non-voting Class B common shares are accounted for on the cost method and are reduced by intercompany dividends. In accordance with generally accepted accounting principles, the amounts related to the issuance of the Class B shares have been presented as contra accounts in Shareholders’ Equity since the Class B issuance on December 31, 2001. The notes payable continue to be reflected as a liability on the balance sheet of IR-New Jersey and are enforceable in accordance with their terms.

83

 
Condensed Consolidating Income Statement	 	 	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2005	 	IR-	 	IR-	 	Other	 	Consolidating	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Adjustments	 	Consolidated	 	
Net revenues	 	 	$          -	 	 	$ 1,638.3	 	 	$ 8,908.6	 	 	$           -	 	 	$ 10,546.9	 	
Cost of goods sold	 	 	-	 	 	1,271.4	 	 	6,472.7	 	 	-	 	 	7,744.1	 	
Selling and administrative expenses	 	 	1.2	 	 	338.7	 	 	1,101.1	 	 	-	 	 	1,441.0	 	
Operating (loss) income	 	 	(1.2	)	 	28.2	 	 	1,334.8	 	 	-	 	 	1,361.8	 	
Equity earnings in affiliates (net of tax)	 	 	1,104.8	 	 	487.1	 	 	197.7	 	 	(1,789.6	)	 	-	 	
Interest expense	 	 	(9.1	)	 	(104.7	)	 	(30.5	)	 	-	 	 	(144.3	)	
Intercompany interest and fees	 	 	(38.4	)	 	(425.8	)	 	464.2	 	 	-	 	 	-	 	
Other income (expense), net	 	 	(1.9	)	 	104.7	 	 	(62.5	)	 	-	 	 	40.3	 	
Earnings (loss) before income taxes	 	 	1,054.2	 	 	89.5	 	 	1,903.7	 	 	(1,789.6	)	 	1,257.8	 	
(Benefit) provision for income taxes	 	 	-	 	 	(112.7	)	 	317.4	 	 	-	 	 	204.7	 	
Earnings (loss) from continuing operations	 	 	1,054.2	 	 	202.2	 	 	1,586.3	 	 	(1,789.6	)	 	1,053.1	 	
Discontinued operations, net of tax	 	 	-	 	 	(4.5	)	 	5.6	 	 	-	 	 	1.1	 	
Net earnings (loss)	 	 	$ 1,054.2	 	 	$ 197.7	 	 	$ 1,591.9	 	 	$ (1,789.6	)	 	$ 1,054.2	 	
 
Condensed Consolidating Income Statement	 	 	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2004	 	 	 	 	 	 	 	 	 	 	 	
 	 	IR-	 	IR-	 	Other	 	Consolidating	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Adjustments	 	Consolidated	 	
Net revenues	 	 	$           -	 	 	$ 1,390.2	 	 	$ 8,003.4	 	 	   $           -	 	 	$ 9,393.6	 	
Cost of goods sold	 	 	-	 	 	1,071.5	 	 	5,782.5	 	 	-	 	 	6,854.0	 	
Selling and administrative expenses	 	 	0.1	 	 	354.5	 	 	1,064.7	 	 	-	 	 	1,419.3	 	
Operating (loss) income	 	 	(0.1	)	 	(35.8	)	 	1,156.2	 	 	-	 	 	1,120.3	 	
Equity earnings in affiliates (net of tax)	 	 	1,231.6	 	 	956.3	 	 	576.2	 	 	(2,764.1	)	 	-	 	
Interest expense	 	 	(0.2	)	 	(122.2	)	 	(30.7	)	 	-	 	 	(153.1	)	
Intercompany interest and fees	 	 	(7.5	)	 	(538.4	)	 	545.9	 	 	-	 	 	-	 	
Other income (expense), net	 	 	(5.1	)	 	87.3	 	 	(81.2	)	 	-	 	 	1.0	 	
Earnings (loss) before income taxes	 	 	1,218.7	 	 	347.2	 	 	2,166.4	 	 	(2,764.1	)	 	968.2	 	
(Benefit) provision for income taxes	 	 	-	 	 	(219.5	)	 	357.9	 	 	-	 	 	138.4	 	
Earnings (loss) from continuing operations	 	 	1,218.7	 	 	566.7	 	 	1,808.5	 	 	(2,764.1	)	 	829.8	 	
Discontinued operations, net of tax	 	 	-	 	 	9.5	 	 	379.4	 	 	-	 	 	388.9	 	
Net earnings (loss)	 	 	$ 1,218.7	 	 	$ 576.2	 	 	$ 2,187.9	 	 	$ (2,764.1	)	 	$ 1,218.7	 	

84

Condensed Consolidating Income Statement	 	 	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2003	 	 	 	 	 	 	 	 	 	 	 	
 	 	IR-	 	IR-	 	Other	 	Consolidating	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Adjustments	 	Consolidated	 	
Net revenues	 	 	$         -	 	 	$ 1,137.4	 	 	$ 7,111.9	 	 	$            -	 	 	$ 8,249.3	 	
Cost of goods sold	 	 	-	 	 	908.5	 	 	5,200.5	 	 	-	 	 	6,109.0	 	
Selling and administrative expenses	 	 	-	 	 	282.9	 	 	1,073.0	 	 	-	 	 	1,355.9	 	
Restructuring charges	 	 	-	 	 	-	 	 	(3.2	)	 	-	 	 	(3.2	)	
Operating income	 	 	-	 	 	(54.0	)	 	841.6	 	 	-	 	 	787.6	 	
Equity earnings in affiliates (net of tax)	 	 	653.1	 	 	1,058.2	 	 	(122.3	)	 	(1,589.0	)	 	-	 	
Interest expense	 	 	-	 	 	(141.6	)	 	(33.9	)	 	-	 	 	(175.5	)	
Intercompany interest and fees	 	 	(5.9	)	 	(442.1	)	 	448.0	 	 	-	 	 	-	 	
Other income (expense), net	 	 	(2.7	)	 	(759.8	)	 	758.5	 	 	-	 	 	(4.0	)	
Earnings (loss) before income taxes	 	 	644.5	 	 	(339.3	)	 	1,891.9	 	 	(1,589.0	)	 	608.1	 	
(Benefit) provision for income taxes	 	 	-	 	 	(224.5	)	 	299.8	 	 	-	 	 	75.3	 	
Earnings (loss) from continuing operations	 	 	644.5	 	 	(114.8	)	 	1,592.1	 	 	(1,589.0	)	 	532.8	 	
Discontinued operations, net of tax	 	 	-	 	 	(7.5	)	 	119.2	 	 	-	 	 	111.7	 	
Net earnings (loss)	 	 	$ 644.5	 	 	$ (122.3	)	 	$ 1,711.3	 	 	$ (1,589.0	)	 	$ 644.5	 	

85

 
Condensed Consolidating Balance Sheet	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2005	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Other	 	Consolidating	 	IR-Limited	 	
In millions	 	IR-Limited	 	IR-New Jersey	 	Subsidiaries	 	Adjustments	 	Consolidated	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	$ 25.5	 	 	$ 207.1	 	 	$ 648.0	 	 	$             -	 	 	$ 880.6	 	
Marketable securities	 	 	-	 	 	-	 	 	156.5	 	 	-	 	 	156.5	 	
Accounts and notes receivable, net	 	 	1.3	 	 	311.8	 	 	1,365.9	 	 	-	 	 	1,679.0	 	
Inventories, net	 	 	-	 	 	188.9	 	 	939.9	 	 	-	 	 	1,128.8	 	
Prepaid expenses and deferred income taxes	 	 	-	 	 	62.1	 	 	341.2	 	 	-	 	 	403.3	 	
Accounts and notes receivable affiliates	 	 	299.6	 	 	3,660.9	 	 	22,687.9	 	 	(26,648.4	)	 	-	 	
Total current assets	 	 	326.4	 	 	4,430.8	 	 	26,139.4	 	 	(26,648.4	)	 	4,248.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment in affiliates	 	 	7,092.7	 	 	11,440.6	 	 	29,894.4	 	 	(48,427.7	)	 	-	 	
Property, plant and equipment, net	 	 	-	 	 	246.8	 	 	829.2	 	 	-	 	 	1,076.0	 	
Intangible assets, net	 	 	-	 	 	163.7	 	 	5,068.2	 	 	-	 	 	5,231.9	 	
Other assets	 	 	1.9	 	 	854.0	 	 	344.4	 	 	-	 	 	1,200.3	 	
Total assets	 	 	$ 7,421.0	 	 	$ 17,135.9	 	 	$ 62,275.6	 	 	$ (75,076.1	)	 	$ 11,756.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accruals	 	 	$ 5.8	 	 	$ 561.2	 	 	$ 1,700.0	 	 	$              -	 	 	$ 2,267.0	 	
Loans payable and current maturities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
of long-term debt	 	 	-	 	 	849.4	 	 	83.3	 	 	-	 	 	932.7	 	
Accounts and note payable affiliates	 	 	956.6	 	 	5,870.1	 	 	19,821.7	 	 	(26,648.4	)	 	-	 	
Total current liabilities	 	 	962.4	 	 	7,280.7	 	 	21,605.0	 	 	(26,648.4	)	 	3,199.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	298.9	 	 	658.1	 	 	227.3	 	 	-	 	 	1,184.3	 	
Note payable affiliate	 	 	300.0	 	 	3,347.4	 	 	-	 	 	(3,647.4	)	 	-	 	
Other noncurrent liabilities	 	 	97.7	 	 	1,389.0	 	 	123.7	 	 	-	 	 	1,610.4	 	
Total liabilities	 	 	1,659.0	 	 	12,675.2	 	 	21,956.0	 	 	(30,295.8	)	 	5,994.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shareholders' equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Class A common shares	 	 	360.8	 	 	-	 	 	(30.1	)	 	-	 	 	330.7	 	
Class B common shares	 	 	270.6	 	 	-	 	 	-	 	 	(270.6	)	 	-	 	
Common shares	 	 	-	 	 	-	 	 	2,362.8	 	 	(2,362.8	)	 	-	 	
Other shareholders' equity	 	 	9,740.2	 	 	5,066.6	 	 	42,376.2	 	 	(51,624.1	)	 	5,558.9	 	
Accumulated other comprehensive income (loss)	 	 	193.9	 	 	(158.7	)	 	(33.2	)	 	(129.6	)	 	(127.6	)	
 	 	 	10,565.5	 	 	4,907.9	 	 	44,675.7	 	 	(54,387.1	)	 	5,762.0	 	
Less: Contra account	 	 	(4,803.5	)	 	(447.2	)	 	(4,356.1	)	 	9,606.8	 	 	-	 	
Total shareholders' equity	 	 	5,762.0	 	 	4,460.7	 	 	40,319.6	 	 	(44,780.3	)	 	5,762.0	 	
Total liabilities and equity	 	 	$ 7,421.0	 	 	$ 17,135.9	 	 	$ 62,275.6	 	 	$ (75,076.1	)	 	$ 11,756.4	 	

86

Condensed Consolidating Balance Sheet	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2004	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Other	 	Consolidating	 	IR-Limited	 	
In millions	 	IR-Limited	 	IR-New Jersey	 	Subsidiaries	 	Adjustments	 	Consolidated	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	$ 236.8	 	 	$ 844.1	 	 	$ 622.2	 	 	$             -	 	 	$ 1,703.1	 	
Marketable securities	 	 	-	 	 	-	 	 	0.6	 	 	-	 	 	0.6	 	
Accounts and notes receivable, net	 	 	1.1	 	 	265.3	 	 	1,232.0	 	 	-	 	 	1,498.4	 	
Inventories, net	 	 	-	 	 	152.7	 	 	906.1	 	 	-	 	 	1,058.8	 	
Prepaid expenses and deferred income taxes	 	 	0.2	 	 	88.9	 	 	259.7	 	 	-	 	 	348.8	 	
Accounts and notes receivable affiliates	 	 	51.7	 	 	1,757.7	 	 	17,064.3	 	 	(18,873.7	)	 	-	 	
Total current assets	 	 	289.8	 	 	3,108.7	 	 	20,084.9	 	 	(18,873.7	)	 	4,609.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment in affiliates	 	 	6,759.6	 	 	10,938.1	 	 	15,773.8	 	 	(33,471.5	)	 	-	 	
Property, plant and equipment, net	 	 	-	 	 	239.4	 	 	773.8	 	 	-	 	 	1,013.2	 	
Intangible assets, net	 	 	-	 	 	151.4	 	 	4,677.8	 	 	-	 	 	4,829.2	 	
Other assets	 	 	-	 	 	649.5	 	 	313.0	 	 	-	 	 	962.5	 	
Total assets	 	 	$ 7,049.4	 	 	$ 15,087.1	 	 	$ 41,623.3	 	 	$ (52,345.2	)	 	$ 11,414.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accruals	 	 	$ 5.0	 	 	$ 481.1	 	 	$ 1,778.0	 	 	$              -	 	 	$ 2,264.1	 	
Loans payable and current maturities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
of long-term debt	 	 	-	 	 	546.3	 	 	66.5	 	 	-	 	 	612.8	 	
Accounts and note payable affiliates	 	 	1,310.6	 	 	3,525.0	 	 	14,038.1	 	 	(18,873.7	)	 	-	 	
Total current liabilities	 	 	1,315.6	 	 	4,552.4	 	 	15,882.6	 	 	(18,873.7	)	 	2,876.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	-	 	 	1,048.3	 	 	219.3	 	 	-	 	 	1,267.6	 	
Note payable affiliate	 	 	-	 	 	3,647.4	 	 	-	 	 	(3,647.4	)	 	-	 	
Other noncurrent liabilities	 	 	-	 	 	434.5	 	 	1,101.8	 	 	-	 	 	1,536.3	 	
Total liabilities	 	 	1,315.6	 	 	9,682.6	 	 	17,203.7	 	 	(22,521.1	)	 	5,680.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shareholders' equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Class A common shares	 	 	178.4	 	 	-	 	 	(5.3	)	 	-	 	 	173.1	 	
Class B common shares	 	 	135.3	 	 	-	 	 	-	 	 	(135.3	)	 	-	 	
Common shares	 	 	-	 	 	-	 	 	2,362.8	 	 	(2,362.8	)	 	-	 	
Other shareholders' equity	 	 	10,006.3	 	 	6,051.6	 	 	26,386.6	 	 	(36,946.6	)	 	5,497.9	 	
Accumulated other comprehensive income (loss)	 	 	384.2	 	 	(186.5	)	 	185.5	 	 	(320.4	)	 	62.8	 	
 	 	 	10,704.2	 	 	5,865.1	 	 	28,929.6	 	 	(39,765.1	)	 	5,733.8	 	
Less: Contra account	 	 	(4,970.4	)	 	(460.6	)	 	(4,510.0	)	 	9,941.0	 	 	-	 	
Total shareholders' equity	 	 	5,733.8	 	 	5,404.5	 	 	24,419.6	 	 	(29,824.1	)	 	5,733.8	 	
Total liabilities and equity	 	 	$ 7,049.4	 	 	$ 15,087.1	 	 	$ 41,623.3	 	 	$ (52,345.2	)	 	$ 11,414.6	 	

87

Condensed Consolidating Statement of Cash Flows	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2005	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 	 	IR-	 	IR-	 	Other	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Consolidated	 	
Net cash (used in) provided by continuing operating activities	 	 	$ (32.0	)	 	$ (510.9	)	 	$ 1,386.1	 	 	$ 843.2	 	
Net cash used in discontiued operating activities	 	 	-	 	 	(18.5	)	 	(15.6	)	 	(34.1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	-	 	 	(26.2	)	 	(85.6	)	 	(111.8	)	
Proceeds from sale of property, plant and equipment	 	 	-	 	 	2.2	 	 	16.8	 	 	19.0	 	
Acquisitions, net of cash	 	 	-	 	 	-	 	 	(514.7	)	 	(514.7	)	
Proceeds from business dispositions	 	 	-	 	 	3.7	 	 	7.7	 	 	11.4	 	
Purchase of marketable securities	 	 	-	 	 	-	 	 	(153.2	)	 	(153.2	)	
Cash provided by equity companies	 	 	-	 	 	-	 	 	7.6	 	 	7.6	 	
Net cash used in continuing investing activities	 	 	-	 	 	(20.3	)	 	(721.4	)	 	(741.7	)	
Net cash (used in) provided by discontinued investing activities	 	 	-	 	 	-	 	 	-	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in debt	 	 	297.4	 	 	(87.3	)	 	(147.4	)	 	62.7	 	
Net inter-company (payments) proceeds	 	 	(134.8	)	 	(25.2	)	 	160.0	 	 	-	 	
Proceeds from the exercise of stock options	 	 	90.9	 	 	-	 	 	-	 	 	90.9	 	
Dividends (paid) received	 	 	(359.2	)	 	13.2	 	 	153.9	 	 	(192.1	)	
Redemption of preferred stock of subsidiary	 	 	(73.6	)	 	-	 	 	-	 	 	(73.6	)	
Purchase of treasury shares	 	 	-	 	 	-	 	 	(763.6	)	 	(763.6	)	
Discontinued operations	 	 	-	 	 	-	 	 	-	 	 	-	 	
Net cash used in continuing financing activities	 	 	(179.3	)	 	(99.3	)	 	(597.1	)	 	(875.7	)	
Net cash (used in) provided by discontinued financing activities	 	 	-	 	 	-	 	 	-	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and	 	 	 	 	 	 	 	 	 	 	 	 	 	
cash equivalents	 	 	-	 	 	-	 	 	(14.2	)	 	(14.2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (decrease) increase in cash and cash equivalents	 	 	(211.3	)	 	(649.0	)	 	37.8	 	 	(822.5	)	
Cash and cash equivalents - beginning of period	 	 	236.8	 	 	844.1	 	 	622.2	 	 	1,703.1	 	
Cash and cash equivalents - end of period	 	 	$ 25.5	 	 	$ 195.1	 	 	$ 660.0	 	 	$ 880.6	 	

88

 
Condensed Consolidating Statement of Cash Flows	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2004	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 	 	IR-	 	IR-	 	Other	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Consolidated	 	
Net cash (used in) provided by continuing operating activities	 	 	$ (14.5	)	 	$ (578.1	)	 	$ 1,345.8	 	 	$ 753.2	 	
Net cash (used in) provided by discontinued operating	 	 	 	 	 	 	 	 	 	 	 	 	 	
activities (revised)	 	 	-	 	 	(13.5	)	 	40.8	 	 	27.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	-	 	 	(38.2	)	 	(70.4	)	 	(108.6	)	
Proceeds from sale of property, plant and equipment	 	 	-	 	 	17.7	 	 	32.7	 	 	50.4	 	
Acquisitions, net of cash	 	 	-	 	 	-	 	 	(33.7	)	 	(33.7	)	
Proceeds from the sale of marketable securities	 	 	-	 	 	-	 	 	0.3	 	 	0.3	 	
Proceeds from business dispositions	 	 	-	 	 	189.0	 	 	1,224.2	 	 	1,413.2	 	
Cash provided by equity companies	 	 	-	 	 	-	 	 	7.6	 	 	7.6	 	
Net cash provided by continuing investing activities	 	 	-	 	 	168.5	 	 	1,160.7	 	 	1,329.2	 	
Net cash used in discontinued investing activities (revised)	 	 	-	 	 	-	 	 	(7.4	)	 	(7.4	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in debt	 	 	-	 	 	(409.5	)	 	(59.9	)	 	(469.4	)	
Net inter-company (payments) proceeds	 	 	191.4	 	 	1,562.4	 	 	(1,753.8	)	 	-	 	
Proceeds from the exercise of stock options	 	 	170.7	 	 	-	 	 	-	 	 	170.7	 	
Dividends (paid) received	 	 	(271.3	)	 	10.2	 	 	108.5	 	 	(152.6	)	
Purchase of treasury shares	 	 	-	 	 	-	 	 	(355.9	)	 	(355.9	)	
Net cash provided by (used in) continuing financing activities	 	 	90.8	 	 	1,163.1	 	 	(2,061.1	)	 	(807.2	)	
Net cash used in discontinued financing activities (revised)	 	 	-	 	 	-	 	 	(1.0	)	 	(1.0	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of change in fiscal year end of business	 	 	-	 	 	-	 	 	(23.8	)	 	(23.8	)	
Effect of exchange rate changes on cash and	 	 	 	 	 	 	 	 	 	 	 	 	 	
cash equivalents	 	 	-	 	 	-	 	 	16.5	 	 	16.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	 	 	76.3	 	 	740.0	 	 	470.5	 	 	1,286.8	 	
Cash and cash equivalents - beginning of period	 	 	160.5	 	 	104.1	 	 	151.7	 	 	416.3	 	
Cash and cash equivalents - end of period	 	 	$ 236.8	 	 	$ 844.1	 	 	$ 622.2	 	 	$ 1,703.1	 	

89

Condensed Consolidating Statement of Cash Flows	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2003	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 	 	IR-	 	IR-	 	Other	 	IR-Limited	 	
In millions	 	Limited	 	New Jersey	 	Subsidiaries	 	Consolidated	 	
Net cash (used in) provided by continuing operating activities	 	 	$ (12.5	)	 	$ 2,704.2	 	 	$ (2,553.3	)	 	$ 138.4	 	
Net cash (used in) provided by discontinued operating	 	 	 	 	 	 	 	 	 	 	 	 	 	
activities (revised)	 	 	-	 	 	(7.0	)	 	31.8	 	 	24.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	-	 	 	(20.5	)	 	(78.8	)	 	(99.3	)	
Proceeds from sale of property, plant and equipment	 	 	-	 	 	11.6	 	 	31.5	 	 	43.1	 	
Acquisitions, net of cash	 	 	(19.6	)	 	(1.5	)	 	(0.2	)	 	(21.3	)	
Proceeds from business dispositions	 	 	43.0	 	 	395.5	 	 	312.9	 	 	751.4	 	
Proceeds from sales and maturities of	 	 	 	 	 	 	 	 	 	 	 	 	 	
marketable securities	 	 	-	 	 	147.6	 	 	-	 	 	147.6	 	
Cash invested in equity companies	 	 	-	 	 	-	 	 	(0.6	)	 	(0.6	)	
Net cash provided by continuing investing activities	 	 	23.4	 	 	532.7	 	 	264.8	 	 	820.9	 	
Net cash used in discontinuing investing activities (revised)	 	 	-	 	 	-	 	 	(2.7	)	 	(2.7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in debt	 	 	-	 	 	(924.2	)	 	(15.4	)	 	(939.6	)	
Net inter-company (payments) proceeds	 	 	158.9	 	 	(2,418.6	)	 	2,259.7	 	 	-	 	
Proceeds from the exercise of stock options	 	 	211.1	 	 	-	 	 	-	 	 	211.1	 	
Dividends (paid) received	 	 	(220.4	)	 	8.0	 	 	89.2	 	 	(123.2	)	
Net cash provided by (used in) continuing financing activities	 	 	149.6	 	 	(3,334.8	)	 	2,333.5	 	 	(851.7	)	
Net cash used in discontinuing financing activities (revised)	 	 	-	 	 	-	 	 	(0.3	)	 	(0.3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and	 	 	 	 	 	 	 	 	 	 	 	 	 	
cash equivalents	 	 	-	 	 	-	 	 	2.6	 	 	2.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	160.5	 	 	(104.9	)	 	76.4	 	 	132.0	 	
Cash and cash equivalents - beginning of period	 	 	-	 	 	209.0	 	 	75.3	 	 	284.3	 	
Cash and cash equivalents - end of period	 	 	$ 160.5	 	 	$ 104.1	 	 	$ 151.7	 	 	$ 416.3	 	

90

SCHEDULE II

INGERSOLL RAND COMPANY LIMITED
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(Amounts in millions)

Allowances for Doubtful Accounts:	 	 	 	
 	 	 	 	
Balance December 31, 2002	 	$ 58.1	 	
Additions charged to costs and expenses *	 	 	24.4	 	
Deductions **	 	 	(26.5	)	
Currency translation	 	 	2.7	 	
 	 	 	 	 	
Balance December 31, 2003	 	 	58.7	 	
Additions charged to costs and expenses *	 	 	21.0	 	
Deductions **	 	 	(13.1	)	
Currency translation	 	 	3.5	 	
 	 	 	 	 	
Balance December 31, 2004	 	 	70.1	 	
Additions charged to costs and expenses *	 	 	0.8	 	
Deductions **	 	 	(21.0	)	
Currency translation	 	 	(2.3	)	
 	 	 	 	 	
Balance December 31, 2005	 	 	$ 47.6	 	
 
(*) "Additions" also include business acquisitions.	 	 	 	 	
(**) "Deductions" include business divestitures and accounts and advances written off, less recoveries.	 	 	 	 	

91

 
 
Exhibit 4.6
 
$1,250,000,000

CREDIT AGREEMENT

dated as of

August 12, 2005

among

Ingersoll-Rand Company
and
Ingersoll-Rand Company Limited

The Banks Listed Herein
 
and
 
Citicorp USA, Inc.,
as Syndication Agent
 
and
 
Bank of America, N.A.,
Deutsche Bank Securities Inc.,
The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
 
and
 
UBS Securities LLC
as Documentation Agents
 
and

JPMorgan Chase Bank, N.A.
as Administrative Agent
 
and
 
J.P. Morgan Securities Inc.
and
Citigroup Global Markets Inc.,
as Lead Arrangers and Bookrunners

 

TABLE OF CONTENTS

 
 	Page	
ARTICLE I DEFINITIONS	1	
SECTION 1.1. Definitions	1	
SECTION 1.2. Accounting Terms and Determinations	15	
SECTION 1.3. Types of Borrowings	15	
SECTION 1.4. Exchange Rates; Reset Dates	15	
ARTICLE II THE CREDITS	16	
SECTION 2.1. Commitments to Lend	16	
SECTION 2.2. Notice of Committed Borrowings	16	
SECTION 2.3. Money Market Borrowings	17	
SECTION 2.4. Notice to Banks; Funding of Loans	21	
SECTION 2.5. Evidence of Debt	22	
SECTION 2.6. Maturity of Loans	22	
SECTION 2.7. Interest Rates	22	
SECTION 2.8. Facility Fee; Utilization Fee; Participation Fee	24	
SECTION 2.9. Optional Termination or Reduction of Commitments	25	
SECTION 2.10. Mandatory Termination of Commitments; Mandatory Prepayments	26	
SECTION 2.11. Optional Prepayments	26	
SECTION 2.12. General Provisions as to Payments	26	
SECTION 2.13. Funding Losses	27	
SECTION 2.14. Computation of Interest and Fees	28	
SECTION 2.15. Withholding Tax Exemption	28	
SECTION 2.16. Additional Borrowers	28	
SECTION 2.17. Additional Borrower Costs	29	
SECTION 2.18. Letters of Credit.	29	
SECTION 2.19. Optional Commitment Increase.	33	
SECTION 2.20. Extension of Termination Date.	34	

i.

 
 
 	Page	
ARTICLE III CONDITIONS	36	
SECTION 3.1. Effectiveness	36	
SECTION 3.2. Borrowings and Extension Date	37	
ARTICLE IV REPRESENTATIONS AND WARRANTIES	38	
SECTION 4.1. Corporate Existence and Power	38	
SECTION 4.2. Corporate and Governmental Authorization; No Contravention	39	
SECTION 4.3. Binding Effect	39	
SECTION 4.4. Financial Information; No Material Adverse Change	39	
SECTION 4.5. Litigation	40	
SECTION 4.6. Compliance with ERISA	40	
SECTION 4.7. Environmental Matters	40	
SECTION 4.8. Taxes	40	
SECTION 4.9. Subsidiaries	41	
SECTION 4.10. Not an Investment Company	41	
SECTION 4.11. Full Disclosure	41	
ARTICLE V COVENANTS	41	
SECTION 5.1. Information	41	
SECTION 5.2. Maintenance of Property; Insurance	43	
SECTION 5.3. Conduct of Business and Maintenance of Existence	43	
SECTION 5.4. Compliance with Laws	44	
SECTION 5.5. Debt	44	
SECTION 5.6. Negative Pledge	44	
SECTION 5.7. Consolidations, Mergers and Sales of Assets	46	
SECTION 5.8. Use of Proceeds	46	
SECTION 5.9. Other Cross Defaults or Negative Pledges	46	
ARTICLE VI DEFAULTS	47	
SECTION 6.1. Events of Default	47	
SECTION 6.2. Notice of Default	49	
ARTICLE VII THE ADMINISTRATIVE AGENT	49	
SECTION 7.1. Appointment and Authorization	49	

ii.

 
 	Page	
SECTION 7.2. Administrative Agent and Affiliates	49	
SECTION 7.3. Action by the Administrative Agent	49	
SECTION 7.4. Consultation with Experts	49	
SECTION 7.5. Liability of the Administrative Agent	49	
SECTION 7.6. Indemnification	50	
SECTION 7.7. Credit Decision	50	
SECTION 7.8. Successor Administrative Agent	50	
SECTION 7.9. Administrative Agent’s Fees	50	
SECTION 7.10. Syndication Agent and Documentation Agents	50	
ARTICLE VIII CHANGE IN CIRCUMSTANCES	51	
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair	51	
SECTION 8.2. Illegality	51	
SECTION 8.3. Increased Cost and Reduced Return	52	
SECTION 8.4. Base Rate Loans Substituted for Affected Fixed Rate Loans	53	
SECTION 8.5. Substitution of Bank	54	
ARTICLE IX MISCELLANEOUS	54	
SECTION 9.1. Notices	54	
SECTION 9.2. No Waivers	54	
SECTION 9.3. Expenses; Documentary Taxes; Indemnification	54	
SECTION 9.4. Sharing of Set-Offs	55	
SECTION 9.5. Amendments and Waivers	55	
SECTION 9.6. Successors and Assigns	56	
SECTION 9.7. Collateral	58	
SECTION 9.8. Governing Law; Submission to Jurisdiction	58	
SECTION 9.9. Counterparts; Integration	58	
SECTION 9.10. Termination of Existing 5-Year Credit Agreement	58	
SECTION 9.11. [Intentionally Omitted]	59	
SECTION 9.12. Conversion of Currencies	59	
SECTION 9.13. WAIVER OF JURY TRIAL	59	
SECTION 9.14. Severability	59	
SECTION 9.15. Headings	59	
SECTION 9.16. Guarantee Agreement	59	
SECTION 9.17. USA Patriot Act.	63	

iii.

 
Schedule I	-	Commitments	
 	 	 	
Exhibit A-1	-	Note (the Borrower)	
Exhibit A-2	-	Note (IR Parent)	
Exhibit B	-	Money Market Quote Request	
Exhibit C	-	Invitation for Money Market Quotes	
Exhibit D	-	Money Market Quote	
Exhibit E	-	Opinion of Counsel for the Borrower	
Exhibit F	-	Assignment and Assumption Agreement	
Exhibit G	-	Additional Borrower Agreement	
Exhibit H	-	New Bank Supplement	
Exhibit I	-	Commitment Increase Supplement	
Exhibit J	-	Opinion of Counsel for IR Parent	
Exhibit K	-	Form of Notice of Extension of Termination Date	

iv.

 
CREDIT AGREEMENT
 
CREDIT AGREEMENT dated as of August 12, 2005 among INGERSOLL-RAND COMPANY, INGERSOLL-RAND COMPANY LIMITED, the BANKS listed on the signature pages hereof, JPMORGAN CHASE BANK, N.A., as Administrative Agent, CITICORP USA, INC., as Syndication Agent, and BANK OF AMERICA, N.A., DEUTSCHE BANK SECURITIES INC., THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH AND UBS SECURITIES LLC, as Documentation Agents.
 
The parties hereto agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
SECTION 1.1.  Definitions .
 
The following terms, as used herein, have the following meanings:
 
“2004 5-Year Existing Credit Agreement” means the 5-Year Credit Agreement, dated as of June 24, 2004 (as amended, supplemented or otherwise modified from time to time) among the Borrower, IR Parent, the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent.
 
“Absolute Rate Auction” means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
 
“Additional Borrower” means, at any time, IR Parent and each of the Subsidiaries which has been designated as an Additional Borrower by the Borrower pursuant to Section 2.16 and which may borrow Committed Loans as described in Section 2.1.
 
“Adjusted London Interbank Offered Rate” has the meaning set forth in Section 2.7(b).
 
“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity.
 
“Administrative Questionnaire” means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank.
 
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such other Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Agents” means the Administrative Agent, the Syndication Agent and the Documentation Agents, and “Agent” means any of the foregoing.
 
“Agreement” means this Credit Agreement, as amended, supplemented or otherwise modified from time to time.
 
“Agreement Currency” has the meaning set forth in Section 9.12.
 
“Applicable Creditor” has the meaning set forth in Section 9.12.
 
“Applicable Currency” means, as to any particular payment, Borrowing or Loan, Dollars or the Foreign Currency in which it is denominated or payable.
 
“Applicable Lending Office” means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Currency Loans, its Euro-Currency Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office.
 
“Applicable Percentage” means, with respect to any Bank, the percentage of the total Commitments represented by such Bank’s Commitment. If the Commitments have terminated or expired, the Applicable Percentage shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.
 
“Assignee” has the meaning set forth in Section 9.6(c).
 
“Assuming Lender” has the meaning set forth in Section 2.20(c).
 
“Attributable Debt” means, at any date, the total net amount of rent required to be paid under a lease during the remaining term thereof (excluding any renewal term unless such renewal is at the option of the lessor), discounted from the respective due dates thereof to such date at 8 3/8% compounded semi-annually. The net amount of rent required to be paid for any such period shall be the aggregate of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of, or measured or determined by, any variable factor, including, without limitation, the cost-of-living index and costs of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges and after excluding any portion of rentals based on a percentage of sales made by the lessee. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered so required to be paid under such lease subsequent to the first date upon which it may be so terminated.
 
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Termination Date and the date of termination of the Commitments.
 
“Available Commitment” means, with respect to any Bank, an amount equal to the Commitment of such Bank minus the amount of all outstanding Committed Loans made by such Bank pursuant to Section 2.1(a) or 2.1(b) and the amount of LC Exposure.

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“Bank” means each bank or other financial institution listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective successors.
 
“Base Rate” means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day.
 
“Base Rate Loan” means a Committed Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article VIII.
 
“Benefit Arrangement” means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
 
“Borrower” means Ingersoll-Rand Company, a New Jersey corporation, and its successors.
 
“Borrowing” has the meaning set forth in Section 1.3.
 
“Calculation Date” means, with respect to each Foreign Currency, the last day of each calendar month (or, if such day is not a Euro-Currency Business Day, the next succeeding Euro-Currency Business Day), provided that the second Euro-Currency Business Day preceding any Borrowing of Foreign Currency Loans shall also be a “Calculation Date” with respect to the Foreign Currency to be borrowed on such date.
 
“Commitment” means, as to any Bank, the obligation of such Bank to make Loans to the Borrower hereunder and to acquire participations in Letters of Credit in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Bank’s name under the column “Commitment” on Schedule I, and with respect to any Bank which becomes a party to this Agreement pursuant to Section 9.6(c), the amount of the Commitment thereby assumed by such Bank, in each case as such amount may from time to time be reduced pursuant to Sections 2.9, 2.10 and 9.6(c) or increased pursuant to Section 9.6(c).
 
“Commitment Increase Date” has the meaning set forth in Section 2.19(b).
 
“Commitment Increase Supplement” has the meaning set forth in Section 2.19(b).
 
“Committed Loan” means a loan made by a Bank pursuant to Section 2.1(a) or (b).
 
“Consenting Lender” has the meaning set forth in Section 2.20(b).

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“Consolidated Debt” means, at any date, without duplication, the sum of (i) all amounts which would be set forth opposite the captions “Loans payable” and “Long-term debt” on a balance sheet of the IR Parent and its Consolidated Subsidiaries as of such date prepared in accordance with generally accepted accounting principles consistent with those utilized in preparing the audited balance sheet of the IR Parent and its Consolidated Subsidiaries referred to in Section 4.4(a) hereof, (ii) capitalized lease obligations of the IR Parent and its Consolidated Subsidiaries and (iii) the higher of the voluntary or involuntary liquidation value of any preferred stock (other than auction-rate preferred stock the higher of the voluntary or involuntary liquidation value of which does not in the aggregate exceed $100,000,000) of a Consolidated Subsidiary held on such date by a Person other than the IR Parent or a wholly-owned Consolidated Subsidiary, but in any event excluding subordinated debentures issued by the IR Parent to one or more Delaware statutory business trusts and purchased by such trusts with the proceeds of the issuance of trust preferred securities (the “Equity-Linked Subordinated Debentures”). The foregoing definition is based on the understanding of the parties that the obligations covered by clauses (i) and (ii) above are co-extensive in all material respects with the obligations covered by the definition of Debt herein, and the reference to specific balance sheet captions is for the purpose of affording both greater simplicity and greater certainty in determining compliance with the provisions of Section 5.5. If the foregoing assumption is at some future time determined not to be correct, and if the Administrative Agent notifies the IR Parent that the Required Banks wish to amend the foregoing definition to include an obligation covered by the definition of Debt (or if the IR Parent notifies the Administrative Agent that the IR Parent wishes to amend the foregoing definition to exclude an obligation not covered by the definition of Debt), then the IR Parent’s compliance with Section 5.5 shall be determined by including in (or excluding from, as the case may be) Consolidated Debt the consolidated amount, determined in accordance with generally accepted accounting principles, of the obligation in question until either such notice is withdrawn or this definition is amended in a manner satisfactory to the IR Parent and the Required Banks.
 
“Consolidated Net Worth” means, in accordance with Section 1.2, at any date the consolidated stockholders’ equity of the IR Parent and its Consolidated Subsidiaries, exclusive of adjustments resulting from any accumulated other comprehensive income, any impairment of tangible assets, or any non-cash charges, but including the amount shown on the balance sheet of the IR Parent as of such date in respect of any Equity-Linked Subordinated Debentures (as such term is defined in the definition of Consolidated Debt).
 
“Consolidated Subsidiary” means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the IR Parent in its consolidated financial statements if such statements were prepared as of such date.
 
“Cross Default” means a provision governing Debt of the Borrower or IR Parent to the effect that the holder of such Debt (or any representative of such holder) shall have the right, upon the giving of any notice and the lapse of any time specified in the instruments governing such Debt, to accelerate the maturity of such Debt by reason of (i) an event or condition which permits acceleration of the maturity of any other Material Debt of the Borrower, IR Parent or of a Subsidiary or (ii) the failure to pay when due any amount on any other Material Debt of the Borrower, IR Parent or of a Subsidiary, in either case whether or not upon the giving of notice and the lapse of any time (including the lapse of any applicable grace period) specified in the instruments governing such other Debt.
 
“Current Board” has the meaning set forth in Section 6.1(j).

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“Debt” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property (and not services), except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, and (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person; provided that “Debt” shall include at any date only such obligations and such Debt of others to the extent such obligations and such Debt of others is reflected as a liability in the consolidated balance sheet of the IR Parent and its Consolidated Subsidiaries as of such date (or would be so reflected if such a balance sheet were prepared as of such date).
 
“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
 
“Disbursement Date” has the meaning set forth in Section 2.18(e).
 
“Documentation Agent” means each of Bank of America, N.A., Deutsche Bank Securities Inc., The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and UBS Securities LLC in their respective capacities as documentation agent hereunder, and their successors in such capacities.
 
“Dollar Equivalent” means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in a Foreign Currency, the equivalent amount in Dollars as determined by the Administrative Agent on the basis of the Exchange Rate, as described in Section 1.4, for the purchase of Dollars with such Foreign Currency on the most recent Calculation Date for such Foreign Currency.
 
“Dollars” and “$” mean dollars in lawful currency of the United States.
 
“Domestic Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
 
“Domestic Lending Office” means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) and/or one or more other offices as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent.
 
“Domestic Loans” means Base Rate Loans.
 
“Effective Date” means the date this Agreement becomes effective in accordance with Section 3.1.
 
“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof.

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
 
“ERISA Group” means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or (c) of the Internal Revenue Code.
 
“Euro-Currency Business Day” means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London and on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) (or, if such clearing system ceases to be operative, such other clearing system (if any) determined by the Administrative Agent to be a suitable replacement) is open for settlement of payment in euros.
 
“Euro-Currency Lending Office” means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Currency Lending Office) and/or one or more other offices, branches or affiliates of such Bank as it may hereafter designate as its Euro-Currency Lending Office by notice to the Borrower and the Administrative Agent.
 
“Euro-Currency Loan” means a Committed Loan denominated in Dollars or in euros to be made by a Bank as a Euro-Currency Loan in accordance with the applicable Notice of Committed Borrowing.
 
“Euro-Currency Margin” has the meaning set forth in Section 2.7(f).
 
“Euro-Currency Reserve Percentage” has the meaning set forth in Section 2.7(b).
 
“Euro Loans” means Loans made by the Banks pursuant to Section 2.1(b).
 
“Event of Default” has the meaning set forth in Section 6.1.
 
“Exchange Rate” means, as to any currency on a particular date, the rate at which such currency may be exchanged into Dollars or the relevant Foreign Currency in London on a spot basis, as set forth on the display page of the Telerate System applicable to such currency as reasonably determined by the Administrative Agent. In the event that such rate does not appear on any Telerate display page, the Exchange Rate with respect to such currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, such Exchange Rate shall instead be determined by reference to the Administrative Agent’s spot rate of exchange quoted to prime banks in the interbank market where its foreign currency exchange operations in respect of the relevant Foreign Currency are then being conducted, at or about noon, local time, at such date for the purchase of Dollars with such Foreign Currency (or such Foreign Currency with Dollars, as applicable), for delivery on a spot basis; provided , however , that if at the time of any such determination, for any reason, no such spot rate is being quoted and no other methods for determining the Exchange Rate can be determined as set forth above, the Administrative Agent may use any reasonable method it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error.

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“Existing 5-Year Credit Agreement” means the Credit Agreement, dated as of July 2, 2001 (as amended by the Amendment and Waiver, dated as of November 28, 2001, and as further amended, supplemented or otherwise modified from time to time), among the Borrower, IR Parent, the banks listed on the signature pages thereof, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as administrative agent.
 
“Extension Date” has the meaning set forth in Section 2.20(b).
 
“Facility Fee Rate” has the meaning set forth in Section 2.7(f).
 
“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to JPMorgan Chase Bank, N.A, on such day on such transactions as determined by the Administrative Agent.
 
“Fixed Rate Loans” means Euro-Currency Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.1) or any combination of the foregoing.
 
“Foreign Currency” means English pounds sterling, euros or Japanese Yen.
 
“Foreign Currency Equivalent” at any time as to any amount denominated in Dollars, the equivalent amount in the relevant Foreign Currency or Foreign Currencies as determined by the Administrative Agent at such time on the basis of the Exchange Rate for the purchase of such Foreign Currency or Foreign Currencies with Dollars on the date of determination thereof.
 
“Foreign Currency Loans” means Loans denominated in a Foreign Currency.
 
“Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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“Granting Bank” has the meaning set forth in Section 9.6(f).
 
“Interest Period” means: (1) with respect to each Euro-Currency Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months and, if agreeable to all the Banks, nine or twelve months, thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that:
 
(a)   any Interest Period which would otherwise end on a day which is not a Euro-Currency Business Day shall be extended to the next succeeding Euro-Currency Business Day unless such Euro-Currency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Currency Business Day;
 
(b)   any Interest Period which begins on the last Euro-Currency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Currency Business Day of a calendar month; and
 
(c)   any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
 
(2)   with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 90 days thereafter; provided that:
 
(a)   any Interest Period which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and
 
(b)   any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
 
(3)   with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending seven days or one, two, three, six, nine or twelve months thereafter as the Borrower may elect in accordance with Section 2.3; provided that:
 
(a)   any Interest Period which would otherwise end on a day which is not a Euro-Currency Business Day shall be extended to the next succeeding Euro-Currency Business Day unless such Euro-Currency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Currency Business Day;
 
(b)   any Interest Period which begins on the last Euro-Currency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Currency Business Day of a calendar month; and
 
(c)   any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.

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(4)   with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter as the Borrower may elect in accordance with Section 2.3; provided that:
 
(a)   any Interest Period which would otherwise end on a day which is not a Euro-Currency Business Day shall be extended to the next succeeding Euro-Currency Business Day; and
 
(b)   no Interest Period shall end after the Termination Date.
 
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.
 
“IR Parent” means Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda.
 
“Issuing Bank” means JPMorgan Chase Bank, N.A. and any other Bank selected by the Borrower or IR Parent and that agrees to act in such capacity, in such Bank’s capacity as the issuer of Letters of Credit hereunder, and such Bank’s successors in such capacity.
 
“Judgment Currency” has the meaning set forth in Section 9.12.
 
“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.
 
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower or any Additional Borrower at such time. The LC Exposure of any Bank at any time shall be its Applicable Percentage of the total LC Exposure at such time.
 
“Letter of Credit” means any letter of credit issued pursuant to this Agreement. All Letters of Credit shall be denominated in Dollars.
 
“Level I Status” exists, subject to the provisions of Section 2.7(f) hereof, at any date if, at such date, the Borrower’s or IR Parent’s, if IR Parent has a higher rating as of such date, outstanding senior unsecured long-term debt securities are rated A+ or higher by S&P or A1 or higher by Moody’s.
 
“Level II Status” exists, subject to the provisions of Section 2.7(f) hereof, at any date if (i) Level I Status does not exist on such date and (ii) the Borrower’s or IR Parent’s, if IR Parent has a higher rating as of such date, outstanding senior unsecured long-term debt securities are rated A or higher by S&P or A2 or higher by Moody’s.
 
“Level III Status” exists, subject to the provisions of Section 2.7(f) hereof, at any date if (i) neither Level I Status nor Level II Status exists on such date and (ii) the Borrower’s or IR Parent’s, if IR Parent has a higher rating as of such date, outstanding senior unsecured long-term debt securities are rated A- or higher by S&P or A3 or higher by Moody’s.

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“Level IV Status” exists, subject to the provisions of Section 2.7(f) hereof, at any date if (i) none of Level I Status, Level II Status and Level III Status exists on such date and (ii) the Borrower’s or IR Parent’s, if IR Parent has a higher rating as of such date, outstanding senior unsecured long-term debt securities are rated BBB+ or higher by S&P or Baa1 or higher by Moody’s.
 
“Level V Status” exists, subject to the provisions of Section 2.7(f) hereof, at any date if (i) none of Level I Status through Level IV Status exists on such date and (ii) the Borrower’s or IR Parent’s, if IR Parent has a higher rating as of such date, outstanding senior unsecured long-term debt securities are rated BBB or higher by S&P or Baa2 or higher by Moody’s.
 
“Level VI Status” exists at any date if none of Level I Status through Level V Status exists on such date.
 
“LIBOR Auction” means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.3.
 
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower, IR Parent or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
 
“Loan” means a Domestic Loan or a Euro-Currency Loan or a Money Market Loan and “Loans” means Domestic Loans or Euro-Currency Loans or Money Market Loans or any combination of the foregoing.
 
“Loan Documents” means, collectively, this Agreement and any Notes.
 
“London Interbank Offered Rate” has the meaning set forth in Section 2.7(b).
 
“Material Adverse Effect” means a material adverse effect on the business, financial position or results of operations or property of the IR Parent and its Consolidated Subsidiaries, considered as a whole.
 
“Material Debt” means (i) any Public Debt and (ii) any Debt of the Borrower, IR Parent and/or one or more of their respective Subsidiaries, arising in one or more related or unrelated transactions after the date hereof, in an aggregate principal amount exceeding $50,000,000.
 
“Material Plan” means at any time a Plan or Plans having aggregate Unfunded Liabilities in an amount which, if the Plan then terminated, would have a Material Adverse Effect, taking into account all members of the ERISA Group.
 
“Material Subsidiary” means (i) Schlage Lock Company LLC, a Delaware limited liability company, Clark Equipment Corporation, a Delaware corporation, Hussmann International, Inc., a Delaware corporation, Thermo King Corporation, a Delaware corporation, and their respective successors and assigns, (ii) at any date, any other Restricted Subsidiary which on such date is encompassed by the definition of a “significant subsidiary” contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission and (iii) in any event, any Additional Borrower other than IR Parent.

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“Money Market Absolute Rate” has the meaning set forth in Section 2.3(d).
 
“Money Market Absolute Rate Loan” means a loan to be made by a Bank pursuant to an Absolute Rate Auction.
 
“Money Market Lending Office” means, as to each Bank, its Domestic Lending Office and/or one or more other offices, branches or affiliates of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
 
“Money Market LIBOR Loan” means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.1(ii)).
 
“Money Market Loan” means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.
 
“Money Market Margin” has the meaning set forth in Section 2.3(d).
 
“Money Market Quote” means an offer by a Bank to make a Money Market Loan in accordance with Section 2.3.
 
“Money Market Quote Request” has the meaning set forth in Section 2.3(b).
 
“Moody’s” means Moody’s Investors Service, Inc.
 
“Mortgage” means, on any specified property, any mortgage, lien, pledge, charge or other security interest or encumbrance of any kind in respect of such property.
 
“Multiemployer Plan” means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions.
 
“New Bank Supplement” has the meaning set forth in Section 2.19(b).
 
“Non-Consenting Lender” has the meaning set forth in Section 2.20 (a).

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“Notes” means promissory notes of the Borrower and IR Parent, substantially in the form of Exhibits A-1 and A-2 hereto, evidencing the obligation of the Borrower and IR Parent to repay the Loans, and “Note” means any one of such promissory notes issued hereunder.
 
“Notice of Borrowing” means a Notice of Committed Borrowing (as defined in Section 2.2) or a Notice of Money Market Borrowing (as defined in Section 2.3(f)).
 
“Obligations” means the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower or any Additional Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, the Letters of Credit and all other obligations and liabilities of the Borrower or any Additional Borrower to the Administrative Agent or to any Bank, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Bank that are required to be paid by the Borrower pursuant hereto) or otherwise.
 
“Parent” means, with respect to any Bank, any Person controlling such Bank.
 
“Participant” has the meaning set forth in Section 9.6(b).
 
“Participation Fee Rate” has the meaning set forth in Section 2.7(f).
 
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
 
“Permitted Investments” means:
 
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;
 
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;
 
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

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(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and
 
(e) money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.
 
“Person” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
 
“Plan” means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group.
 
“Prime Rate” means that rate of interest from time to time announced by JPMorgan Chase Bank, N.A. at its principal office, presently located at 270 Park Avenue, New York, New York 10017, as its prime rate.
 
“Principal Property” means any manufacturing plant or other manufacturing facility of the Borrower or any Restricted Subsidiary, as the case may be, which plant or facility is located within the United States of America, except any such plant or facility which the Borrower’s Board of Directors by resolution declares is not of material importance to the total business conducted by the Borrower and its Restricted Subsidiaries.
 
“Public Debt” means (i) the Borrower's 9.00% Debentures due 2021; (ii) the Borrower's 7.20% Debentures due 2006-2025; (iii) the Borrower's 6.48% Redeemable Debentures due 2025; (iv) the Borrower's 6.391% Debentures due 2027; (v) the Borrower's 6.443% Debentures due 2027; (vi) the Borrower's Medium Term Notes due through 2028; (vii) the Clark Medium Term Notes due 2023; (viii) the 6.75% Hussmann International, Inc. Senior Notes due 2008; (ix) the Borrower's 6.25% Notes due 2006; and (x) the IR Parent’s 4.75% Senior Notes due 2015.
 
“Refunding Borrowing” means a Committed Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Committed Loans made by any Bank.
 
“Register” has the meaning set forth in Section 9.6(g).
 
“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.
 
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

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“Required Banks” means at any time Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Loans evidencing at least 51% of the aggregate unpaid principal amount of the Loans.
 
“Reset Date” shall have the meaning set forth in Section 1.4.
 
“Restricted Subsidiary” means any Subsidiary, excluding any Subsidiary the greater part of the operating assets of which are located or the principal business of which is carried on outside of the United States of America.
 
“Revolving Exposure” means, at any time, the aggregate principal amount of Loans then outstanding together with the aggregate amount of LC Exposure at such time. The amount of Revolving Exposure, at any time, shall not exceed the amount of total Commitments at such time.
 
“Sale and Leaseback Transaction” means an arrangement with any Person for the leasing by the Borrower or a Restricted Subsidiary (except for temporary leases for a term of not more than three years and, in the case of a Restricted Subsidiary, a lease to the Borrower or another Restricted Subsidiary) of any Principal Property (whether now owned or hereafter acquired), which Principal Property has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to such Person.
 
“S&P” means Standard & Poor’s Ratings Services.
 
“SPC” has the meaning set forth in Section 9.6(f).
 
“Subsidiary” means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower or by IR Parent, as applicable.
 
“Syndication Agent” means Citicorp USA, Inc. in its capacity as syndication agent for the Banks hereunder, and its successors in such capacity.
 
“Termination Date” means the fifth anniversary of the Effective Date or, if such day is not a Euro-Currency Business Day, the next preceding Euro-Currency Business Day; provided , however , that the Termination Date of any Lender that is a Non-Consenting Lender to any requested extension pursuant to Section 2.20 shall be the Termination Date in effect immediately prior to the applicable Extension Date for all purposes of this Agreement.
 
“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all accrued benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined on the basis of a Plan termination as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

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“US Borrower” means the Borrower and each Additional Borrower which is incorporated under the laws of or engaged in a trade or business in the United States of America.
 
SECTION 1.2.  Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by IR Parent’s independent public accountants) with the most recent audited consolidated financial statements of IR Parent and its Consolidated Subsidiaries delivered to the Banks; provided that, (x) if IR Parent or the Borrower notifies the Administrative Agent that IR Parent or the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies IR Parent or the Borrower that the Required Banks wish to amend Article V for such purpose), then IR Parent’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks, and (y) for purposes of determining Consolidated Net Worth, generally accepted accounting principles as in effect at the time of and as used to prepare the financial statements referred to in Section 4.4(a) hereof shall be used for such determination, notwithstanding any change in such generally accepted accounting principles after the date of such financial statements, provided that Consolidated Net Worth shall be determined excluding the effect of goodwill impairment charges, net of taxes, to the extent that such effect would not otherwise have been included in such determination but for the application of FAS 142.
 
SECTION 1.3.  Types of Borrowings . The term “Borrowing” denotes the aggregation of Loans of one or more Banks to be made to the Borrower or any Additional Borrower pursuant to Article II on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g, a “Euro-Currency Borrowing” is a Borrowing comprised of Euro-Currency Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a “Committed Borrowing” is a Borrowing under Section 2.1 in which all Banks participate in proportion to their Commitments, while a “Money Market Borrowing” is a Borrowing under Section 2.3 in which the Bank participants are determined on the basis of their bids in accordance therewith).
 
SECTION 1.4.  Exchange Rates; Reset Dates .  (a)  At approximately 10:00 A.M., New York City time, or as close to such time as is reasonably practicable, on each Calculation Date, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to euros and with respect to each other Foreign Currency in which any Loan shall be outstanding and (ii) give notice thereof to the Banks and the Borrower. The Exchange Rates so determined shall become effective on the first Euro-Currency Business Day immediately following the relevant Calculation Date (a “ Reset Date ”) and shall remain effective until the next succeeding Reset Date.

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(b)   At approximately 10:00 A.M., New York City time, or as close to such time as is reasonably practicable, on each Reset Date, the Administrative Agent shall (i) determine the aggregate amount of the Dollar Equivalents of the principal amounts of the Foreign Currency Loans then outstanding (after giving effect to any Foreign Currency Loans made or repaid on such date) and (ii) notify the Borrower of the results of such determination.
 
ARTICLE II
 
THE CREDITS
 
SECTION 2.1.  Commitments to Lend .  (a)  During the Availability Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans in Dollars to the Borrower or any Additional Borrower pursuant to this Section from time to time in amounts such that the Revolving Exposure by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.2(b)) and shall be made from the several Banks ratably in proportion to their respective Available Commitments. Within the foregoing limits, the Borrower or any Additional Borrower may borrow under this Section, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Availability Period under this Section.
 
(b)   Commitments to Lend in Euros . During the Availability Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans in euros (“Euro Loans”) to the Borrower or any Additional Borrower pursuant to this Section from time to time in amounts such that (i) the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment and (ii) the Revolving Exposure by such Bank at any one time outstanding shall not exceed the amount of its Commitment. All Euro Loans shall be Euro-Currency Loans. Each Borrowing under this Section shall be in an aggregate principal amount of the Foreign Currency Equivalent of $10,000,000 or any larger multiple of the Foreign Currency Equivalent of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.2(b)) and shall be made from the several Banks ratably in proportion to their respective Available Commitments. Within the foregoing limits, the Borrower or any Additional Borrower may borrow under this Section, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Availability Period under this Section. It is expressly understood and agreed among the parties hereto that any and all Euro Loan Borrowings made pursuant to Section 2.1(b) hereof shall constitute utilizations of the Banks’ Commitments hereunder and shall reduce the Available Commitment of the Banks accordingly.
 
SECTION 2.2.  Notice of Committed Borrowings . The Borrower or any Additional Borrower, as applicable, shall give the Administrative Agent notice (a “Notice of Committed Borrowing”) (w) at its New York address not later than 11:00 A.M. (New York City time) on the date of each Base Rate Borrowing, (x) at its New York address not later than 11:00 A.M. (New York City time) on the third Euro-Currency Business Day before each Euro-Currency Borrowing denominated in Dollars, and (y) in the case of Euro Loans, at its London address not later than 10:00 A.M. (London time) on the date of each such Euro-Currency Borrowing denominated in euros, specifying:

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(a)   the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Currency Business Day in the case of a Euro-Currency Borrowing,
 
(b)   the aggregate amount of such Borrowing and whether such Borrowing is to be denominated in Dollars or in Euros,
 
(c)   in the case of Loans to be made in Dollars, whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Currency Loans, and
 
(d)   in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
 
SECTION 2.3.  Money Market Borrowings .
 
(a)   The Money Market Option . In addition to Committed Borrowings pursuant to Section 2.1, the Borrower or IR Parent may, as set forth in this Section, request the Banks during the Availability Period to make offers to make Money Market Loans to the Borrower or IR Parent. The Banks may, but shall have no obligation to, make such offers and the Borrower or IR Parent may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. The Borrower or IR Parent may request the Banks to make Money Market Loans denominated in Dollars or in any Foreign Currency; provided , however , that at no time may the Borrower or IR Parent request the Banks to make Money Market Loans so as to cause the amount of the Revolving Exposure to exceed the amount of the total Commitments.
 
(b)   Money Market Quote Request . When the Borrower or IR Parent wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto (a “ Money Market Quote Request ”) so as to be received no later than 11:00 A.M. (New York City time) at the Administrative Agent’s New York facsimile number, and, in the case of Money Market Loans to be denominated in a Foreign Currency, so as to be received no later than 11:00 A.M. (London time) at the Administrative Agent’s London facsimile number on (x) the fourth Euro-Currency Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower or IR Parent and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:
 
(i)   the proposed date of Borrowing, which shall be a Euro-Currency Business Day in the case of a LIBOR Auction or in the case of an Absolute Rate Auction to be denominated in a Foreign Currency or a Domestic Business Day in the case of an Absolute Rate Auction to be denominated in Dollars,

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(ii)   the aggregate amount of such Borrowing, which shall be subject to the provisions of Section 2.3(a) and shall be $10,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency) or a larger multiple of $1,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency),
 
(iii)   the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period,
 
(iv)   whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate ; and
 
(v)   the Applicable Currency in which the proposed Borrowing is to be denominated.
 
The Borrower or IR Parent may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Currency Business Days (or such other number of days as the Borrower or IR Parent and the Administrative Agent may agree) of any other Money Market Quote Request.
 
(c)   Invitation for Money Market Quotes . Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by facsimile transmission an invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower or IR Parent to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section.
 
(d)   Submission and Contents of Money Market Quotes . (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by facsimile transmission at its offices specified in or pursuant to Section 9.1 not later than (x) 9:30 A.M. (New York City time or London time, as applicable) on the third Euro-Currency Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time or London time, as applicable) on the first Euro-Currency Business Day prior to the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower or IR Parent and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower or IR Parent of the terms of the offer or offers contained therein not later than 15 minutes prior to the deadline for the other Banks. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower or IR Parent.

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(ii)   Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify:
 
(A)   the proposed date of Borrowing,
 
(B)   the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $10,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency) or a larger multiple of $1,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency), (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted,
 
(C)   in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the “Money Market Margin”) offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
 
(D)   in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the “Money Market Absolute Rate”) offered for each such Money Market Loan, and
 
(E)   the identity of the quoting Bank.
 
A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes.
 
(iii)   Any Money Market Quote shall be disregarded if it:
 
(A)   is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii);
 
(B)   contains qualifying, conditional or similar language;
 
(C)   proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or
 
(D)   arrives after the time set forth in subsection (d)(i).
 
(e)   Notice to Borrower . The Administrative Agent shall promptly notify the Borrower or IR Parent of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent’s notice to the Borrower or IR Parent shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.

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(f)   Acceptance and Notice by Borrower . Not later than 11:30 A.M. (New York City time or London time, as applicable) on (x) the third Euro-Currency Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower or IR Parent and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower or IR Parent shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a “Notice of Money Market Borrowing”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower or IR Parent may accept any Money Market Quote in whole or in part; provided that:
 
(i)   the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request,
 
(ii)   the principal amount of each Money Market Borrowing must be $10,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency) or a larger multiple of $1,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency),
 
(iii)   acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and
 
(iv)   neither the Borrower nor IR Parent may accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement (including the requirements of the third sentence of Section 2.3(a)).
 
(g)   Allocation by Administrative Agent . If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000 (or the Foreign Currency Equivalent thereof, in the case of Money Market Loans to be denominated in a Foreign Currency), as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error.

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SECTION 2.4.  Notice to Banks; Funding of Loans .
 
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank’s share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower or Additional Borrower, as the case may be.
 
(b)   Not later than 12:30 p.m. (New York City time or London time, as applicable) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City or in London, as applicable, to the Administrative Agent at its address specified in or pursuant to Section 9.1 (or, in the case of any Borrowing denominated in a Foreign Currency, at such other address as the Administrative Agent may specify from time to time by written notice to the Borrower and the Banks). Unless the Administrative Agent determines that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Banks available in like funds to the Borrower or the Additional Borrower, as the case may be, at the Administrative Agent’s aforesaid address. If any Bank makes a new Loan hereunder on a day on which the Borrower or the Additional Borrower, as the case may be, is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Administrative Agent as provided in subsection (b), or remitted by the Borrower or the Additional Borrower to the Administrative Agent as provided in Section 2.12, as the case may be.  
 
(c)   Unless the Administrative Agent shall have received notice from a Bank prior to the date (or, if a Base Rate Borrowing, the time) of any Borrowing that such Bank will not make available to the Administrative Agent such Bank’s share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.4 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower or the Additional Borrower, as the case may be, on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower or the Additional Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower or the Additional Borrower until the date such amount is repaid to the Administrative Agent, at a rate per annum equal to (x) in the case of amounts denominated in Dollars, the daily average Federal Funds Rate, and (y) in the case of amounts denominated in a Foreign Currency, the daily average cost of funding such amount (as determined by the Administrative Agent). A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank’s Loan included in such Borrowing for purposes of this Agreement.

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SECTION 2.5.  Evidence of Debt .  (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower or any Additional Borrower to such Bank resulting from the Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement.
 
(b)   The Administrative Agent shall maintain the Register pursuant to subsection 9.6(g), and a subaccount therein for each Bank, in which shall be recorded (i) the amount of each Loan made hereunder and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower and any Additional Borrower to each Bank hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Additional Borrower and each Bank’s share thereof.
 
(c)   The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted by applicable law, be prima   facie evidence of the existence and amounts of the obligations of the Borrower and any Additional Borrower therein recorded; provided , however , that the failure of any Bank or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower or any Additional Borrower to repay (with applicable interest) the Loan made to such Borrower or Additional Borrower by such Bank in accordance with the terms of this Agreement.
 
(d)   The Borrower and all Additional Borrowers agree that, upon the request to the Administrative Agent by any Bank, the Borrower or such Additional Borrower will execute and deliver to such Bank a single Note of the Borrower or such Additional Borrower, as the case may be, evidencing the Loan of such Bank.
 
SECTION 2.6.  Maturity of Loans .  Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing.
 
SECTION 2.7.  Interest Rates .   (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
 
(b)   Each Euro-Currency Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Currency Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.

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The “Adjusted London Interbank Offered Rate” applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.0 minus the Euro-Currency Reserve Percentage.
 
The “London Interbank Offered Rate” applicable to any Interest Period (other than any seven day Interest Period) means the rate appearing on the relevant page of the Telerate screen (or on any successor or substitute page of such service, or any successor to or substitute for such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in the Applicable Currency in the London interbank market) at approximately 11:00 A.M., London time, two Euro-Currency Business Days prior to the commencement of such Interest Period, as the rate for deposits in the Applicable Currency with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason or in the case of any seven day Interest Period, and, in any event, in the case of sterling-denominated Loans, then the “London Interbank Offered Rate” with respect to such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which deposits of $5,000,000 (or the Foreign Currency Equivalent thereof, in the case of a Foreign Currency) and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Euro-Currency Business Days prior to the commencement of such Interest Period.
 
“Euro-Currency Reserve Percentage” means for any day as applied to a Euro-Currency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System of the United States (or any successor) (the “Board”) or any other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Currency Reserve Percentage. The Banks acknowledge and agree that the Euro-Currency Reserve Percentage on the date hereof is 0%.
 
(c)   Any overdue principal of or interest on any Euro-Currency Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Currency Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such day.
 
(d)   Each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.7(b) as if the related Money Market LIBOR Borrowing were a Committed Euro-Currency Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.3. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.3. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such day.

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(e)   The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.
 
(f)   Each of “Euro-Currency Margin”, “Facility Fee Rate” and “Participation Fee Rate” means, for any day, the percentage set forth below in the row opposite such term and in the column corresponding to the “Level” status in existence on such day:
 
 	Level I
Status	Level II
Status	Level III
Status	Level IV
Status	Level V
Status	Level VI
Status	
Euro-Currency Margin	.115%	.135%	.180%	.300%	.500%	.600%	
Facility Fee Rate	.060%	.065%	.070%	.100%	.125%	.150%	
Participation Fee Rate	.215%	.235%	.280%	.400%	.600%	.700%	
 
; provided that, (i) if the Borrower’s or IR Parent’s (if IR Parent has a higher rating as of such date) lower rating is two or more Levels lower than the Borrower’s or IR Parent’s (if IR Parent has a higher rating as of such date) higher rating, the Euro-Currency Margin, Facility Fee Rate and Participation Fee Rate shall be determined by reference to the Level corresponding to the rating which is one above the lower of the two ratings, (ii) if only one rating exists, the Borrower or IR Parent (if IR Parent has a higher rating as of such date) may have its debt rated by a substitute nationally-recognized rating agency reasonably acceptable to the Administrative Agent; until the issuance of such rating, the Euro-Currency Margin, Facility Fee Rate and Participation Fee Rate shall be determined by reference to the Level with the rating which is one Level lower than the Level corresponding to the available rating, and (iii) if any rating shall be changed (other than as a result of a change in the rating system of the applicable rating agency), such change shall be effective as of the date on which it is first announced by the rating agency making such change. Each such change in the Euro-Currency Margin, Facility Fee Rate or Participation Fee Rate shall apply to all outstanding Euro-Currency Loans and to all facility fees and participation fees accruing during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of any rating agency shall change, the parties hereto shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system.
 
SECTION 2.8.  Facility Fee ; Utilization Fee; Participation Fee .  (a)  The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a facility fee at the Facility Fee Rate. Such facility fee shall accrue (i) from and including the date of receipt by the Administrative Agent of counterparts of this Agreement duly executed by all the parties hereto to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. Accrued fees under this Section shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31, and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety).

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(b)   The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a utilization fee equal to 0.10% per annum on the outstanding Loans for each day on which the Revolving Exposure outstanding exceed 50% of the aggregate Commitments on such day (or, if such day is after the Termination Date (or earlier date of termination of the Commitments in their entirety), the aggregate Commitments on the Termination Date (or such earlier date of termination)).
 
(c)   The Borrower agrees to pay (i) to the Administrative Agent for the account of each bank a participation fee with respect to its participations in Letters of Credit, which shall accrue at the Participation Fee Rate on the average daily amount of such Bank’s LC Exposure during the period from and including the Effective Date to but excluding the later of the date on which such Bank's Commitment terminates and the date on which such Bank ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum separately agreed upon between the Borrower and the Issuing Bank on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Domestic Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
 
SECTION 2.9.  Optional Termination or Reduction of Commitments .  During the Availability Period, the Borrower may, upon at least three Domestic Business Days’ notice to the Administrative Agent (which shall give prompt notice thereof to each Bank), (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 (or the Foreign Currency Equivalent thereof, in the case of Euro Loans) or any multiple of $5,000,000 (or the Foreign Currency Equivalent thereof, in the case of Euro Loans) in excess thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. Any termination or reduction of the Commitments shall be permanent.

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SECTION 2.10.  Mandatory Termination of Commitments ; Mandatory Prepayments .  (a)   Mandatory Termination of Commitments . The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date.
 
(b)   Mandatory Prepayments . If, on any day, the Dollar Equivalent of Revolving Exposure exceeds the aggregate Commitments on such date, the Borrower and any Additional Borrowers shall, within five Euro-Currency Business Days, prepay sufficient outstanding Loans in an aggregate principal amount (together with interest accrued to the date of such prepayment on the principal so prepaid and any amounts payable under Section 2.13 in connection therewith) such that, after giving effect thereto, the Dollar Equivalent of Revolving Exposure does not exceed the aggregate Commitments on such date.
 
SECTION 2.11.  Optional Prepayments .  (a) The Borrower or any Additional Borrower may (i) upon at least one Domestic Business Day’s notice to the Administrative Agent, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.1) and (ii) upon at least three Euro-Currency Business Days’ notice to the Administrative Agent, subject to Section 2.13, prepay any Euro-Currency Borrowing, in whole at any time, or from time to time in part, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided that any such partial prepayment shall be in the amount of $25,000,000 (or the Foreign Currency Equivalent thereof, in the case of Foreign Currency Loans) or any multiple of $5,000,000 (or the Foreign Currency Equivalent thereof, in the case of Foreign Currency Loans) in excess thereof. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing.
 
(b)   Except as provided in clause (i) of Section 2.11(a), the Borrower and any Additional Borrowers may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof.
 
(c)   Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank’s ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower or the Additional Borrower, as the case may be.
 
SECTION 2.12.  General Provisions as to Payments .  (a)  The Borrower and any Additional Borrower, as applicable, shall make each payment of principal or interest on the Loans and of fees hereunder, without set-off, counterclaim or deduction of any kind, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its New York address referred to in Section 9.1, provided that any such payments made in respect of Euro Loans or other Loans denominated in a Foreign Currency shall be made not later than 12:00 Noon (London time) on the date when due, in funds immediately available in London, to the Administrative Agent at its London address referred to in Section 9.1. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Currency Loans shall be due on a day which is not a Euro-Currency Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Currency Business Day unless such Euro-Currency Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Currency Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Currency Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Currency Business Day, provided that in the case of Money Market Loans denominated in Dollars, whenever any payment of principal of, or interest on, such Dollar-denominated Money Market Loans shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.

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(b)   Unless the Administrative Agent shall have received notice from the Borrower or the relevant Additional Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower or such Additional Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower or such Additional Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower or such Additional Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at a rate per annum equal to (x) in the case of amounts denominated in Dollars, the daily average Federal Funds Rate, and (y) in the case of amounts denominated in a Foreign Currency, the daily average cost of funding such amount (as determined by the Administrative Agent).
 
SECTION 2.13.  Funding Losses .  If the Borrower or any Additional Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Section 2.11, Article VI or VIII or otherwise, but not pursuant to Section 8.2) on any day other than the last day of the Interest Period applicable thereto, if the Borrower or any Additional Borrower fails to borrow any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.4(a) or if the Borrower or any Additional Borrower fails to prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.11(c), the Borrower or such Additional Borrower shall reimburse each Bank within 30 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower or such Additional Borrower a certificate setting forth the calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.

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SECTION 2.14.  Computation of Interest and Fees .  Interest based on the Prime Rate and interest and fees based on amounts denominated in English pounds sterling hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).
 
SECTION 2.15.  Withholding Tax Exemption .  On or prior to the Effective Date, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or a successor form), certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes from each US Borrower at the time of such delivery without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form W-8BEN or W-8ECI (or a successor form) further undertakes to deliver to each of the Borrower and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by any US Borrower or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes from each US Borrower at the time of such delivery without deduction or withholding of any United States federal income taxes, unless an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises each of the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.
 
SECTION 2.16.  Additional Borrowers . 
 
(a)   The Borrower hereby designates IR Parent as an Additional Borrower.
 
(b)   On or after the Effective Date, the Borrower may designate any wholly owned Subsidiary of IR Parent or any wholly owned Subsidiary of the Borrower as an Additional Borrower by delivery to the Administrative Agent, at least five Domestic Business Days in the case of a domestic Subsidiary and ten Domestic Business Days, in the case of a foreign Subsidiary of (i) an Additional Borrower Agreement executed by such Subsidiary, IR Parent and the Borrower, substantially in the form of Exhibit G hereto (each, an “ Additional Borrower Agreement ”) and (ii) a favorable written opinion (addressed to the Administrative Agent and the Banks) of counsel of such Subsidiary or Subsidiaries (which opinion shall be reasonably satisfactory to the Administrative Agent). Upon delivery of the above-mentioned documents, such Subsidiary shall for all purposes of this Agreement be an Additional Borrower and a party to this Agreement. Promptly following receipt of any Additional Borrower Agreement, the Administrative Agent shall send a copy thereof to each Bank.

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SECTION 2.17.  Additional Borrower Costs . 
 
(a)  If the cost to any Bank of making or maintaining any Loan to an Additional Borrower is increased, or the amount of any sum received or receivable by any Bank (or its Applicable Lending Office) is reduced, by an amount deemed by such Bank to be material, by reason of the fact that such Additional Borrower is organized under the laws of, or principally conducts its business in, a jurisdiction or jurisdictions outside the United States of America, the Borrower and such Additional Borrower shall indemnify such Bank for such increased cost or reduction within 15 days after demand by such Bank (with a copy to the Administrative Agent). A certificate of such Bank claiming compensation under this subsection (a) and setting forth the additional amount or amounts to be paid to it hereunder, together with calculations in reasonable detail supporting such amounts, shall be conclusive in the absence of clearly demonstrable error. No such compensation may be claimed (x) in respect of any Committed Loan for any period prior to the date 90 days before the date of notice by such Bank to the Borrower of its intention to make claims therefore or (y) to the extent such Bank was aware of such cost or reduction at the time the related Loan was made.
 
(b)   Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge that will entitle such Bank to additional interest or payments pursuant to the foregoing subsection (a) and will designate a different Applicable Lending Office, if, in the judgment of such Bank, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank .
 
SECTION 2.18.  Letters of Credit .  (a)   General . Subject to the terms and conditions set forth herein, the Borrower or any Additional Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower or any Additional Borrower to, or entered into by the Borrower or any Additional Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
 
(b)   Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower or any Additional Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Domestic Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower or such Additional Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower or such Additional Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $400,000,000 and (ii) the sum of the total Loans plus the LC Exposure shall not exceed the total Commitments. The Issuing Bank shall not issue, amend, renew or extend a Letter of Credit if notice has been given to such Issuing Bank by the Administrative Agent or the Required Banks that a Default or Event of Default has occurred and is continuing. The Issuing Bank shall provide to the Administrative Agent and, in turn, the Administrative Agent shall provide to the Banks a monthly update, in accordance with customary practices, of total LC Exposures, it being understood that the obligations of the Banks shall not be subject to the receipt of such update.

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(c)   Expiration Date. Each Letter of Credit shall expire at or prior to the earlier of (i) one year after the date of issuance and (ii) the close of business on the date that is five Domestic Business Days prior to the Termination Date.
 
(d)   Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Banks, the Issuing Bank hereby grants to each Bank, and each Bank hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Bank's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Bank's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower or any Additional Borrower, as applicable, on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower or any Additional Borrower for any reason. Each Bank acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
 
(e)   Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower or any Additional Borrower, as applicable, shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the Domestic Business Day immediately following the Domestic Business Day that such LC Disbursement is made (the “ Disbursement Date ”), if the Borrower or such Applicable Borrower shall have received notice of such LC Disbursement prior to 3:00 p.m., New York City time, on the Disbursement Date, or, if such notice has not been received by the Borrower or such Additional Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Domestic Business Day immediately following the Domestic Business Day that the Borrower or such Additional Borrower, as applicable, receives such notice, if such notice is received prior to 3:00 p.m., New York City time, on the day of receipt, or (ii) within two Domestic Business Days immediately following the day that the Borrower or such Additional Borrower receives such notice, if such notice is not received prior to 3:00 p.m., New York City time, on the day of receipt; provided that, if such LC Disbursement is not less than $10,000,000, the Borrower or such Additional Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 or 2.4 that such payment be financed with a Domestic Loan, Euro-Currency Loan or Money Market Loan in an equivalent amount and, to the extent so financed, the Borrower's or such Additional Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Domestic Loan, Euro-Currency Loan or Money Market Loan. If the Borrower or any Additional Borrower fails to make such payment when due, the Administrative Agent shall notify each Bank of the applicable LC Disbursement, the payment then due from the Borrower or any Additional Borrower in respect thereof and such Bank's Applicable Percentage thereof. Promptly following receipt of such notice, each Bank shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower or any Additional Borrower, in the same manner as provided in Section 2.4 with respect to Loans made by such Bank (and Section 2.4 shall apply, mutatis   mutandis , to the payment obligations of the Banks), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Banks. Promptly following receipt by the Administrative Agent of any payment from the Borrower or any Additional Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Banks have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Banks and the Issuing Bank as their interests may appear. Any payment made by a Bank pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of a Domestic Loan, Euro-Currency Loan or Money Market Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower or any Additional Borrower of its obligation to reimburse such LC Disbursement.

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(f)   Obligations Absolute . The Borrower's or Additional Borrower’s, as applicable, obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's or any Additional Borrower’s obligations hereunder. Neither the Administrative Agent, the Banks nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower or any Additional Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower and any Additional Borrower to the extent permitted by applicable law) suffered by the Borrower or any Additional Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

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(g)   Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower or such Additional Borrower, as applicable, by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower or any Additional Borrower of its obligation to reimburse the Issuing Bank and the Banks with respect to any such LC Disbursement.
 
(h)   Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower or any Additional Borrower, as applicable, shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower or such Additional Borrower reimburses such LC Disbursement, at the rate per annum then applicable to Domestic Loans; provided that, if the Borrower or such Additional Borrower, as applicable, fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then the third sentence of Section 2.7(a) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Bank pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Bank to the extent of such payment.
 
(i)   Cash Collateralization. If any Event of Default shall occur and be continuing, on the Domestic Business Day that the Borrower or any Additional Borrower receives notice from the Administrative Agent or the Required Banks (or, if the maturity of the Loans has been accelerated, Banks with LC Exposure representing greater than 51% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower or such Additional Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Banks, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or such Additional Borrower described in clause (f) or (g) of Section 6.1. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower or such Additional Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made in Permitted Investments at the Borrower's or such Additional Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower or such Additional Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Banks with LC Exposure representing greater than 51% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower or any Additional Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower or such Additional Borrower within three Domestic Business Days after all Events of Default have been cured or waived.

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SECTION 2.19.  Optional Commitment Increase . 
 
(a)   The Borrower shall have the right at any time and from time to time to increase the total Commitments in an aggregate amount not to exceed $750,000,000 (i) to the extent insufficient Commitments are available from such existing Banks, by requesting that one or more banks or other financial institutions not a party to this Agreement become a Bank hereunder and (ii) by requesting that any Bank already party to this Agreement increase the amount of such Bank’s Commitment; provided that the addition of any bank or financial institution pursuant to clause (i) above shall be subject to the consent of the Administrative Agent (which consent shall not be unreasonably withheld); provided , further , that the Commitment of any bank or other financial institution pursuant to clause (i) above shall be in an aggregate principal amount at least equal to $10,000,000 ; provided , further , that the amount of the increase of any Bank’s Commitment pursuant to clause (ii) above, when added to the amount of such Bank’s Commitment before the increase, shall be in an aggregate principal amount at least equal to $10,000,000.
 
(b)   Any additional bank, financial institution or other entity which elects to become a party to this Agreement and obtain a Commitment pursuant to clause (a)(i) of this Section 2.19 shall execute a New Bank Supplement (each, a “ New Bank Supplement ”) with the Borrower and the Administrative Agent, substantially in the form of Exhibit H. Upon its receipt of a New Bank Supplement executed by an additional bank, financial institution or other entity which elects to become a party to this Agreement and obtain a Commitment pursuant to clause (a) of this Section 2.19, together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such New Bank Supplement and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto, whereupon such bank, financial institution or other entity shall become a Bank for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement. Any increase in the total Commitments pursuant to clause (a)(ii) of this Section 2.19 shall be effective only upon the execution and delivery to the Borrower and the Administrative Agent of a commitment increase supplement in substantially the form of Exhibit I (a “ Commitment Increase Supplement ”), which Commitment Increase Supplement shall be delivered to the Administrative Agent not less than five Domestic Business Days prior to the Commitment Increase Date and shall specify (i) the amount of any increase in the Commitment of any Bank and (ii) the date such increase is to become effective (the “ Commitment Increase Date ”). In addition, such changes as the Administrative Agent determines desirable to effectuate the foregoing, including changes to the provision relating to pro rata borrowings, payments and other similar treatment of Banks and the calculation and payment of interest and fees, shall be deemed authorized by the Banks and this Agreement shall be deemed amended upon the effectiveness of such addition of Banks or increase in Commitments, and the Administrative Agent may require that the Borrower prepay and reborrow any outstanding Loans in connection therewith if it determines such action to be desirable to facilitate administration under the Agreement.

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(c)   Any increase in the total Commitments pursuant to this Section 2.19 shall not be effective unless:
 
(i)   no Default or Event of Default shall have occurred and be continuing on the Commitment Increase Date;
 
(ii)   each of the representations and warranties made by the Borrower and IR Parent in Article IV, or in any certificate delivered pursuant hereto, shall be true and correct in all material respects on the Commitment Increase Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date.
 
Each notice requesting an increase in the total Commitments pursuant to this Section 2.19 shall constitute a certification to the effect set forth in clauses (i) and (ii) of this Section 2.19(c).

(d)   No Bank shall at any time be required to agree to a request of the Borrower to increase its Commitment or obligations hereunder.
 
SECTION 2.20.  Extension of Termination Date . 
 
(a)   At least 60 days but not more than 90 days prior to the first or second anniversary of the Closing Date, as the case may be, the Borrower, by written notice to the Administrative Agent, may request an extension of the Termination Date in effect at such time by one year from its then scheduled expiration. The Administrative Agent shall promptly notify each Lender of such request, and each Lender shall in turn, in its sole discretion, not later than 30 days prior to the first or second anniversary of the Closing Date, as applicable, notify the Borrower and the Administrative Agent in writing as to whether such Lender will consent to such extension, such notice to be in substantially the form of Exhibit K hereto. If any Lender shall fail to notify the Administrative Agent and the Borrower in writing of its consent to any such request for extension of the Termination Date at least 30 days prior to the first or second anniversary of the Closing Date, as applicable, such Lender shall be deemed to not have consented to such request (a “ Non-Consenting Lender ”). The Administrative Agent shall notify the Borrower in writing not later than 15 days prior to the first or second anniversary of the Closing Date, as applicable, of the decision of the Lenders regarding the Borrower’s request for an extension of the Termination Date.

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(b)   If all the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.20, the Termination Date in effect at such time shall, effective as at the first or second anniversary of the Closing Date, as the case may be (the “ Extension Date ”), be extended for one year; provided that on each Extension Date, the applicable conditions set forth in Article III shall be satisfied. If less than all of the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.20, the Termination Date in effect at such time shall, subject to Lenders having more than 65% of the Commitments consenting to a requested extension in accordance with subsection (d) of this Section 2.20 and effective as at the applicable Extension Date, be extended as to those Lenders that so consented (each, a “ Consenting Lender ”) but shall not be extended as to any other Lender pursuant to this Section 2.20 and if the Commitments of such Lender is not assumed in accordance with subsection (c) of this Section 2.20 on or prior to the applicable Extension Date, the Commitment of such Non-Consenting Lender shall automatically terminate in whole on such unextended Termination Date without any further notice or other action by the Borrower, such Lender or any other Person; provided that such Non-Consenting Lender’s rights under Section 2.15, 8.3 and 9.3 and its obligations under Section 7.6 shall survive the Termination Date for such Lender as to matters occurring prior to such date. It is understood and agreed that no Lender shall have any obligation whatsoever to agree as to any request made by the Borrower for any requested extension of the Termination Date.
 
(c)   The Borrower may arrange for one or more Consenting Lenders or other Assignees that agree to an extension of the Termination Date (an “ Assuming Lender ”) to assume, effective as of the Extension Date, any Non-Consenting Lender’s Commitment under this Agreement thereafter arising, without recourse to or warranty by, or expense to, such Non-Consenting Lender; provided , however , that the amount of the Commitment of any such Assuming Lender as a result of such substitution shall in no event be less than $10,000,000 unless the amount of the Commitment of such Non-Consenting Lender is less than $10,000,000, in which case such Assuming Lender shall assume all such lesser amount; and provided , further that:
 
(i) any such Consenting Lender or Assuming Lender shall have paid to such Non-Consenting Lender (A) the aggregate principal amount of, and any interest accrued and unpaid to the effective date of the assignment on, the outstanding Loans, if any, of such Non-Consenting Lender plus (B) any accrued but unpaid facility fees owing to such Non-Consenting Lender as of the effective date of such assignment;

(ii) all additional costs, reimbursement, expense reimbursements and indemnities payable to such Non-Consenting Lender, and all other accrued and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the effective date of such assignment shall have been paid to such Non-Consenting Lender; and

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(iii) with respect to any such Assuming Lender, the applicable processing and recordation fee required under Section 9.6(c) for such assignment shall have been paid by the Assuming Lender;

provided , further that such Non-Consenting Lender’s rights under Sections 2.17, 8.3 and 9.3, and its obligations under Sections 2.15 and 7.6, shall survive such substitution as to matters occurring prior to the date of substitution. At least three Business Days prior to any Extension Date, (A) each such Assuming Lender, if any, shall deliver to the Borrower and the Administrative Agent an Assignment and Assumption Agreement duly executed by such Assuming Lender, such Non-Consenting Lender, the Borrower and the Administrative Agent, (B) any such Consenting Lender shall deliver confirmation in writing satisfactory to the Borrower and the Administrative Agent as to the increase in the amount of its Commitments and (C) each Non-Consenting Lender being replaced pursuant to this Section 2.20 shall deliver to the Administrative Agent any Note or Notes held by such Non-Consenting Lender. Upon the payment or prepayment of all amounts referred to in clause (i), (ii) and (iii) of the immediately preceding sentence, each such Consenting Lender or Assuming Lender, as of the Extension Date, will be substituted for such Non-Consenting Lender under this Agreement and shall be a Lender for all purposes of this Agreement, without any further acknowledgment by or the consent of the other Lenders, and the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released and discharged.

(d)   If the Lenders having more than 65% of the Commitments (after giving effect to any assignments pursuant to subsection (c) of this Section 2.20) consent in writing to a requested extension (whether by execution or delivery of an Assignment and Assumption or otherwise) not later than one Domestic Business Day prior to such Extension Date, the Agent shall so notify the Borrower, and, upon satisfaction of the applicable conditions set forth in Article III, the Termination Date then in effect shall be extended for an additional one-year period as described in subsection (a) of this Section 2.20, and all references in this Agreement, and in the Notes, if any, to such “ Termination Date ” shall, with respect to each such Consenting Lender and each Assuming Lender for such Extension Date, refer to the Termination Date as so extended. Promptly following each Extension Date, the Administrative Agent shall notify the Lenders (including, without limitation, each Assuming Lender) of the extension of the scheduled Termination Date in effect immediately prior thereto and shall thereupon record in the Register the relevant information with respect to each such Consenting Lender and each such Assuming Lender.

ARTICLE III
 
CONDITIONS
 
SECTION 3.1.  Effectiveness .  This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.5):

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(a)   receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telecopy or other written confirmation from such party of execution of a counterpart hereof by such party);
 
(b)   receipt by the Administrative Agent for the account of each Bank requesting a Note of a duly executed Note dated on or before the Effective Date complying with the provisions of Section 2.5;
 
(c)   receipt by the Administrative Agent of a certificate of the chief financial officer or the treasurer of the Borrower and IR Parent stating that the representations and warranties of the Borrower and IR Parent set forth in Article IV hereof are true in all material respects as of the date of such certificate;
 
(d)   receipt by the Administrative Agent of (i) an opinion of Patricia Nachtigal, Senior Vice President and General Counsel for the Borrower, substantially in the form of Exhibit E hereto and (ii) an opinion of Conyers, Dill & Pearman, counsel to IR Parent, substantially in the form of Exhibit J hereto;  
 
(e)   receipt by the Administrative Agent of evidence satisfactory to it of (i) the repayment in full, not later than the Effective Date, of all loans (if any) outstanding under the Existing 5-Year Credit Agreement, together with interest accrued thereon to the Effective Date and (ii) the payment of all accrued and unpaid facility fees and all other amounts due and payable under the Existing 5-Year Credit Agreement for the account of the “Administrative Agents” or the “Banks” (as defined therein); and
 
(f)   receipt by the Administrative Agent of all documents it may reasonably request relating to the existence of the Borrower and IR Parent, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent;
 
provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than September 30, 2005. The Administrative Agent shall promptly notify the Borrower, IR Parent and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto.
 
SECTION 3.2.  Borrowings and Extension Date .  The obligation of any Bank to make a Loan on the occasion of any Borrowing or an extension of Commitments pursuant to Section 2.20, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit (as applicable), is subject to the satisfaction of the following conditions:
 
(a)   receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.2 or 2.3, as the case may be;
 
(b)   immediately after such Borrowing, or the issuance, amendment, renewal or extension of such Letter of Credit, the aggregate outstanding principal amount of the Loans plus the LC Exposure will not exceed the aggregate amount of the Commitments;  

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(c)   in the case of a Borrowing, other than a Refunding Borrowing, an extension of Commitments pursuant to Section 2.20, or an issuance, amendment, renewal or extension of a Letter of Credit:
 
(i)   immediately before and after such Borrowing, the applicable Extension Date or the issuance, amendment, renewal or extension of such Letter of Credit, no Default shall have occurred and be continuing;
 
(ii)   immediately before and after such Borrowing, the applicable Extension Date or the issuance, amendment, renewal or extension of such Letter of Credit, no event or condition shall have occurred and be continuing which permits any holder of any Material Debt or any Person acting on such holder’s behalf to accelerate the maturity thereof; and
 
(iii)   except to the extent any representation or warranty expressly relates only to an earlier date, the fact that the representations and warranties of the Borrower and IR Parent contained in this Agreement (except the representations and warranties set forth in Sections 4.4(c), 4.7, 4.11(b) and 4.5) shall be true in all material respects on and as of the date of such Borrowing, the applicable Extension Date or the issuance, amendment, renewal or extension of such Letter of Credit; and
 
(d)   on the date of such Borrowing, extension of Commitments pursuant to Section 2.20, or the issuance, amendment, renewal or extension of such Letter of Credit, each of the Borrower and IR Parent shall not be in arrears on payments of principal under, or in arrears for more than five days on payments of interest due under, the 2004 5-Year Credit Agreement .
 
Each Borrowing, each extension of Commitments pursuant to Section 2.20 and each issuance, amendment, renewal or extension of a Letter of Credit hereunder shall be deemed to be a representation and warranty by the Borrower and each Additional Borrower on the date of such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit as to the facts specified in clause (b) of this Section and each Borrowing, other than a Refunding Borrowing, and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to be a representation and warranty by the Borrower and each Additional Borrower on the date of such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit as to the facts specified in clause (c) of this Section.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
 
Each of the Borrower and IR Parent represents and warrants that:
 
SECTION 4.1.  Corporate Existence and Power . The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of New Jersey, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. IR Parent is a company duly organized, validly existing and in good standing under the laws of Bermuda, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

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SECTION 4.2.  Corporate and Governmental Authorization; No Contravention .  The execution, delivery and performance by the Borrower and IR Parent of this Agreement and the Notes are within the Borrower’s and IR Parent’s corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of IR Parent or of any judgment, injunction, order or decree binding upon the Borrower or IR Parent or of any limitation on borrowing imposed by any agreement or other instrument binding upon the Borrower or IR Parent.
 
SECTION 4.3.  Binding Effect .  This Agreement constitutes a valid and binding agreement of the Borrower and IR Parent and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower and IR Parent, in each case enforceable in accordance with their respective terms subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
 
SECTION 4.4.  Financial Information; No Material Adverse Change . 
 
(a)   The consolidated balance sheet of IR Parent and its Consolidated Subsidiaries as of December 31, 2004 and the related consolidated statements of income, shareowners’ equity and cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP and set forth in IR Parent’s 2004 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of IR Parent and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year.
 
(b)   The unaudited condensed consolidated balance sheet of IR Parent and its Consolidated Subsidiaries as of March 31, 2005, and the related unaudited condensed consolidated statements of income and cash flows for the three months then ended, set forth in IR Parent’s quarterly report for the fiscal quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of IR Parent and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such three month period (subject to normal year-end adjustments).
 
(c)   Since March 31, 2005, there has been no material adverse change in the business, financial position or results of operations of IR Parent and its Consolidated Subsidiaries, considered as a whole.

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SECTION 4.5.  Litigation .  There is no action, suit or proceeding pending against, or to the knowledge of IR Parent threatened against or affecting, IR Parent or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the business, consolidated financial position or consolidated results of operations of IR Parent and its Consolidated Subsidiaries or which in any manner draws into question the validity of this Agreement or the Notes.
 
SECTION 4.6.  Compliance with ERISA .  In the case of the Borrower, except where the liability that could reasonably be expected to be incurred would be in an amount that would not have a Material Adverse Effect: (i) each current member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan; (ii) no member of the ERISA Group has (A) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (B) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code; (C) incurred any liability to the PBGC under Title IV of ERISA (other than a liability to the PBGC for premiums under Section 4007 of ERISA or contributions in the normal course); or (D) incurred any liability in connection with a Plan termination under Section 4201 of ERISA.
 
SECTION 4.7.  Environmental Matters .  In the ordinary course of its business, IR Parent conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of IR Parent and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints or operating activities, including any periodic or permanent shutdown or any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, IR Parent has reasonably concluded that Environmental Laws are unlikely to have a material adverse effect on the business, financial condition or results of operations of IR Parent and its Consolidated Subsidiaries, considered as a whole.
 
SECTION 4.8.  Taxes .  United States Federal income tax returns of the Borrower and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1994. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes shown to be due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith by the Borrower or such Subsidiary as of the date this representation is made. IR Parent and its Subsidiaries have filed all Bermuda income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes shown to be due pursuant to such returns or pursuant to any assessment received by IR Parent or any Subsidiary, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith by IR Parent or such Subsidiary as of the date this representation is made. The charges, accruals and reserves on the books of the Borrower, IR Parent and their Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower and IR Parent, adequate.

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SECTION 4.9.  Subsidiaries .  Each of the Borrower’s and IR Parent’s Material Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.
 
SECTION 4.10.  Not an Investment Company . Neither the Borrower nor IR Parent is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
SECTION 4.11.  Full Disclosure .  (a) All information heretofore furnished by the Borrower and IR Parent to either Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and any such information hereafter furnished by the Borrower or IR Parent to either Administrative Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified.
 
(b)   The Borrower and IR Parent have disclosed to the Banks in writing any and all facts which materially and adversely affect or may affect (to the extent the Borrower or IR Parent can now reasonably foresee), the business, operations or financial condition of IR Parent and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower or IR Parent to perform its obligations under this Agreement.
 
ARTICLE V
 
COVENANTS
 
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of the Borrower and IR Parent agree that:
 
SECTION 5.1.  Information .  The Borrower will deliver to each of the Banks:
 
(a)   as soon as available and in any event within 90 days after the end of each fiscal year of IR Parent, a consolidated balance sheet of IR Parent and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, shareowners’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing;

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(b)   as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of IR Parent, a consolidated balance sheet of IR Parent and its Consolidated Subsidiaries as of the end of such quarter and as of the end of the preceding fiscal year, condensed consolidated statements of income for such quarter, for the portion of IR Parent’s fiscal year ended at the end of such quarter and for the corresponding portion of IR Parent’s previous fiscal year and condensed consolidated statements of cash flows for the portion of IR Parent’s fiscal year ended at the end of such quarter and for the corresponding portion of IR Parent’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the treasurer of IR Parent;
 
(c)   simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the treasurer of IR Parent (i) setting forth in reasonable detail the calculations required to establish whether IR Parent was in compliance with the requirements of Sections 5.5 and 5.6 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which IR Parent is taking or proposes to take with respect thereto;
 
(d)   within five Domestic Business Days after the chief financial officer, chief accounting officer, treasurer or chief legal officer of the Borrower or IR Parent obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the treasurer of the Borrower or IR Parent, as applicable, setting forth the details thereof and the action which the Borrower or IR Parent, as applicable, is taking or proposes to take with respect thereto;
 
(e)   promptly upon the mailing thereof to the shareholders of IR Parent generally, copies of all financial statements, reports and proxy statements so mailed;
 
(f)   promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which IR Parent shall have filed with the Securities and Exchange Commission; provided that, unless the Administrative Agent notifies IR Parent in writing to the contrary, satisfaction of the provisions of this subsection (f) shall satisfy as well the provisions of subsections (a) and (b);
 
(g)   if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA, other than those events as to which the 30 day notice requirement has been waived by the PBGC) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA which, together with any other such liability incurred since the date hereof, exceeds in the aggregate $135,000,000 or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement, which in any event has resulted or could result in the imposition of a Lien or the posting of a bond or other security, but only if with respect to the foregoing, the liability, individually or in the aggregate with all other events in subsections (i)-(vii), that could reasonably be expected to result could have a Material Adverse Effect, a certificate of the chief financial officer or the treasurer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take;

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(h)   immediately after the chief financial officer or the treasurer of the Borrower or IR Parent obtains knowledge of a change or a proposed change in the rating of Borrower’s or IR Parent’s outstanding senior unsecured long-term debt securities by Moody’s or S&P, a certificate of the chief financial officer or the treasurer setting forth the details thereof; and
 
(i)   from time to time such additional information regarding the financial position or business of the Borrower, IR Parent and their Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request, provided that each Bank hereby agrees to keep such information confidential subject to applicable legal requirements and, to the extent permitted by law or regulation, each such Bank agrees to notify the Borrower or IR Parent, as applicable, prior to any such disclosure required by law.
 
SECTION 5.2.  Maintenance of Property; Insurance .  (a) IR Parent will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, unless the failure to do so would not have a material adverse effect on the business, financial position or results of operations of IR Parent and its Consolidated Subsidiaries, considered as a whole.
 
(b)   Both the Borrower and IR Parent will maintain, and will cause each Material Subsidiary to maintain (either in the name of the Borrower, IR Parent or in such Material Subsidiary’s own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business.
 
SECTION 5.3.  Conduct of Business and Maintenance of Existence .  Each of the Borrower and IR Parent will continue, and will cause each Material Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower, IR Parent and their Material Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.3 shall prohibit (i) the merger of a Material Subsidiary into the Borrower or IR Parent or the merger or consolidation of a Material Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Material Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (ii) the termination of the corporate existence of any Material Subsidiary if the Borrower or IR Parent in good faith determines that such termination is in the best interest of the Borrower or IR Parent and is not materially disadvantageous to the Banks.

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SECTION 5.4.  Compliance with Laws .  Each of the Borrower and IR Parent will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except (i) where the necessity of compliance therewith is contested in good faith by appropriate proceedings and (ii) where the failure so to comply would not have a material adverse effect on the business, financial position or results of operations of IR Parent and its Consolidated Subsidiaries, considered as a whole.
 
SECTION 5.5.  Debt .  Consolidated Debt will at no time exceed 65% of the sum of Consolidated Debt plus Consolidated Net Worth. For purposes of this Section any preferred stock, except for auction-rate preferred stock the higher of the voluntary or involuntary liquidation value of which does not in the aggregate exceed $100,000,000, of a Consolidated Subsidiary held by a Person other than the Borrower, IR Parent or a wholly-owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in “Consolidated Debt.”
 
SECTION 5.6.  Negative Pledge .  (a)  Neither the Borrower nor IR Parent will, nor will they permit any Restricted Subsidiary to, create, assume or guarantee any indebtedness for money borrowed secured by a Mortgage on any Principal Property of the Borrower, IR Parent or a Restricted Subsidiary or on any shares or indebtedness of a Restricted Subsidiary (whether such Principal Property, shares or 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 Loans and the obligations of the Borrower and IR Parent hereunder and under the Notes (together, if the Borrower and IR Parent shall so determine, with any other indebtedness then or thereafter existing created, assumed or guaranteed by the Borrower, IR Parent or such Restricted Subsidiary ranking equally with the Loans and the obligations of the Borrower and IR Parent hereunder and under the Notes) shall be secured equally and ratably with such indebtedness excluding, however, from the foregoing any indebtedness secured by a Mortgage (including any extension, renewal or replacement, or successive extensions, renewals or replacements, of any Mortgage hereinafter specified or any indebtedness secured thereby, without increase of the principal of such indebtedness):
 
(i)   on property, shares or indebtedness of any corporation which Mortgage exists at the time such corporation becomes a Restricted Subsidiary; or

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(ii)   on property existing at the time of acquisition thereof by the Borrower, IR Parent or a Restricted Subsidiary, or to secure any indebtedness incurred by the Borrower, IR Parent or a Restricted Subsidiary prior to, at the time of, or within 180 days after the later of the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operation of such property, which indebtedness is incurred for the purpose of financing all or any part of the purchase price thereof or construction or improvements thereon; provided , however , that in the case of any such acquisition, construction or improvement the Mortgage shall not apply to any property theretofore owned by the Borrower, IR Parent or a Restricted Subsidiary, other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; or
 
(iii)   on property, shares or indebtedness of a corporation, which Mortgage exists at the time such corporation is merged into or consolidated with the Borrower, IR Parent 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 the Borrower, IR Parent or a Restricted Subsidiary; or
 
(iv)   on property of a Restricted Subsidiary to secure indebtedness of such Restricted Subsidiary to the Borrower, IR Parent or another Restricted Subsidiary; or
 
(v)   on property of the Borrower, IR Parent or a Restricted Subsidiary in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America 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
 
(vi)   on property, which Mortgage exists at the date of this Agreement; or
 
(vii)     with the prior written approval of the Required Banks;
 
provided , however , that any Mortgage permitted by any of the foregoing clauses (i), (ii), (iii) and (v) of this Section 5.6 shall not extend to or cover any property of the Borrower, IR Parent or such Restricted Subsidiary, as the case may be, other than the property specified in such clauses and improvements thereto.
 
(b)   Notwithstanding the provisions of subsection (a) of this Section 5.6, the Borrower, IR Parent or any Restricted Subsidiary may create, assume or guarantee secured indebtedness for money borrowed which would otherwise be prohibited in subsection (a) in an aggregate amount which, together with all other such indebtedness for money borrowed by the Borrower, IR Parent and their Restricted Subsidiaries and the Attributable Debt in respect of Sale and Leaseback Transactions existing at such time (other than Sale and Leaseback Transactions the proceeds of which have been applied in accordance with Section 5.6(d)(ii)), does not at the time of such creation, assumption or guaranteeing exceed 5% of Consolidated Net Worth.

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(c)   Notwithstanding the foregoing provisions of this Section 5.6, neither the Borrower nor IR Parent will permit any Subsidiary (other than a Restricted Subsidiary) to which after the date hereof the Borrower, IR Parent or a Restricted Subsidiary has transferred any assets to create, assume or guarantee any indebtedness for money borrowed secured by a Mortgage on such assets unless such assets could have been so secured in accordance with the provisions of this Agreement by the Borrower, IR Parent or such Restricted Subsidiary making such transfer.
 
(d)   Neither the Borrower nor IR Parent will, nor will they permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction, unless (i) the Borrower, IR Parent or such Restricted Subsidiary would be entitled, pursuant to the foregoing subsections of this Section 5.6, to incur indebtedness secured by a Mortgage on such Principal Property without equally and ratably securing the Loans and the obligations of the Borrower and IR Parent hereunder and under the Notes, or (ii) each of the Borrower and IR Parent shall (and in any case each of the Borrower and IR Parent covenants that it will) apply an amount equal to the fair value (as determined by the Borrower’s or IR Parent’s Board of Directors) of such Principal Property so leased to the retirement, within 180 days of the effective date of any such Sale and Leaseback Transaction, of indebtedness of the Borrower and IR Parent for money borrowed which by its terms matures at, or may be extended or renewed at the option of the Borrower and IR Parent to, a date more than 12 months after the date of the creation of such indebtedness.
 
SECTION 5.7.  Consolidations, Mergers and Sales of Assets .  Neither the Borrower nor IR Parent will (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Borrower or IR Parent to any other Person; provided that the Borrower or IR Parent may merge with another Person if (A) the Borrower or IR Parent, as applicable, is the corporation surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing.
 
SECTION 5.8.  Use of Proceeds .  The proceeds of the Loans made under this Agreement will be used by the Borrower, IR Parent and any Additional Borrower (i) for working capital purposes, (ii) to support the commercial paper programs of the Borrower, IR Parent or such Additional Borrower and (iii) for other general corporate purposes.
 
SECTION 5.9.  Other Cross Defaults or Negative Pledges .  Neither the Borrower nor IR Parent shall incur any Material Debt the terms of which include a Cross Default or which include a negative pledge provision more favorable to the holder of such Material Debt (or more restrictive of the actions of the Borrower or IR Parent) than the provisions of Section 5.6 hereof unless, prior to or contemporaneously with such incurrence, the Borrower and IR Parent shall have entered into an amendment to this Agreement, to which the Required Banks shall not unreasonably withhold their consent, providing a Cross Default or negative pledge provision, as the case may be, no less favorable to the Banks than the provisions of the Cross Default or negative pledge governing such other Debt.

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ARTICLE VI
 
DEFAULTS
 
SECTION 6.1.  Events of Default .  If one or more of the following events (“Events of Default”) shall have occurred and be continuing:
 
(a)   the Borrower or any Additional Borrower shall fail to pay when due principal of any Loan, or shall fail to pay within five days of the due date thereof any interest, fees or other amount payable hereunder;
 
(b)   the Borrower or IR Parent shall fail to observe or perform any covenant contained in Sections 5.5 to 5.9, inclusive;
 
(c)   the Borrower or any Additional Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 20 days after notice thereof has been given to the Borrower or such Additional Borrower by the Administrative Agent at the request of any Bank;
 
(d)   any representation, warranty, certification or statement made by the Borrower or any Additional Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);
 
(e)   any event or condition shall occur which results in the acceleration of the maturity of any Material Debt;
 
(f)   the Borrower, IR Parent or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
 
(g)   an involuntary case or other proceeding shall be commenced against the Borrower, IR Parent or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower, IR Parent or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

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(h)   any member of the ERISA Group at the time in question shall fail to pay when due an amount or amounts which shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group at the time in question, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation where, individually or in the aggregate, the liability that could reasonably be expected to result would have a Material Adverse Effect;
 
(i)   a final judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Borrower, IR Parent or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days or for such longer period of time, not exceeding 90 days, during which, under applicable law, an appeal may be taken from such judgment or order without leave of the relevant court; or
 
(j)   any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 25% or more of the outstanding shares of common stock of IR Parent; or, during any period of 25 consecutive calendar months, directors of IR Parent on the date hereof (the “Current Board”), or such directors who are recommended or endorsed for election to the board of directors of IR Parent by a majority of the Current Board or their successors so recommended or endorsed, shall cease to constitute a majority of the board of directors of IR Parent;
 
(b)   the Borrower shall have designated one or more Additional Borrowers and the guarantee of the Borrower, made in Section 9.16 hereof, shall cease to be effective or the Borrower shall contest the validity of such guarantee in court; or the guarantee of IR Parent made in Section 9.16 hereof shall cease to be effective or IR Parent shall contest the validity of such guarantee in court;
 
then, and in every such event, the Administrative Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by the Required Banks, by notice to the Borrower declare the Loans hereunder (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and all Additional Borrowers; provided that in the case of any of the Events of Default specified in clause (f) or (g) above with respect to the Borrower or any Additional Borrower, without any notice to the Borrower or any Additional Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and any Additional Borrowers.

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SECTION 6.2.  Notice of Default .  The Administrative Agent shall give notice to the Borrower under Section 6.1(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof.
 
ARTICLE VII
 
THE ADMINISTRATIVE AGENT
 
SECTION 7.1.  Appointment and Authorization .  Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to such Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto.
 
SECTION 7.2.  Administrative Agent and Affiliates .  JPMorgan Chase Bank, N.A. shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and JPMorgan Chase Bank, N.A. and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower, IR Parent or any Subsidiary or Affiliate of the Borrower or IR Parent as if it were not the Administrative Agent hereunder.
 
SECTION 7.3.  Action by the Administrative Agent .  The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI.
 
SECTION 7.4.  Consultation with Experts .  T he Administrative Agent may consult with legal counsel (who may be counsel for the Borrower or IR Parent), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
 
SECTION 7.5.  Liability of the Administrative Agent .  Neither the Administrative Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or all the Banks, if applicable) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to it; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire or similar writing) believed by it to be genuine or to be signed by the proper party or parties.

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SECTION 7.6.  Indemnification .  Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent (to the extent not reimbursed by the Borrower or IR Parent) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Administrative Agent’s gross negligence or willful misconduct) that the Administrative Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Administrative Agent hereunder.
 
SECTION 7.7.  Credit Decision .  Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.
 
SECTION 7.8.  Successor Administrative Agent .  The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent reasonably satisfactory to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent.
 
SECTION 7.9.  Administrative Agent’s Fees .  The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent.
 
SECTION 7.10.  Syndication Agent and Documentation Agents .  Except as expressly set forth herein, the Syndication Agent, in its capacity as such, and each Documentation Agent, in its capacity as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement.

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ARTICLE VIII
 
CHANGE IN CIRCUMSTANCES
 
SECTION 8.1.  Basis for Determining Interest Rate Inadequate or Unfair .  If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Administrative Agent that the Adjusted London Interbank Offered Rate (in respect of Dollars or any Foreign Currency), as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Banks of funding their Euro-Currency Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make Euro-Currency Loans shall be suspended. Unless the Borrower or any Additional Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing denominated in Dollars, such Borrowing shall instead be made as a Base Rate Borrowing, (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing denominated in Dollars, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day, and (iii) if such Fixed Rate Borrowing was to be denominated in a Foreign Currency, such Borrowing shall not be made.
 
SECTION 8.2.  Illegality .  If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Currency Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Currency Lending Office) to make, maintain or fund its Euro-Currency Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Currency Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Currency Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Currency Loans to maturity and shall so specify in such notice, the Borrower or any Additional Borrower, as the case may be, shall immediately prepay in full the then outstanding principal amount of each such Euro-Currency Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Currency Loan, the Borrower or such Additional Borrower, as the case may be, shall borrow a Base Rate Loan denominated in Dollars in an equal principal amount (or in an amount equal to the Dollar Equivalent of the principal amount, in the case of Foreign Currency Loans) from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Currency Loans of the other Banks), and such Bank shall make such a Base Rate Loan.

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SECTION 8.3.  Increased Cost and Reduced Return .  (a)  If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:
 
(i)   shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank’s principal executive office or Applicable Lending Office is located); or
 
(ii)   shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board or any similar Governmental Authority, but excluding with respect to any Euro-Currency Loan any such requirement included in an applicable Euro-Currency Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans;
 
and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 30 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower or any Additional Borrower, as the case may be, shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. The Banks acknowledge and agree that the foregoing subsection (a) creates no right to demand payment of additional amounts in respect of laws, rules and regulations, as in effect and interpreted and administered on the date hereof.

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(b)   If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank’s obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 30 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower or any Additional Borrower, as the case may be, shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that the Borrower or such Additional Borrower shall not be obligated to compensate such Bank for any reduction incurred more than 60 days prior to the receipt by the Borrower or such Additional Borrower from such Bank of the notice contemplated by subsection (c) below. The Banks acknowledge and agree that the foregoing subsection (b) creates no right to demand payment of additional amounts in respect of laws, rules and regulations regarding capital adequacy as in effect and interpreted and administered on the date hereof.
 
(c)   Each Bank will notify the Borrower and the Administrative Agent within 90 days of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank; provided that if a Bank shall not have so notified the Borrower within 90 days of such event, such Bank may not seek compensation for any period beginning prior to the date upon which the Borrower is notified of such event. A certificate of any Bank claiming compensation under this Section and setting forth the calculation of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods.
 
SECTION 8.4.  Base Rate Loans Substituted for Affected Fixed Rate Loans .  If (i) the obligation of any Bank to make Euro-Currency Loans has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3(a) and the Borrower shall, by at least five Euro-Currency Business Days’ prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply:
 
(a)   all Loans which would otherwise be made by such Bank as Euro-Currency Loans shall be made instead as Base Rate Loans denominated in Dollars (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and
 
(b)   after each of its Euro-Currency Loans has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead.

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SECTION 8.5.  Substitution of Bank .  If (i) the obligation of any Bank to make Euro-Currency Loans has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3, the Borrower shall have the right, with the assistance of the Administrative Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Loans and Note (as applicable) and assume the Commitment of such Bank.
 
ARTICLE IX
 
MISCELLANEOUS
 
SECTION 9.1.  Notices .  All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, facsimile transmission or similar writing) and shall be given to such party: (w) in the case of the Borrower, IR Parent or any other Additional Borrower, at the Borrower’s address or facsimile number set forth on the signature pages hereof, (x) in the case of the Administrative Agent, at its New York address or facsimile number set forth on the signature pages hereof, provided that notices in respect of London-based transactions shall be given at the Administrative Agent’s London address or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII or to the Borrower under Section 6.1 shall not be effective until received. Notices, requests and other communications to be given to IR Parent or any other Additional Borrower shall be deemed given if such notice, request or other communication has been given to the Borrower, and any consent to be given by IR Parent or any other Additional Borrower shall be deemed given if such consent has been given on behalf of IR Parent or such other Additional Borrower by the Borrower.
 
SECTION 9.2.  No Waivers .  No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
 
SECTION 9.3.  Expenses; Documentary Taxes; Indemnification .  (a)  The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder, (ii) as described in the fee letter, dated as of July 8, 2005 among JPMorgan Chase Bank, N.A., J.P. Morgan Securities, Inc., Ingersoll-Rand Company and Ingersoll-Rand Company Limited, for the preparation of this Agreement, (iii) as described in the fee letter, dated as of July 8, 2005, among Citigroup Global Markets Inc., Ingersoll-Rand Company and Ingersoll-Rand Company Limited, for the preparation of this Agreement and (iv) if an Event of Default occurs, all out-of-pocket expenses incurred by each Agent and Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes. To the extent practicable, the Administrative Agent or Bank, as the case may be, shall give the Borrower prior notice of the incurrence of any expenses described in this subsection (a); provided , however , that the failure to give such notice shall not affect the obligation of the Borrower to pay such Administrative Agent or Bank the amount or amounts due pursuant to subsection (a) with respect to such expenses.

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(b)   The Borrower and IR Parent each agree to indemnify the Agents and each Bank and hold the Agents and each Bank harmless from and against any and all liabilities, losses, damages, costs, penalties paid to third parties and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by any Bank (or by any Agent in connection with its actions as Agent hereunder) in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that neither any Agent nor any Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
 
SECTION 9.4.  Sharing of Set-Offs .  Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Loan made by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Loan made by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans made by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans made by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Loans. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any Bank acquiring a participation in a Loan pursuant to the foregoing arrangements may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation.
 
SECTION 9.5.  Amendments and Waivers .  Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower, IR Parent and the Required Banks (and, if the rights or duties of any Agent or Issuing Bank are affected thereby, by such Agent or Issuing Bank); provided that no such amendment or waiver shall, unless signed by each of the Banks directly affected thereby, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change Sections 2.12(a) or 9.4 in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Bank . For the purposes of this Section, any Loans assigned to the Borrower pursuant to Section 9.16 shall not be considered outstanding.

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SECTION 9.6.  Successors and Assigns .  (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks.
 
(b)   Any Bank may at any time grant to one or more banks or other institutions (each a “Participant”) participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.5 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b).
 
(c)   Any Bank may at any time assign to one or more banks or other institutions (each an “Assignee”) all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit F hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower and the Administrative Agent, the latter of which such consent shall not be unreasonably withheld or delayed by such Administrative Agent; provided that if an Assignee is an Affiliate of such transferor Bank, the consent of the Borrower shall not be required and the consent of the Administrative Agent shall not be unreasonably withheld; and provided   further that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.15.

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(d)   Any Bank may at any time assign all or any portion of its rights under this Agreement and its Loans and, if applicable, Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder.
 
(e)   No Assignee, Participant or other transferee of any Bank’s rights shall be entitled to receive any greater payment under Section 8.3 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower’s prior written consent or by reason of the provisions of Section 8.2 or 8.3 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist.
 
(f)   Notwithstanding anything to the contrary contained herein, any Bank (a “Granting Bank”) may grant to a special purpose funding vehicle (an “SPC”) of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to Section 2.3, provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall be deemed to utilize the Commitments of all the Banks to the same extent, and as if, such Loan were made by the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Bank would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.6, any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Bank or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC.  

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(g)   The Administrative Agent, on behalf of the Borrower, shall maintain at the Administrative Agent’s Domestic Lending Office a copy of each Assignment and Assumption Agreement delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loan owing to, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Banks may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register.
 
SECTION 9.7.  Collateral .  Each of the Banks represents to the Administrative Agent and the other Banks that it in good faith is not relying upon any “margin stock” (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.
 
SECTION 9.8.  Governing Law; Submission to Jurisdiction .  This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower and each Additional Borrower hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower and each Additional Borrower irrevocably waive, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
 
SECTION 9.9.  Counterparts; Integration .  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
 
SECTION 9.10.  Termination of Existing 5-Year Credit Agreement .  The Borrower and each of the Banks that is also a “Bank” party to the Existing 5-Year Credit Agreement agrees that the “Commitments” as defined in the Existing 5-Year Credit Agreement shall be terminated in their entirety on and as of the Effective Date. Each of such Banks waives any requirement of notice of such termination pursuant to Section 2.9 of the Existing 5-Year Credit Agreement. The Borrower (i) represents and warrants that no loans are, as of the date hereof, or will be, as of the Effective Date, outstanding under the Existing 5-Year Credit Agreement and (ii) covenants that all accrued and unpaid facility fees and any other amounts due and payable under the Existing 5-Year Credit Agreement shall have been paid on or prior to the Effective Date.

58

 
SECTION 9.11.  [Intentionally Omitted] .
 
SECTION 9.12.  Conversion of Currencies .  (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto (including the Borrower and each Additional Borrower) agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be determined as described in the definition of Exchange Rate in Section 1.1 hereof and in accordance with normal banking procedures in the relevant jurisdiction of the first currency and shall be calculated at approximately 10:00 A.M., New York City time, or as close to such time as is reasonably practicable on the Euro-Currency Business Day immediately preceding the day on which final judgment is given.
 
(b)   The obligations of the Borrower and each Additional Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “ Applicable Creditor ”) shall, notwithstanding any judgment in a currency (the “ Judgment Currency ”) other than the currency in which such sum is stated to be due hereunder (the “ Agreement Currency ”), be discharged only to the extent that, on the Euro-Currency Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower and each Additional Borrower agree, as applicable, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower and each Additional Borrower contained in this Section 9.12 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. Furthermore, if the amount of the Agreement Currency purchased as described above is more than the sum originally due to the Applicable Creditor in the Agreement Currency, then such Applicable Creditor shall remit such excess to the Borrower or the relevant Additional Borrower.
 
SECTION 9.13.  WAIVER OF JURY TRIAL .  EACH OF THE BORROWER, EACH ADDITIONAL BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
SECTION 9.14.  Severability .  Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
SECTION 9.15.  Headings .  A rticle and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
 
SECTION 9.16.  Guarantee Agreement .

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(a)   In order to induce the Banks to extend credit to the Additional Borrowers hereunder, the Borrower hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Additional Borrowers. The Borrower further agrees that the due and punctual payment of the Obligations of the Additional Borrowers may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation.
 
The Borrower waives presentment to, demand of payment from and protest to any Additional Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of the Borrower hereunder shall not be affected by (a) the failure of any lender to assert any claim or demand or to enforce any right or remedy against any Additional Borrower under the provisions of this Agreement, any Additional Borrower Agreement, and other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement, any Additional Borrower Agreement or any other Loan Document or agreement; (d) the failure or delay of any Bank to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Bank to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might otherwise operate as a discharge of the Borrower as a matter of law or equity or which would impair or eliminate any right of the Borrower to subrogation.
 
The Borrower further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Bank to any balance of any deposit account or credit on the books of any Bank in favor of the Borrower, any Additional Borrower or other Subsidiary or any other Person.
 
The obligations of the Borrower hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise.
 
The Borrower further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Bank upon the bankruptcy or reorganization of the Borrower or any Additional Borrower or otherwise.
 
In furtherance of the foregoing and not in limitation of any other right which any Bank may have at law or in equity against the Borrower by virtue hereof, upon the failure of any Additional Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Borrower hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Banks in cash an amount equal the unpaid principal amount of such Obligation. The Borrower further agrees that if payment in respect of any Obligation shall be due in currency other than Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Bank, not consistent with the protection of its rights, then, at the election of such Bank and in reasonable consultation with the Borrower, the Borrower shall make payments of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Bank against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment.

60

 
Upon payment in full by the Borrower of any Obligation of any Additional Borrower, each Bank shall, in a reasonable manner, assign to the Borrower the amount of such Obligation owed to such Bank and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by the Borrower, or make such disposition thereof as the Borrower shall direct (all without recourse to any Bank and without any representation or warranty by any Bank). Upon payment by the Borrower of any sums as provided above, all rights of the Borrower against any Additional Borrower arising as a result thereof by way of right of subrogation, through the assignment described herein or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by such Additional Borrower to the Bank (it being understood that, after the discharge of all the Obligations due and payable from such Additional Borrower, such rights may be exercised by the Borrower notwithstanding that such Additional Borrower may remain contingently liable for indemnity or other Obligations).
 
(b)   In order to induce the Banks to extend credit to the Borrower hereunder, IR Parent hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Borrower and each Additional Borrower. IR Parent further agrees that the due and punctual payment of the Obligations of the Borrower or any Additional Borrower may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation.
 
IR Parent waives presentment to, demand of payment from and protest to the Borrower or any Additional Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of IR Parent hereunder shall not be affected by (a) the failure of any lender to assert any claim or demand or to enforce any right or remedy against the Borrower or any Additional Borrower under the provisions of this Agreement, any Additional Borrower Agreement, any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement or any other Loan Document or agreement; (d) the failure or delay of any Bank to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Bank to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might otherwise operate as a discharge of IR Parent as a matter of law or equity or which would impair or eliminate any right of IR Parent to subrogation.

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IR Parent further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Bank to any balance of any deposit account or credit on the books of any Bank in favor of the Borrower, any Additional Borrower or other Subsidiary or any other Person.

The obligations of IR Parent hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise.

IR Parent further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Bank upon the bankruptcy or reorganization of the Borrower or any Additional Borrower or otherwise.

In furtherance of the foregoing and not in limitation of any other right which any Bank may have at law or in equity against IR Parent by virtue hereof, upon the failure of the Borrower or any Additional Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, IR Parent hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Banks in cash an amount equal the unpaid principal amount of such Obligation. IR Parent further agrees that if payment in respect of any Obligation shall be due in currency other than Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Bank, not consistent with the protection of its rights, then, at the election of such Bank and in reasonable consultation with IR Parent, IR Parent shall make payments of such Obligation in Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Bank against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment.

Upon payment in full by IR Parent of any Obligation of the Borrower or any Additional Borrower, each Bank shall, in a reasonable manner, assign to IR Parent the amount of such Obligation owed to such Bank and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by IR Parent, or make such disposition thereof as IR Parent shall direct (all without recourse to any Bank and without any representation or warranty by any Bank). Upon payment by IR Parent of any sums as provided above, all rights of IR Parent against the Borrower or any Additional Borrower arising as a result thereof by way of right of subrogation, through the assignment described herein or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by the Borrower or any Additional Borrower to the Bank (it being understood that, after the discharge of all the Obligations due and payable from the Borrower and the Additional Borrowers, such rights may be exercised by IR Parent notwithstanding that the Borrower may remain contingently liable for indemnity or other Obligations).

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SECTION 9.17.  USA Patriot Act .  
 
Each Bank hereby notifies the Borrower and IR Parent that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, IR Parent and each other Additional Borrower, which information includes the names and addresses of the Borrower and IR Parent and other information that will allow such Bank to identify the Borrower and IR Parent in accordance with the Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their proper and duly authorized officers as of the day and year first above written.

 	INGERSOLL-RAND COMPANY	

 

 	By:	 	
 	 	
Name:
Title:	

 	By:	 	
 	 	
Name:
Title:	

 	155 Chestnut Ridge Road
Montvale, NJ 07645
Facsimile number: 201-573-3468	

  	INGERSOLL-RAND COMPANY LIMITED	

 	By:	
Name:
Title:	

 	By:	
Name:
Title:	

 	c/o Ingersoll-Rand Company
155 Chestnut Ridge Road
Montvale, NJ 07645
Facsimile number: 201-573-3468	

 	 	

 
Ingersoll-Rand Credit Agreement

 

 	 	 	
 	JPMORGAN CHASE BANK, N.A.
as Administrative Agent and as a Bank	

 	 
 	
 	By:  	 	
 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 

 	CITICORP USA, INC.,
as Syndication Agent and as a Bank	

 	 
 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 

 	BANK OF AMERICA, N.A.,
as Documentation Agent and as a Bank	

 	 
 	
 	By:  	 	
 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	DEUTSCHE BANK SECURITIES INC., as
Documentation Agent	

 	 
 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH,
as Documentation Agent and as a Bank	

 	 
 	
 	By:  	 	
 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 

 	UBS SECURITIES LLC,
as Documentation Agent	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	UBS LOAN FINANCE LLC,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	DEUTSCHE BANK AG NEW YORK BRANCH
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	WELLS FARGO BANK, N.A.,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	BNP PARIBAS,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	CREDIT SUISSE,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 
 	 	 	
 	HSBC BANK USA, NATIONAL ASSOCIATION,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	WACHOVIA BANK, NATIONAL ASSOCIATION,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	THE ROYAL BANK OF SCOTLAND,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

 	MELLON BANK, N.A.,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

 

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	THE NORTHERN TRUST COMPANY,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

:

Ingersoll-Rand Credit Agreement

 

 
 	 	 	
 	THE BANK OF NEW YORK,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

:

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	THE BANK OF NOVA SCOTIA,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

 	BANK OF IRELAND CORPORATE BANKING,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

 	CALYON NEW YORK BRANCH,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	 	
 	By:  	 	
 	
Name:
Title:	

Ingersoll-Rand Credit Agreement

 

 	PNC BANK, NATIONAL ASSOCIATION,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

 	SOCIETE GENERALE,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

 	 	 	
 	STANDARD CHARTERED BANK,
as a Bank	

 	 
 	
 	By: 	
Name:
Title:	

 	 	

Ingersoll-Rand Credit Agreement

 

Exhibit 10.10

DESCRIPTION OF ANNUAL INCENTIVE ARRANGEMENTS

Chairman, President and Other Staff Officers of Ingersoll-Rand Company Limited
 
There are no formal Plan documents setting forth these arrangements.  However, as set forth in the Company's Annual Proxy Statement, the Compensation Committee of the Board of Directors approves the incentive award arrangements for the Chairman, President and other Company officers responsible for staff functions.  These officers may receive annual incentive awards attributable to current year results dependent upon the Company's attainment of predetermined financial and operational goals.  In establishing awards for these officers, the Compensation Committee considers several financial metrics, including the Company’s earnings per share, free cash flow, and return on invested capital performance compared to the Company’s annual plan and also the individual’s contribution to such performance. The amount of such annual awards is discretionary and is subject to general guidelines.  Discretionary awards may also be paid in the event that corporate goals are not met.
 
Sector Presidents of Ingersoll-Rand Company Limited
 
There is no formal Plan document setting forth these arrangements.  However, the Compensation Committee of the Board of Directors approves incentive award arrangements for the Sector Presidents annually which are dependent upon the performance of the Sector Presidents' respective business plans in two categories: a set of financial objectives based on planned sales, operating income, free cash flow and return on invested capital; and other subjective criteria applicable to the respective operations and personal performance of these Sector Presidents .  Discretionary awards may also be paid in the event that minimum financial objectives are not met.

 
Exhibit 10.11

DESCRIPTION OF PERFORMANCE SHARE PROGRAM

The performance share program provides annual awards for the achievement of pre-established long-term strategic initiatives and annual financial performance of the Company. With respect to the Chairman, President and Chief Executive Officer of Ingersoll-Rand Company Limited, t he number of performance share program awards granted are based upon a combination of financial objectives and strategic objectives, including the Company’s performance as well as his individual performance. For all other participants in the performance share program, t he number of performance share program awards granted are based solely on enterprise financial objectives rather than a combination of those financial objectives and strategic objectives. The amount of any performance share program awards is discretionary and is subject to general guidelines.

 

 
 
Exhibit 10.25

AMENDMENT
TO THE
INGERSOLL-RAND COMPANY
ELECTED OFFICERS SUPPLEMENTAL PROGRAM

 WHEREAS, Ingersoll-Rand Company (the “Company”) maintains the Ingersoll-Rand Company Elected Officers Supplemental Program (the “Plan”) which was originally effective on June 30, 1995, was thereafter amended and restated, effective as of January 1, 2003, and was thereafter amended; and

 WHEREAS, the Board of Directors of the Company desires to amend the Plan to freeze all deferrals effective December 31, 2004 to the extent such deferrals would otherwise be subject to section 409A of the Internal Revenue Code of 1986, as amended.

 NOW, THEREFORE, the Plan is hereby amended, effective December 31, 2004, as set forth below:

1.	The Introduction of the Plan is hereby amended to add the following as a new paragraph to the end thereof:	

“Notwithstanding any other provision of the Plan to the contrary, (i) no amount shall be deferred under the Plan if, pursuant to the effective date rules of Section 885(d) of the American Jobs Creation Act of 2004 and Q&A-16 of IRS Notice 2005-1, such amount would be subject to Section 409A of the Internal Revenue Code of 1986, as amended (a “Non-Grandfathered New Deferral Amount”), and (ii) any amount previously credited under the Plan that, pursuant to the effective date rules of Section 885(d) of the American Jobs Creation Act of 2004 and Q&A-16 of IRS Notice 2005-1, is subject to Section 409A of the Internal Revenue Code of 1986, as amended (a “Non-Grandfathered Prior Deferral Amount”) shall no longer be credited or payable under the Plan after December 31, 2004. Any Non-Grandfathered New Deferral Amount shall instead be deferred under the Ingersoll-Rand Company Elected Officers Supplemental Program II, and any Non-Grandfathered Prior Deferral Amount shall instead be credited under the Ingersoll-Rand Company Elected Officers Supplemental Program II, as and to the extent provided under the terms of the Ingersoll-Rand Company Elected Officers Supplemental Program II.”

2.	Except as specifically set forth herein, all other terms of the Plan shall remain in full force and effect and are hereby ratified in all respects.	

1

IN WITNESS WHEREOF , the Company has caused this amendment to be executed by its duly authorized representative on this 1 st day of February, 2006.

 	INGERSOLL-RAND COMPANY	

 	 
 	
 	By:  	/s/ Timothy McLevish	
 	
Timothy McLevish	
 	Senior Vice-President and Chief Financial Officer	

2

 
 
Exhibit 10.26

INGERSOLL-RAND COMPANY

ELECTED OFFICERS SUPPLEMENTAL PROGRAM II

Effective January 1, 2005

Introduction

Ingersoll-Rand Company (the “Company”) adopts this Ingersoll-Rand Company Elected Officers Supplemental Program II (the “Program”), effective January 1, 2005, to provide retirement benefits to certain key management individuals employed by the Company in addition to the benefits provided from other qualified and non-qualified plans maintained by the Company or any of its affiliates. The Program shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”). To the extent Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) applies to the Program, the terms of the Program are intended to comply with that Code section and any regulations or other administrative guidance issued thereunder, and the terms of the Program shall be interpreted and administered in accordance therewith.

The Program is a continuation of the Ingersoll-Rand Company Elected Officers Supplemental Program (the “Predecessor Program”). The Predecessor Program became effective on June 30, 1995 and was amended and restated, effective January 1, 2003, and was thereafter amended. Effective December 31, 2004, the Company froze the Predecessor Program with respect to all deferrals (within the meaning of regulations and other administrative guidance issued under Code Section 409A) to the extent such deferrals would otherwise be subject to Code Section 409A (including amounts that were credited under the Predecessor Program as of December 31, 2004 but were not grandfathered with respect to Code Section 409A).

The Company now hereby adopts the Program to provide for deferrals of amounts subject to Code Section 409A (including amounts that were credited under the Predecessor Program as of December 31, 2004 but were not grandfathered with respect to Code Section 409A) on substantially the same terms as those provided under the Predecessor Program to the extent such terms are not inconsistent with Code Section 409A. The Program shall apply to (i) amounts initially deferred hereunder on or after January 1, 2005 and (ii) amounts initially credited to the Predecessor Program before January 1, 2005 that, pursuant to the effective date rules of Code Section 409A, are subject to the provisions of Code Section 409A.

INGERSOLL-RAND COMPANY
ELECTED OFFICERS SUPPLEMENTAL PROGRAM II

TABLE OF CONTENTS
 	 	 	  Page	
 	 	 	 	
INTRODUCTION	  i	
 	 	 	 	
ARTICLE 1  - DEFINITIONS	 	
 	 	 	 	
 	1.1	Actuarial Equivalent	1	
 	1.2	Board	1	
 	1.3	Change in Control	1	
 	1.4	Company	1	
 	1.5	Committee	1	
 	1.6	Deferral Plan	1	
 	1.7	Effective Time	1	
 	1.8	Elected Officer	1	
 	1.9	Employee	1	
 	1.10	Estate Program	1	
 	1.11	Final Average Pay	1	
 	1.12	Merger Agreement	2	
 	1.13	Pension Plan	2	
 	1.14	Predecessor Program	2	
 	1.15	Program	2	
 	1.16	Year of Service	3	
 	 	 	 	
ARTICLE 2  - ARTICIPATION	 	
 	 	 	 	
 	2.1	Commencement of Participation	4	
 	2.2	Duration of Participation	4	
 	 	 	 	
ARTICLE 3  - AMOUNT OF BENEFIT	 	
 	 	 	 	
 	3.1	Amount of Benefit	5	
 	 	 	 	
ARTICLE 4  - VESTING	 	
 	 	 	 	
 	4.1	Vesting	6	
 	4.2	Forfeiture for Cause	6	

INGERSOLL-RAND COMPANY
TABLE OF CONTENTS (cont.)

 	 	 	Page	
ARTICLE 5  - DISTRIBUTIONS	 	
 	 	 	 	
 	5.1	Retirement	7	
 	5.2	Form of Distribution	8	
 	5.3	Disability	8	
 	5.4	Death	9	
 	5.5	Payment of Benefits	10	
 	5.6	Special Rule	10	
 	5.7	No Acceleration	10	

ARTICLE 6  - FUNDING	 	
 	 	 	 	
 	6.1	Funding	11	
 	6.2	Company Obligation	11	
 	 	 	 	
ARTICLE 7  - CHANGE IN CONTROL	 	
 	 	 	 	
 	7.1	Contributions to Trust	12	
 	7.2	Amendments	12	
 	 	 	 	
ARTICLE 8  - MISCELLANEOUS	 	
 	 	 	 	
 	8.1	Amendment and Termination	13	
 	8.2	No Contract of Employment	13	
 	8.3	Withholding 	13	
 	8.4	Loans	13	
 	8.5	Compensation and Nominating Committee	13	
 	8.6	Entire Agreement; Successors	14	
 	8.7  	Severability	14	
 	8.8	Governing Law	14	
 	8.9	Participant as General Creditor	14	
 	8.10  	Nonassignability	14	
 	 	 	 	
APPENDIX A	16	

ARTICLE 1

DEFINITIONS

1.1	“Actuarial Equivalent” means an amount having equal value to a single life annuity when computed on the basis of the mortality table specified in IRS Revenue Ruling 2001-62 and an interest rate equal to the average of the monthly rates for ten-year Constant Maturities for US Treasury Securities for the twelve-month period immediately preceding the month prior to the month in which a determination of benefit occurs, such rate as published in Federal Reserve statistical release H  .15(519) .	

1.2	“Board” means the Board of Directors of Ingersoll-Rand Company.	

1.3	“Change in Control” shall have the same meaning as such term is defined in the most recent Company Incentive Stock Plan, unless a different definition is used for purposes of a change in control event in any severance or employment agreement between an Employer and an Employee, in which event as to such Employee such definition shall apply.  Notwithstanding any other provision in this Program to the contrary, none of the transactions contemplated by the Merger Agreement that are undertaken by (i) Ingersoll-Rand Company or its affiliates prior to or as of the Effective Time or (ii) Ingersoll-Rand Company Limited or its affiliates on and after the Effective Time, shall trigger, constitute or be deemed a Change in Control.  On and after the Effective Time, the term Change in Control shall refer solely to a Change in Control of Ingersoll-Rand Company Limited.	
 
1.4	“Company” means Ingersoll-Rand Company, and its successors or assigns.	

1.5	“Committee” means the Compensation Committee of Ingersoll-Rand Company Limited.	

1.6	“Deferral Plan” means the IR Executive Deferred Compensation Plan and/or the IR Executive Deferred Compensation Plan II.	
 
1.7	"Effective Time" means the Effective Time as such term is defined in the Merger Agreement.	
 
1.8	“Elected Officer” means an individual elected by the Board as an officer of the Company.	

1.9	“Employee” means an individual eligible to participate in the Program as provided in Section 2.1.	

1.10	“Estate Program” means the Ingersoll-Rand Company Estate Enhancement Program.	

1.11	“Final Average Pay” means, except as provided in Section 5.3 for purposes of disability, the sum of the following:	

1

 	(a)	for Employees actively employed by the Company or one of its affiliates on and after February 1, 2006, the average of each of the three highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forgo a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee’s retirement or death occurs, or a Change in Control occurs, but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and	

 	(b)	the Employee’s annualized base salary in effect immediately prior to the date of determination (whether such base salary is paid to the Employee or is a Deferral Amount (as such term is defined in the Deferral Plan)).	

For any Employee who terminated employment with the Company or any of its affiliates prior to February 1, 2006, the phrase “five highest bonus awards” shall be substituted for the phrase “three highest bonus awards” in subsection (a).
 
1.12	"Merger Agreement" means that certain Agreement and Plan of Merger among the Company, Ingersoll-Rand Company Limited, and IR Merger Corporation dated as of October 31, 2001, pursuant to which the Company will become an indirect wholly-owned subsidiary of Ingersoll-Rand Company Limited.	
 
1.13	“Pension Plan” means the Ingersoll-Rand Pension Plan Number One as in effect on January 1, 2005 and as amended from time to time.	

1.14	“Predecessor Program” means the Ingersoll-Rand Company Elected Officers Supplemental Program, as effective on June 30, 1995, as amended and restated, effective January 1, 2003, and as thereafter amended.	

1.15	“Program” means the Ingersoll-Rand Company Elected Officers Supplemental Program II as stated herein and as may be amended from time to time.	

2

1.16	"Year of Service" shall be determined in accordance with the provisions of the qualified defined benefit pension plan(s) (as defined below) in which an individual participates while an Employee that are applicable to determining years of vesting service under such plan.  For purposes of this Section a qualified defined benefit pension plan means a plan (a) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, or any other entity designated by the Company and (b) which is defined in Code Section 414(j).  Notwithstanding any provision of the Program to the contrary, in the event an Employee earns one or more hours of service during a calendar year, he shall be credited with a Year of Service with respect to such year for purposes of the Program.	
 
Whenever the word “he”, “his,” or “him” is used in the Program, such word is intended to embrace within its purview the word “she” or “her”, as may be appropriate.

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ARTICLE 2

PARTICIPATION

2.1	Commencement of Participation	

An individual employed by the Company shall commence participation in the Program upon (a) becoming an Elected Officer of the Company and (b) being approved for participation by the Committee.

2.2	Duration of Participation	

An Employee shall continue to participate in the Program until the earlier of his termination of employment, death, or election to waive the benefit provided under the Program.

4

ARTICLE 3

AMOUNT OF BENEFIT

3.1	Amount of Benefit	

Unless the Program has been modified pursuant to a written agreement between the Company and an Employee as described in Section 8.6, an Employee shall be entitled to receive a benefit under the Program equal to (a) minus the sum of (b), (c), and (d) below:

	(a)	the product of:	

 	(i)	his Final Average Pay,	

 	(ii)	his Years of Service (up to a maximum of 35 Years of Service),	

 	(iii)	1.9%, and	

 	(iv)	a factor, as of the Employee’s date of retirement, used to determine the lump sum that is the Actuarial Equivalent	

	(b)	the amount set forth in Appendix A as attached hereto	

	(c)	the benefit he would be entitled to receive under Section 5.2 of the Program but for his election to forgo such benefit pursuant to the Estate Program	

	(d)	the benefit payable to the Employee under the Predecessor Program, expressed in the same form and with the same commencement date as the benefit payable to the Employee under this Program.	

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ARTICLE 4

VESTING

4.1	Vesting	

An Employee shall become vested in the benefit provided under the Program upon the earliest of (i) the attainment of age 55 and the completion of 5 Years of Service, (ii) the attainment of age 62, (iii) death, or (iv) a Change in Control.

4.2	Forfeiture for Cause	

All benefits for which an Employee would otherwise be eligible hereunder may be forfeited, at the discretion of the Committee, prior to the occurrence of a Change in Control under the following circumstances:

 	(a)	The Employee is discharged by the Company for cause, which shall be a breach of the standards set forth in the Ingersoll Rand Company Code of Conduct; or	

 	 (b)	Determination by the Committee no later than 12 months after termination of employment that the Employee has engaged in serious or willful misconduct in connection with his employment with the Company ; or	

 	(c)	The Employee (whether while employed or for two years thereafter) without the written consent of the Company is employed by, becomes associated with, renders service to, or owns an interest in any business that is competitive with the Company or with any business in which the Company has a substantial interest as determined by the Committee; provided, however, that an Employee may own up to 1% of the publicly traded equity securities of any business, notwithstanding the foregoing.	

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ARTICLE 5

DISTRIBUTIONS

5.1   Retirement

Employee retirement distributions under the Program shall be as follows:

 	(a)	Retirement at Age 62  - An Employee shall be eligible to retire and receive the benefit under Section 3.1 upon attaining age 62.	

 	 (b)	Retirement  before Age 62 - An Employee may retire under the Program at any time after he becomes vested in accordance with Section  4.1. In the event he retires before age 62, he will receive a benefit under the Program in accordance with Section 5.5. Such benefit shall be equal to the benefit he would have received at age 62 under Section 3.1, provided however that:	

	(i)	 the amount determined under Section 3.1(a) shall be reduced by  0.429% for each month that the benefit commences prior to age 62,	

	(ii)	  the benefit offset amount derived from defined benefit plans, as identified in Appendix A and as adjusted for retirement at the earliest date on which the Employee may retire and begin receiving a benefit under such defined benefit plans and as further adjusted, if necessary, to the Actuarial Equivalent of the benefit payable on the date benefits under the Program commence, shall be as determined under the applicable plans irrespective of whether the Employee elects to receive a benefit under such plans, and	

	(iii)	 for years prior to Social Security normal retirement age, the Social Security Primary Insurance Amount (as defined in Appendix A) shall be reduced by the same factors used by the Social Security Administration to adjust benefits payable at age 62 or later, and by .3% for each month that benefits under the Program commence prior to age 62.	

 	 (c)	Retirement  after Age 62 - If an Employee retires after age 62 as provided under (a) above, he will receive a benefit equal to the greater of:	

	(i)	 the benefit determined under Section 3.1 as of his date of retirement, or	

	(ii)	 the benefit he would have received had he retired at age 62, credited with interest from the date he attained age 62 until his date of retirement. For purposes of this subsection  (ii), the interest rate will be equal to the average of the monthly rates for ten-year Constant Maturities for US Treasury Securities for the twelve-month period immediately preceding the month prior to the month in which a determination of benefit occurs, such rate as published in Federal Reserve statistical release H.15(519).	

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5.2	Form of Distribution	

 	(a)	Unless the Employee elects to make a deferral under subsection (b) below, benefits under the Program shall be payable solely in a single lump sum as determined under Section 3.1 as of his date of retirement. The lump sum amount, determined as of the date of the Employee’s retirement, shall be the Actuarial Equivalent of the benefit under Section 3.1 adjusted, if applicable, to reflect the provisions of Section 5.1. The lump sum distribution determined under this Section 5.2 shall be credited with interest at a rate equal to the average of the monthly rates for ten-year Constant Maturities for US Treasury Securities for the twelve-month period immediately preceding the month prior to the month in which a determination of benefit occurs, such rate as published in Federal Reserve statistical release H.15(519), from the Employee’s date of retirement until the date of distribution.	

 	(b)	An Employee may file a deferral election under the Deferral Plan at least one year in advance of the Employee’s date of retirement to defer the payment of the lump sum determined under subsection (a) above for a period of not less than 5 years after the date on which the lump sum amount would have been paid had a deferral election not been made. In the event a valid deferral election is made under the Deferral Plan, the payment of the lump sum amount that otherwise would have been paid under this Section 5.2 shall be credited to the Deferral Plan as of the date the lump sum amount would have been paid had a valid deferral election not been made.	

5.3	Disability	

An Employee who becomes disabled and who remains continuously disabled until attaining age 65 shall continue to accrue benefits under the Program as if he continued to be employed by the Company. Such Employee shall receive an immediate lump sum payment determined under Sections 3.1 and 5.2 of the Program as of the Employee’s 65 th birthday.

Notwithstanding any other provision of the Program to the contrary, when determining Final Average Pay for an Employee who is disabled under the provisions of this Section, Final Average Pay means the sum of:

 	(a)	the average of each of the three highest bonus awards (whether the awards are paid to the Employee, are a Deferral Amount (as such term is defined in the Deferral Plan) or the Employee has elected to forgo a bonus award pursuant to the Estate Program) during the six most recent calendar years, including the year during which the Employee’s disability occurs, (or, if the average of the three highest bonus awards would be greater, the six most recent calendar years prior to the year in which the Employee’s disability occurs), but excluding Supplemental Contributions (as such term is defined in the Deferral Plan) or any amounts paid from the Deferred Compensation Account (as such term is defined in the Deferral Plan) or any other account under the Deferral Plan including, but not limited to, amounts paid consisting of Deferral Amounts and Supplemental Contributions and their earnings, and any amounts paid by the Company pursuant to the Estate Program, and	

8

 	(b)	the Employee’s annualized base salary in effect as of the date he becomes disabled.	

An Employee who is no longer disabled under this Section and who returns to the employ of the Company or an affiliated company, shall be entitled to accrue benefits under this Section for the period of his disability.

An Employee who is no longer disabled under this Section and who does not return to the employ of the Company or an affiliated company, shall not be entitled to accrue any benefits under this Section for any portion of the period of his disability.

For purposes of the Program, an Employee shall be disabled if he is unable to continue to perform the duties of his position due to a physical or mental impairment. Notwithstanding the preceding, to the extent required under Code Section 409A, an Employee shall not be considered disabled for purposes of the Program unless such Employee is also considered disabled under Code Section 409A.

5.4	Death	

In the event that an Employee dies prior to retirement, his beneficiary shall receive a lump sum payment determined under Sections 3.1 and 5.2 of the Program as of the date of the Employee’s death as if the Employee retired on the date of his death; provided that if the Employee’s death occurs prior to his attainment of age 55, his benefit shall be reduced by .3% for each month that the benefit commences before the Employee would have reached age 65; and further provided that, if an Employee elected to make a deferral election under Section 5.2(b), his beneficiary shall receive payment of any benefits at the time and in the form of payment elected by the deceased Employee. The Employee’s beneficiary(ies) and the percentage(s) of the benefit payable under the Program to such beneficiary(ies) shall be the same as the Employee’s beneficiary(ies) and percentage(s) under the Pension Plan.

9

5.5	Payment of Benefits	

Unless the Employee makes a deferral election as described in Section 5.2(b), the benefit under the  Program shall be paid on the later of  (i) the first business day that is six months after the Employee’s retirement or death, or  (ii) the first business day of the calendar year following the Employee’s retirement or death.

In the event an Employee is disabled in accordance with Section 5.3, his benefit shall be paid on the first day of the month following the date that the Employee attains age 65.

5.6	Special Rule	

Notwithstanding any other provision of this Program, an Employee shall not be considered retired unless such Employee has separated from service (within the meaning of Code Section 409A and any regulations and other administrative guidance issued thereunder) with respect to the Company and all other entities with which the Company is required to be aggregated under Code Section 409A for purposes of determining whether an Employee has separated from service.

5.7	No Acceleration	

Except to the extent permitted under Code Section 409A, no benefits or payments under the Program shall be accelerated at any time.

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ARTICLE 6

FUNDING

6.1	Funding	

Except as provided in Section 8.9 hereof, the Company, nor any of its affiliates shall have any obligation to fund the benefit that an Employee earns under the Program.

6.2	Company Obligation	

Notwithstanding the provisions of any trust agreement or similar  funding vehicle to the contrary, the Company shall remain obligated to pay benefits under the Program. Nothing in the Program or any trust agreement shall relieve the Company of its liabilities to pay benefits under the Program except to the extent that such liabilities are met by the distribution of trust assets.

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ARTICLE 7

CHANGE IN CONTROL

7.1	Contributions to Trust	

In the event that a Change in Control has occurred, the Company shall be obligated to establish a trust and to contribute to the trust an amount necessary to fund the accrued benefit earned by the Employee under the Program (assuming immediate benefit commencement) as of the last day of the calendar month immediately preceding the date the Board determines that a Change in Control has occurred. If the Employee shall not have attained age 55, his annual benefit shall be determined on the same basis used to determine his accrued benefit in the case of death as specified in Section 5.4.

7.2	Amendments	

Following a Change in Control of Ingersoll-Rand Company Limited, any amendment modifying or terminating the Program shall have no force or effect.

12

 
ARTICLE 8

MISCELLANEOUS

8.1	Amendment and Termination	

Except as provided in Section 7.2 hereof, the Program may, at any time and from time to time, be amended or terminated without the consent of any Employee or beneficiary, (a) by the Board, or  (b) in the case of amendments which do not materially modify the provisions hereof, the Committee or such other committee appointed by the Board; provided, however, that no such amendment or termination shall reduce any benefits accrued under the terms of the Program prior to the date of termination or amendment.

8.2	No   Contract of Employment	

The establishment of the Program or any modification hereof shall not give any Employee or other person the right to remain in the  service of the Company or any of its subsidiaries, and all Employees and other persons shall remain subject to discharge to the same extent as if the Program had never been adopted.

8.3	Withholding	

The Company shall be entitled to withhold from any payment due under the Program any and all taxes of any nature required by any government to be withheld from such payment.

8.4	Loans	

No loans to Employees shall be permitted under the Program.

8.5	Compensation Committee	

The Program shall be administered by the Committee (or any successor committee) of the Board. The primary responsibility of the Committee is to administer the Program for the exclusive benefit of the Employees and their beneficiaries, subject to the specific terms of the Program. The Committee shall administer the Program in accordance with its terms to the extent consistent with applicable law, and shall have the power to determine all questions arising in connection with the administration, interpretation, and application of the Program. Any such determination by the Committee shall be conclusive and binding upon all affected parties. Any denial by the Committee of a claim for benefits under the Program by an Employee or beneficiary shall be stated in writing by the Committee and delivered or mailed to the Employee or beneficiary. Such notice shall set forth the specific reasons for the Committee's decision. In addition, the Committee shall afford a reasonable opportunity to any Employee or beneficiary whose claim for benefits has been denied for a review of the decision denying this claim.

13

8.6	Entire Agreement; Successors	

The Program, including any subsequently adopted amendments, shall constitute the entire agreement or contract between the Company and any Employee regarding the Program. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between the Company and any Employee regarding the provisions of the Program, other than those set forth herein. Notwithstanding the previous sentence, to the extent any written agreement between the Company and an Employee modifies the provisions of the Program with respect to the Employee, such agreement shall be deemed to modify the provisions of the Program but only to the extent such agreement is approved by the Committee. The Program and any amendment hereof shall be binding on the Company, and the Employees and their respective heirs, administrators, trustees, successors and assigns, including but not limited to, any successors of the Company by merger, consolidation or otherwise by operation of law, and on all designated beneficiaries of the Employee.

8.7	 Severability	

If any provisions of the Program shall, to any extent, be invalid or unenforceable, the remainder of the Program shall not be affected thereby, and each provision of the Program shall be valid and enforceable to the fullest extent permitted by law.

8.8	Governing Law	

The laws of the State of New Jersey shall  govern the Program.

8.9	Participant as General Creditor	

Benefits under the Program shall be payable by the Company out of its general funds. The Company shall have the right to establish a reserve or make any investment for the purposes of satisfying its obligations hereunder for payment of benefits at its discretion, provided, however, that no Employee eligible to participate in the Program shall have any interest in such investment or reserve. To the extent that any person acquires a right to receive benefits under the Program, such rights shall be no greater than the right of any unsecured general creditor of the Company.

8.10	Nonassignability	

To the extent permitted by law, the right of any Employee or any beneficiary in any benefit hereunder shall not be subject to attachment or any other legal process for the debts of such Employee or beneficiary nor shall any such benefit be subject to anticipation, alienation, sale, transfer, assignment or encumbrance.

14

 

* * * * * * *

IN WITNESS WHEREOF , the Company has caused this Program to be executed by its duly authorized representative on this 1st day of February 2006.

 	INGERSOLL-RAND COMPANY	

 	 
 	
 	By:  	/s/ Timothy McLevish	
 	
Timothy McLevish	
 	Senior Vice President and Chief Financial Officer	

15

 
APPENDIX A

Unless otherwise specified in another Appendix attached hereto or another provision set forth in the Program, the sum of the following shall be used for purposes of Section 3.1(b) of the Program:

 	(a)	All employer-paid benefits under any qualified defined benefit plan (as defined in Code Section 414(j)) and associated supplemental plans sponsored by the Company. For purposes of this Paragraph (a), the amount of any pension payable under the Clark Equipment Company Retirement Program for Salaried Employees shall be determined without reduction by the lifetime pension equivalent of the Employee’s vested interest in his PPOA Account (as such term is defined in the I-R/Clark Leveraged Employee Stock Ownership Plan).	

For purposes of determining the benefit under Section 3.1 of the Program, the Employee’s benefit, if any, under any qualified defined benefit plan and associated supplemental plans described in the previous paragraph, shall be determined as a lump sum at the date of determination.

 	(b)	The Social Security Primary Insurance Amount (as defined below) estimated at age 65, multiplied by a fraction, the numerator of which is his Years of Service (up to a maximum of 35 Years of Service), and the denominator of which is 35.	

For purposes of the Program, “Social Security Primary Insurance Amount” means the amount of the Employee’s annual primary old age insurance determined under the Social Security Act in effect at the date of determination and payable in accordance with (i) or (ii) below.

	(i)	For benefits determined on or after age 65, payable for the year following his date of retirement.	

	(ii)	For benefits determined before the Employee attains age 65, payable for the year following his retirement or death (or which would be payable when he first would have become eligible if he were then unemployed), assuming he will not receive after retirement (or death) any income that would be treated as wages for purposes of the Social Security Act.	

For purposes of determining the Social Security Benefit under paragraphs (i) and (ii) above, an Employee’s covered earnings under said Act for each calendar year preceding the Employee’s first full calendar year of employment shall be determined by multiplying his covered earnings subsequent to the year being determined by the ratio of the average per worker total wages as reported by the Social Security Administration for the calendar year being determined to such average for the calendar year subsequent to the year being determined.

16

The “Social Security Primary Insurance Amount” determined above shall be converted to a lump sum using the factor determined under Section 3.1(a)(iv).

 	(c)	An Employee’s accrued benefit under any qualified defined benefit pension plan (as defined in Code Section 414(j)) and any nonqualified pension plan with respect to any business that was acquired by the Company, or any of its affiliates (“Acquired Business”), (each such pension plan shall be referred to in this Paragraph (c) as a “Former Plan”), shall be used for purposes of Section 3.1(b) of the Program if the Employee:	

	(i)	was an employee of the Acquired Business on the date it was acquired by the Company, or any of its affiliates,	

	(ii)	became an employee of the Company, or any of its affiliates as a result of the acquisition of the Acquired Business, and	

	(iii)	was granted vesting service under any qualified defined benefit pension plan (as defined in Code Section 414(j)) sponsored by the Company, any domestic entity in which the Company owns (directly or indirectly) a 50% or more interest, and any other entity designated by the Company for service performed while an employee of the Acquired Business.	

The Employee’s accrued benefit under the Former Plan shall be determined as a life annuity payable as of the date of determination, using the Former Plan’s early retirement factors, if applicable, and converted to a lump sum using the factor determined under Section 3.1(a)(iv).

Notwithstanding anything to the contrary in this Paragraph (c), if the Committee determines that the accrued benefit under a Former Plan cannot reasonably be calculated due to lack of information about the Former Plan or otherwise, the provisions of this Paragraph (c) shall not apply with respect to such Former Plan.

17

 
Exhibit 10.40    

August 22, 2005

Mr. James R. Bolch
12 Jordan Lane
Unionville, CT 06085

Dear Jim,

I am pleased to present you with an offer for the position of Senior Vice President & Sector President reporting to me, with responsibility for the leadership of Ingersoll-Rand’s Industrial Technologies business located in Davidson, NC. You will be presented to the Board of Directors at their first meeting following your date of hire for election as a Senior Vice President and Officer of Ingersoll-Rand Company Limited to take effect on the date of your election.

1.  	Your starting base salary will be at an annual rate of $375,000 (three hundred, seventy-five thousand U.S. dollars) paid monthly.	

2.  	Additionally, you will receive a sign-on cash award of up to $210,000 (the final amount will be based on what you owe Schindler as a result of your resignation), which will be paid as soon as administratively practical following your start date.	

3.  	You will be eligible to participate in the Annual Incentive Matrix (AIM) Program. Your annual opportunity is targeted at 80% of base salary depending upon your performance and the performance of Ingersoll-Rand Company Limited. For performance year 2005 your annual incentive opportunity will be pro-rated, unless, as a result of your termination from Schindler, you lose your award. If you do lose the Schindler award, your IR annual incentive opportunity will be based on a full year of service, up to the target value of $300,000.	

4.  	You will be recommended for a sign-on award of 20,000 (twenty thousand) (post-split) non-qualified stock options. This award is subject to approval by the Compensation Committee of the Ingersoll Rand Company Board of Directors (the “Committee”) and to the terms and conditions of awards made under our Incentive Stock Plan. These options will be priced at the fair market value of Ingersoll-Rand stock on the day the Committee considers and approves awards. Your award recommendation will be considered by the Committee at their first meeting following your first day of employment.	

In future years you will be eligible to receive stock option awards under the Plan as administered by the Compensation Committee of the Board. Currently, your annual target award is 45,000 (forty-five thousand) (post-split) option shares. Annual stock option awards are contingent on and variable with your performance and the Company’s financial performance, specifically, earnings per share against plan. If you join us by October 1, 2005, your annual stock option award opportunity for performance year 2005 (awarded February 2006) will be prorated. If you join us after this date, you will receive no option shares for performance year 2005, but will instead be eligible for performance year 2006.

 
 
 James Bolch	 2	 August 22, 2005	

5.  	You will be recommended as a participant in the IR Performance Share Program (PSP) for a target award of 7,000 (post-split) performance shares for performance year 2006 (payable February 2007). Awards under the IR Performance Share Program are both contingent on and variable with achievement of specific objectives. The objectives are established each year by the Chairman and Board of Directors, and include several strategic objectives aimed at improving organizational effectiveness and several financial performance metrics, which for 2006 are E.P.S., Free Cash Flow and R.O.I.C. Awards from this plan are distributed as cash (unless deferred) in February following the Board’s approval. In subsequent years, you will be eligible for additional annual awards of similar value with qualifying criteria set at the time of each award.	

6.  	You will be eligible to participate in the IR Executive Deferred Compensation Plan (EDCP). The EDCP gives you the opportunity to defer your AIM award, PSP award and up to 50% of your base salary on a pretax basis. In addition, as a selected IR leader, you will also be eligible to receive a 20% company match on AIM and PSP deferrals invested in IR stock equivalents. Information regarding the EDCP will be sent to you and a representative from our vendor, TBG Financial, will contact you to explain this program.	

7.  	Additionally, you will be recommended for a sign-on award of 7,000 (seven thousand) (post-split) IR employment shares to be contributed to the Company’s Executive Deferred Compensation Plan (EDCP) and invested in IR stock equivalents, with vesting in 2009. The value will fluctuate with the value of IR’s share price and dividends.	

8.  	You will be eligible for the complete program of employee benefits offered to all Ingersoll-Rand salaried employees in accordance with the terms and conditions of those plans. Please note that your medical and life insurance coverage with Ingersoll-Rand will commence on the first day of the month following employment. A summary of Ingersoll-Rand’s key benefits is enclosed.	

9.  	You will be entitled to four (4) weeks of paid vacation per year, which exceeds our normal company policy.	

10.  	You will be provided a company automobile in accordance with our company car policy, which in your case provides an executive automobile with a purchase value of up to $60,000. A portion of the benefit will be imputed to your statement of gross income for tax purposes.	

11.  	You will be eligible for the Company’s Executive Health Program, a copy of which is enclosed.	

12.  	This position is eligible for participation in the Elected Officer Supplemental Program (EOSP). The EOSP is a non-qualified defined benefit pension plan that substantially augments IR’s qualified pension plan and, as its name denotes, is reserved for elected officers of the company. A brief summary is enclosed.	

13.  	As an elected officer, you are eligible for financial and retirement counseling services through AYCO, a division of Goldman-Sachs. This service includes investment strategy and tax filing assistance. A portion of the cost for these services is imputed to your annual income. A representative from AYCO will contact you after your employment date.	

 
 James Bolch	 3	 August 22, 2005	
 
14.  	Also, as an elected officer, you will be given a standard Change of Control Agreement, which provides economic security in the form of cash payments to the participant and guaranteed coverage under certain benefit plans in the event of job loss caused by the sale of all (or a substantial part of) the company.	

15.  	You will be eligible for the Company’s Relocation Program. The timing of the relocation will be at your discretion. A representative from Cendant Mobility will be in touch with you to explain the program and to discuss the timing of your relocation.	

16.  	In the unlikely event of your involuntary termination from Ingersoll-Rand within the two years from your date of hire for other than gross cause, as consideration for your release of whatever claims might be made, you will receive severance of one year’s base salary plus whatever pro-rata Annual Incentive Matrix (AIM) and Performance Share (PSP) award is earned as of your termination date, to be paid according to plan provisions. You will also have 90 days following your termination date within which to exercise your vested options.	

17.  	This offer is conditional upon satisfactorily passing a drug test, finalization of our reference checking and fulfilling the requirements of the Immigration Reform and Control Act of 1986.	

Jim, we all believe that you will make a significant contribution in this new role and look forward to having you join our executive team. If you have any questions regarding your compensation and benefits, please contact Rob Butler (201-573-3137), Connie Roseler (201-573-3052) or myself.

Sincerely,

Herbert L. Henkel
Chairman, President and
Chief Executive Officer

cc:   Rob Butler
 
Attachments:	Elected Officer Supplemental (Pension) Program	
  Ingersoll-Rand Key Benefits Summary
  Executive Health Program Summary

Offer Accepted By:

 /s/ James R. Bolch	 	 August 25, 2005	
  James R. Bolch	 	  Date	

 

Exhibit 10.41

December 8, 2005

Mr. James R. Bolch
12 Jordan Lane
Unionville, CT

Dear Jim,

As an addendum to our employment agreement (dated August 22, 2005), the following additional relocation support is provided.

In consideration of the expenses that you will incur associated with your temporary housing expense in the Davidson, North Carolina area, IR will provide a $3,000 per month supplemental temporary housing allowance for one year. This payment will be subject to normal taxes as regular income.

Sincerely,

/s/ Herbert L. Henkel

Herbert L. Henkel
Chairman, President and
Chief Executive Officer

cc:   R. C. Butler  –  Executive Director Compensation and Benefits

  
Exhibit 12
 
INGERSOLL-RAND COMPANY LIMITED
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)  
 
 	 	 	 	Years Ended December 31,	 	
 	 	 	 	2005	 	2004	 	2003	 	2002	 	2001	 	
Fixed charges:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	 	 	$ 144.3	 	$ 153.1	 	$ 175.6	 	$ 228.0	 	$ 247.5	 	
Amortization of debt discount and expense	 	 		 	1.4	 	 	2.2	 	 	2.9	 	 	7.3	 	 	7.4	 	
Rentals (one-third of rentals)	 	 	 	 	 	20.6	 	 	20.9	 	 	21.4	 	 	22.1	 	 	28.5	 	
Capitalized interest	 	 	 	 	 	2.9	 	 	2.2	 	 	3.1	 	 	2.8	 	 	3.2	 	
Equity-linked security charges	 	 	 	 	 	0.0	 	 	0.0	 	 	0.0	 	 	0.0	 	 	8.3	 	
Total fixed charges	 	 	 	 	$ 169.2	 	$ 178.4	 	$ 203.0	 	$ 260.2	 	$ 294.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before cumulative
 effect of change in accounting principle	 	$ 1,053.1	 	$ 829.8	 	$ 532.8	 	$ 322.4	 	$ 149.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add:  Minority income of majority-owned subsidiaries	 	 	12.7	 	 	16.0	 	 	14.9	 	 	15.5	 	 	20.7	 	
           Taxes on income from continuing operations	 	 	204.7	 	 	138.4	 	 	75.3	 	 	(7.9	)	 	(65.4	)	
           Fixed charges	 	 	 	 	 	169.2	 	 	178.4	 	 	203.0	 	 	260.2	 	 	294.9	 	
Less: Capitalized interest	 	 	 	 	 	2.9	 	 	2.2	 	 	3.1	 	 	2.8	 	 	3.2	 	
   Undistributed earnings (losses) from 
less than 50% owned affiliates	 	 	 	 	 	(2.3	)	 	5.7	 	 	(2.1	)	 	(0.1	)	 	0.2	 	
Earnings available for fixed charges	 	 	 	 	$ 1,439.1	 	$ 1,154.7	 	$ 825.0	 	$ 587.5	 	$ 396.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges	 	 	 	 	 	8.51	 	 	6.47	 	 	4.06	 	 	2.26	 	 	1.35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Undistributed earnings (losses) from less	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
than 50% owned affiliates:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings (losses)	 	 	 	 	$ 2.1	 	$ 5.7	 	 	$(1.8	)	$ 0.6	 	$ 0.9	 	
Less:   Amounts Distributed	 	 	 	 	 	4.4	 	 	0.0	 	 	0.3	 	 	0.7	 	 	0.7	 	
Undistributed earnings (losses) from	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
less than 50% owned affiliates	 	 	 	 	 	$(2.3	)	$	5.7	 	 	$(2.1	)	 	$(0.1	)	$ 0.2	 	
 
All amounts have been restated to reflect a reclassification of discontinued operations

 
 
Exhibit 14

  
Exhibit 21

Name of Subsidiary	 	% owned by IR	 	
 	 	 	 	
ARGENTINA:	 	 	 	
Ingersoll-Rand Argentina S.A.I.C.	 	 	100.00	%	
 	 	 	 	 	
AUSTRALIA:	 	 	 	 	
Ingersoll-Rand (Australia) Ltd.	 	 	100.00	%	
Ingersoll-Rand (Australia) Superannuation Pty. Ltd.	 	 	100.00	%	
Ingersoll-Rand Architectural Hardware (Australia) Pty. Limited	 	 	100.00	%	
McAlpine Australia Pty Limited	 	 	100.00	%	
McAlpine Hussmann (Australia) Pty Limited	 	 	100.00	%	
McAlpine Hussmann Pty Limited	 	 	100.00	%	
Triangle Refrigeration Pty. Ltd.	 	 	100.00	%	
 	 	 	 	 	
AUSTRIA:	 	 	 	 	
Astrum IT Losungen GmbH	 	 	30.00	%	
Interflex Datensysteme Gesmbh	 	 	100.00	%	
 	 	 	 	 	
BARBADOS:	 	 	 	 	
Ingersoll-Rand (Barbados) Corporation	 	 	100.00	%	
Ingersoll-Rand (Barbados) Holding Incorporated	 	 	100.00	%	
 	 	 	 	 	
BELGIUM:	 	 	 	 	
Ingersoll-Rand Benelux, N.V.	 	 	100.00	%	
Interflex Belgium N.V./S.A.	 	 	100.00	%	
Koxka Belgium	 	 	100.00	%	
Newman Tonks Brussels N.V.	 	 	100.00	%	
Separal B.V.	 	 	100.00	%	
Thermo King Belgium N.V.	 	 	100.00	%	
 	 	 	 	 	
BERMUDA:	 	 	 	 	
Ingersoll-Rand Global Holding Company Limited	 	 	100.00	%	
Ingersoll-Rand World Trade Ltd. (Bermuda)	 	 	100.00	%	
IR Techno Holding Company Limited	 	 	100.00	%	
St. Michael's Insurance Limited	 	 	100.00	%	
Woodcliff Insurance Ltd.	 	 	100.00	%	
 	 	 	 	 	
BRAZIL:	 	 	 	 	
Hussmann do Brasil Ltda.	 	 	100.00	%	
Hussmann Service do Brasil Ltda.	 	 	100.00	%	
Ingersoll-Rand do Brasil Ltda.	 	 	100.00	%	
Thermo King do Brasil, Ltda.	 	 	100.00	%	

 

 
 
BRITISH VIRGIN ISLANDS:	 	 	 	 	
Ingersoll-Rand Fu Hsing Holdings Limited	 	 	51.00	%	
 	 	 	 	 	
CANADA:	 	 	 	 	
Bobcat Equipment Ltd.	 	 	100.00	%	
ETC Electronic Technologies Incorporated	 	 	100.00	%	
Hussmann Canada Holdings Limited	 	 	100.00	%	
Hussmann Canada Inc.	 	 	100.00	%	
Ingersoll-Rand Canada, Inc.	 	 	100.00	%	
 	 	 	 	 	
CHILE:	 	 	 	 	
Comercial Ingersoll-Rand (Chile) Limitada	 	 	100.00	%	
Hussmann Chile S.A.	 	 	100.00	%	
Ingersoll-Rand Company (Chile) y Cia Ltda.	 	 	100.00	%	
IR- Bobcat Chile S.A.	 	 	50.00	%	
 	 	 	 	 	
CHINA:	 	 	 	 	
Changzhou Superay Tools Co., Ltd.	 	 	100.00	%	
Fu Hsing Industrial (Shanghai) Co., Ltd.	 	 	100.00	%	
Fu Jia Hardware Products (Shanghai) Co., Ltd.	 	 	100.00	%	
Guangzhou Hussmann Refrigeration Company, Ltd.	 	 	100.00	%	
Ingersoll-Rand (China) Investment Company Limited	 	 	100.00	%	
Ingersoll-Rand (Guilin) Tools Company Limited	 	 	90.00	%	
Ingersoll-Rand (Wuxi) Road Machinery Company Limited	 	 	100.00	%	
Ingersoll-Rand Machinery (Shanghai) Company Limited	 	 	100.00	%	
Luoyang Hussmann Refrigeration Company	 	 	100.00	%	
Nanjing Ingersoll-Rand Compressor Co., Ltd.	 	 	80.00	%	
Shanghai Air-Tec Compressor Solutions Co., Ltd.	 	 	100.00	%	
Shanghai Ingersoll-Rand Compressor Limited	 	 	100.00	%	
Thermo King Container Temperature Control (Suzhou) Corporation Ltd.	 	 	90.00	%	
Thermo King Dalian Transport Refrigeration Company, Limited	 	 	75.00	%	
Triangle Hussman Refrigeration (Shanghai) Co. Limited	 	 	100.00	%	
 	 	 	 	 	
COLOMBIA:	 	 	 	 	
Inv. Lockey Ltda.	 	 	55.10	%	
 	 	 	 	 	
CZECH REPUBLIC:	 	 	 	 	
Emerson Electric, s.r.o.	 	 	10.00	%	
Ingersoll-Rand Equipment Manufacturing Czech Republic s.r.o.	 	 	100.00	%	
IRCR Manufacturing s.r.o.	 	 	100.00	%	
 	 	 	 	 	
DENMARK:	 	 	 	 	
NT Randi A/S	 	 	100.00	%	
Thermo King Container-Denmark A/S	 	 	100.00	%	

 

 

FRANCE:	 	 	 	 	
ABG France S.A.R.L.	 	 	100.00	%	
Bobcat France S.A.	 	 	100.00	%	
Bricard S.A.	 	 	100.00	%	
Cacir, S.A.	 	 	100.00	%	
Compagnie Ingersoll-Rand	 	 	100.00	%	
Ingersoll-Rand Equipements de Construction	 	 	100.00	%	
Ingersoll-Rand Equipements de Production S.A.	 	 	100.00	%	
IR Services S.A.R.L.	 	 	100.00	%	
Koxka France SARL	 	 	100.00	%	
Montabert	 	 	100.00	%	
Mustad S.A.	 	 	100.00	%	
Normbau France S.A.	 	 	100.00	%	
S.A. Etablissements Charles Maire	 	 	100.00	%	
SA CAP France	 	 	100.00	%	
Security System France Sarl.	 	 	99.80	%	
 	 	 	 	 	
GERMANY:	 	 	 	 	
ABG Allgemeine Baumaschinen Gesellschaft mbH	 	 	100.00	%	
Astrum Gesellschaft fur angewandte Informatik mbH	 	 	100.00	%	
Best Matic Vermogensverwaltungs GmbH	 	 	100.00	%	
Bobcat Bensheim GmbH & Co. KG	 	 	100.00	%	
Bobcat Parts Service GmbH	 	 	100.00	%	
GHH-Rand Schraubenkompressoren GmbH	 	 	100.00	%	
Ingersoll-Rand Beteiligungs GmbH	 	 	100.00	%	
Ingersoll-Rand Beteiligungs und Grundstucksverwaltungs GmbH	 	 	100.00	%	
Ingersoll-Rand GmbH	 	 	100.00	%	
IR Security and Safety GmbH	 	 	100.00	%	
Ingersoll-Rand Service GmbH	 	 	100.00	%	
Ingersoll-Rand Wasserstrahl-Schneidtechnik GmbH	 	 	100.00	%	
Interflex Datensysteme GmbH & Co. KG	 	 	100.00	%	
IR Deutsche Holding GmbH	 	 	100.00	%	
Koxka Deutschland GmbH	 	 	100.00	%	
Normbau Beschlage und Ausstattungs GmbH	 	 	100.00	%	
Thermo King Deutschland GmbH	 	 	100.00	%	
 	 	 	 	 	
HONG KONG:	 	 	 	 	
Hussmann Tempcool (Hong Kong) Limited	 	 	100.00	%	
Ingersoll-Rand (Hong Kong) Limited	 	 	100.00	%	
Ingersoll-Rand Fu Hsing Trading Company Limited	 	 	51.00	%	
Ingersoll-Rand Superay Holdings Limited	 	 	100.00	%	
Koolzone Asia Limited	 	 	100.00	%	
Superay International Limited	 	 	100.00	%	
 	 	 	 	 	
HUNGARY:	 	 	 	 	
Hussmann Refrigeration (Hungary) KFT.	 	 	60.00	%	
Ingersoll-Rand Hungary Central Europe Group Financing LLC	 	 	100.00	%	
 	 	 	 	 	
ICELAND:	 	 	 	 	
Ingersoll-Rand Finance Islandi slf.	 	 	100.00	%	

 

 

INDIA:	 	 	 	 	
India Infrastructure Equipment Limited	 	 	2.90	%	
Ingersoll-Rand (India) Limited	 	 	74.00	%	
Ingersoll-Rand International (India) Limited	 	 	100.00	%	
Ingersoll-Rand Wadco Tools Private Limited	 	 	100.00	%	
IR Rasta Resource Centre for Asphalt and Soil	 	 	100.00	%	
Thermo King India Private Limited	 	 	100.00	%	
 	 	 	 	 	
INDONESIA:	 	 	 	 	
PT Ingersoll-Rand Indonesia	 	 	100.00	%	
 	 	 	 	 	
IRELAND:	 	 	 	 	
Airside Manufacturing Limited	 	 	100.00	%	
Ingersoll-Rand International Finance Limited	 	 	100.00	%	
Ingersoll-Rand International Limited	 	 	100.00	%	
Ingersoll-Rand Irish Holdings	 	 	100.00	%	
Ingersoll-Rand Technical and Services Limited	 	 	100.00	%	
Spanashview	 	 	100.00	%	
Thermo King European Manufacturing Limited	 	 	100.00	%	
Thermo King Ireland Limited	 	 	100.00	%	
Thermo King Services Limited	 	 	100.00	%	
Thermo King Total Kare Limited	 	 	100.00	%	
 	 	 	 	 	
ITALY:	 	 	 	 	
Cisa S.p.A.	 	 	100.00	%	
Hussmann Koxka Italia S.r.l.	 	 	100.00	%	
Ingersoll-Rand Italia S.r.l.	 	 	100.00	%	
Ingersoll-Rand Italiana S.p.A.	 	 	100.00	%	
 	 	 	 	 	
JAPAN:	 	 	 	 	
Bobcat Corporation	 	 	100.00	%	
Ingersoll-Rand Japan, Ltd.	 	 	100.00	%	
Thermo King Japan, Ltd.	 	 	100.00	%	
 	 	 	 	 	
KOREA:	 	 	 	 	
Ingersoll-Rand Korea Limited	 	 	100.00	%	
 	 	 	 	 	
LUXEMBOURG:	 	 	 	 	
Ingersoll-Rand Holdings & Finance International S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand Faenza Financing S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand ITO Financing Sarl	 	 	100.00	%	
Ingersoll-Rand Lux International S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand Lux Roza III S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand Lux Roza S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand Luxembourg United S.a.r.l.	 	 	100.00	%	
Ingersoll-Rand Worldwide Capital S.a.r.l.	 	 	100.00	%	
 	 	 	 	 	
MALAYSIA:	 	 	 	 	
Hussmann Tempcool (Malaysia) Limited	 	 	100.00	%	
Ingersoll-Rand Malaysia Co. Sdn. Bhd.	 	 	100.00	%	
Maltaitech Corporation Sdn. Bhd.	 	 	100.00	%	
 	 	 	 	 	
MEXICO:	 	 	 	 	
Hussmann American, S. de R.L. de C.V.	 	 	100.00	%	
Hussmann-Mexico, S. de R.L. de C.V.	 	 	100.00	%	
Hussmann-Servicios, S. de R.L. de C.V.	 	 	100.00	%	
Industrias Frigorificas, S.A. de C.V.	 	 	100.00	%	
Ingersoll-Rand S.A. de C.V.	 	 	100.00	%	
Schlage de Mexico S.A. de C.V.	 	 	100.00	%	

 

 

NETHERLANDS:	 	 	 	 	
Cielle B.V.	 	 	100.00	%	
ECO Kompressoren	 	 	100.00	%	
Hussmann Netherlands B.V.	 	 	100.00	%	
Ingersoll-Rand European Holding Company B.V.	 	 	100.00	%	
Ingersoll-Rand Holdings (Netherlands) B.V.	 	 	100.00	%	
Ingersoll-Rand Service B.V.	 	 	100.00	%	
Interflex Datasystems B.V.	 	 	100.00	%	
Sonna II B.V.	 	 	100.00	%	
Thermo King Netherlands B.V.	 	 	100.00	%	
Thermo King Transportkoeling B.V.	 	 	100.00	%	
 	 	 	 	 	
NEW ZEALAND:	 	 	 	 	
Club Car Limited	 	 	100.00	%	
Contract Refrigeration Ltd.	 	 	100.00	%	
Hussmann Australasia Limited	 	 	100.00	%	
Ingersoll-Rand Architectural Hardware Limited	 	 	100.00	%	
Koxka New Zealand Ltd.	 	 	100.00	%	
McAlpine Hussmann Ltd.	 	 	100.00	%	
McAlpine Industries Ltd.	 	 	100.00	%	
 	 	 	 	 	
PERU:	 	 	 	 	
Ingersoll-Rand Company of Peru S.A.	 	 	100.00	%	
 	 	 	 	 	
PHILIPPINES:	 	 	 	 	
Ingersoll-Rand Philippines, Inc.	 	 	100.00	%	
 	 	 	 	 	
POLAND:	 	 	 	 	
Hussmann Koxka Poland, Spzoo	 	 	100.00	%	
 	 	 	 	 	
PORTUGAL:	 	 	 	 	
Comingersoll-Comercio e Industria de Equipamentos, S.A.R.L.	 	 	20.65	%	
 	 	 	 	 	
PUERTO RICO:	 	 	 	 	
Ingersoll-Rand de Puerto Rico, Inc.	 	 	100.00	%	
 	 	 	 	 	
RUSSIA:	 	 	 	 	
Cisa Elbor O.O.O	 	 	51.00	%	
Instrum-Rand	 	 	59.80	%	
OOO ABG Service Center	 	 	100.00	%	
 	 	 	 	 	
SINGAPORE:	 	 	 	 	
Cisatron Pte. Ltd. Singapore	 	 	100.00	%	
Hussmann Tempcool Holdings PTE. Ltd.	 	 	50.00	%	
Hussmann Tempcool Singapore Pte. Ltd.	 	 	100.00	%	
Ingersoll-Rand South East Asia (Pte.) Ltd.	 	 	100.00	%	
NT Asia (Singapore) Pte. Limited	 	 	100.00	%	

 

 

SOUTH AFRICA:	 	 	 	 	
D. Purdue & Sons Ltd.	 	 	25.00	%	
Ingersoll-Rand Company South Africa (Pty.) Limited	 	 	100.00	%	
NT South Africa	 	 	100.00	%	
 	 	 	 	 	
SPAIN:	 	 	 	 	
Cisa Cerraduras S.A.	 	 	100.00	%	
Hussmann Koxka, S.L.	 	 	100.00	%	
Ingersoll-Rand Iberica, S.L.	 	 	100.00	%	
Ingersoll-Rand Rodamientos Holding, S.L.	 	 	100.00	%	
Ingersoll-Rand Servicios, S.A.	 	 	100.00	%	
Koxka Levante S.A.	 	 	60.00	%	
Koxka Valladolid, S.A.	 	 	51.00	%	
Palladio S.A.	 	 	99.95	%	
Reftrans, S.A.	 	 	85.00	%	
 	 	 	 	 	
SWEDEN:	 	 	 	 	
H.O. Nilsson Service AB	 	 	100.00	%	
Ingersoll-Rand AB	 	 	100.00	%	
Ingersoll-Rand Best-Matic AB	 	 	100.00	%	
Ingersoll-Rand Svenska AB	 	 	100.00	%	
 	 	 	 	 	
SWITZERLAND:	 	 	 	 	
Ingersoll-Rand Acceptance Company S.A.	 	 	100.00	%	
Ingersoll-Rand Equipment & Consulting S.A.R.L.	 	 	100.00	%	
Ingersoll-Rand International Sales S.A.	 	 	100.00	%	
Ingersoll-Rand Investment Company S.A.	 	 	100.00	%	
Ingersoll-Rand Machinery & Services S.A.R.L.	 	 	100.00	%	
Ingersoll-Rand S.A.	 	 	100.00	%	
Ingersoll-Rand Services & Engineering Company	 	 	100.00	%	
Ingersoll-Rand Technical & Services S.A.R.L.	 	 	100.00	%	
Interflex Datensysteme AG	 	 	100.00	%	
I-R Trading S.A.	 	 	100.00	%	
Klemm Bohrtechnik AG	 	 	99.98	%	
Torrington Sales Limited	 	 	100.00	%	
 	 	 	 	 	
TAIWAN:	 	 	 	 	
Fu Yang Investment Company Limited	 	 	100.00	%	
Taiwan Fu Hsing Industrial Co. Ltd.	 	 	9.90	%	
 	 	 	 	 	
THAILAND:	 	 	 	 	
Hussmann Thailand Co. Ltd.	 	 	75.00	%	
Hussmann-Thai Holding Co. Ltd.	 	 	49.00	%	

 

 

TURKEY:	 	 	 	 	
IR Emniyet ve Guvenlik Sistemleri Sanayi A.S. (IR Security	 	 	100.00	%	
& Security Industrial Company)	 	 	 	 	
 	 	 	 	 	
UNITED KINGDOM:	 	 	 	 	
A/S Parts Limited	 	 	100.00	%	
Best-Matic International Limited	 	 	100.00	%	
Blackrod Europe Limited	 	 	100.00	%	
Blaw-Knox Company	 	 	100.00	%	
Bondpaint Limited	 	 	100.00	%	
Briton Door Controls Limited	 	 	100.00	%	
C.A.P. Sales Limited	 	 	100.00	%	
Capital Metalworks Limited	 	 	100.00	%	
CISA (UK) Plc.	 	 	84.60	%	
Compressed Air Parts Limited	 	 	100.00	%	
D.A. Thomas (Northern) Limited	 	 	100.00	%	
Hussmann Europe Limited	 	 	100.00	%	
Hussmann Holdings, Ltd.	 	 	100.00	%	
Hussmann (Europe) Pension Trustee Company Limited	 	 	100.00	%	
Ingersoll-Rand Dor-O-Matic Limited	 	 	100.00	%	
Ingersoll-Rand Company Limited	 	 	100.00	%	
Ingersoll-Rand European Financial Services plc.	 	 	100.00	%	
Ingersoll-Rand European Sales Limited	 	 	100.00	%	
Ingersoll-Rand Financial Services Limited	 	 	100.00	%	
Ingersoll-Rand Holdings Limited	 	 	100.00	%	
Ingersoll-Rand UK Ltd.	 	 	100.00	%	
Interflex Time & Access Ltd.	 	 	100.00	%	
IR Investment Holding Co. Ltd.	 	 	100.00	%	
IR Security and Safety Architectural Hardward Limited	 	 	100.00	%	
IR Security and Safety (Anglia) Limited	 	 	100.00	%	
IR Secruity and Safety (Eastern) Limited	 	 	100.00	%	
IR Security and Safety (South East) Limited	 	 	100.00	%	
IR Security and Safety (South West) Limited	 	 	100.00	%	
IR Security and Safety (South) Limited	 	 	100.00	%	
IR Security and Safety (Tayforth) Limited	 	 	100.00	%	
IR Security and Safety (Thomas) Limited	 	 	100.00	%	
IR Security and Safety Thomson Group Limited	 	 	100.00	%	
IR Security & Safety Limited	 	 	100.00	%	
Newman Tonks (Amersham) Limited	 	 	100.00	%	
Newman Tonks (Kings Norton) Limited	 	 	100.00	%	
Newman Tonks (North Devon) Limited	 	 	100.00	%	
Newman Tonks (Overseas Holdings) Limited	 	 	100.00	%	
Newman Tonks (Woodford Green) Limited	 	 	100.00	%	
Newman Tonks Limited	 	 	100.00	%	
Newman Tonks Management Services Limited	 	 	100.00	%	
NT Access Limited	 	 	100.00	%	
NT Acquisition Limited	 	 	100.00	%	
NT Architectural Hardware Limited	 	 	100.00	%	
NT Door Controls Limited	 	 	100.00	%	
NT Group Properties Limited	 	 	100.00	%	
NT Legge Limited	 	 	100.00	%	
NT Martin Roberts Limited	 	 	100.00	%	
NT Normbau Limited	 	 	100.00	%	
NT Partition Systems Limited	 	 	100.00	%	
NT Projects Limited	 	 	100.00	%	
NT Railing Systems Limited	 	 	100.00	%	
NT Security Limited	 	 	100.00	%	
NT Separal Limited	 	 	100.00	%	
R. Cartwright & Co. Limited	 	 	100.00	%	
Randall Taximeters Limited	 	 	100.00	%	
Roconeco Limited	 	 	100.00	%	
Strathclyde Hardware Services Limited	 	 	100.00	%	
The Southwark Bridge Leasehold Property Company Limited	 	 	100.00	%	
William Newman & Sons, Limited	 	 	100.00	%	

 

 

UNITED STATES	 	 	 	 	
Armoro, Inc.	 	 	100.00	%	
Blaw-Knox Construction Equipment Corporation	 	 	100.00	%	
CDS Midwest Inc.	 	 	100.00	%	
Checker Flag Parts, Inc.	 	 	100.00	%	
Chesley Industries, Inc.	 	 	100.00	%	
CISA Security Products, Inc.	 	 	100.00	%	
Clark Business Services Corporation	 	 	100.00	%	
Clark Distribution Services Inc.	 	 	100.00	%	
Clark Equipment Company	 	 	100.00	%	
Club Car Inc.	 	 	100.00	%	
Commercial Refrigeration Co.	 	 	100.00	%	
Compressed Air Parts, Inc.	 	 	100.00	%	
Crystal Refrigeration, Inc.	 	 	100.00	%	
Design & Build Construction, Inc.	 	 	100.00	%	
Dor-O-Matic LLC	 	 	100.00	%	
Dor-O-Matic of Mid Atlantic States, Inc.	 	 	100.00	%	
DR Acquisition, LLC	 	 	100.00	%	
DR Holding Corp.	 	 	100.00	%	
Earth Force America, Inc.	 	 	100.00	%	
Electronic Technologies Corporation USA	 	 	100.00	%	
Falcon Lock Company LLC	 	 	100.00	%	
Harrow Industries, LLC	 	 	100.00	%	
Harrow Products, LLC	 	 	100.00	%	
Harrow Products, LLC (Delaware)	 	 	100.00	%	
Hussmann Corporation	 	 	100.00	%	
Hussmann Holdings, Inc.	 	 	100.00	%	
Hussmann International, Inc.	 	 	100.00	%	
Hussmann Mechanical Corporation	 	 	100.00	%	
Hussmann Services Corporation	 	 	100.00	%	
IDP Acquisition, LLC	 	 	100.00	%	
Improved Machinery, Inc.	 	 	100.00	%	
Ingersoll-Rand Asia Pacific Inc.	 	 	100.00	%	
Ingersoll-Rand Charitable Foundation	 	 	100.00	%	
Ingersoll-Rand China Limited	 	 	100.00	%	
Ingersoll-Rand Climate Control Holding Corporation	 	 	100.00	%	
Ingersoll-Rand Company	 	 	100.00	%	
Ingersoll-Rand Construction Services, Inc.	 	 	100.00	%	
Ingersoll-Rand Energy Systems Corporation	 	 	100.00	%	
Ingersoll-Rand Enhanced Recovery Company	 	 	100.00	%	
Ingersoll-Rand Financial Services Corporation	 	 	100.00	%	
Ingersoll-Rand Industrial Solutions Holding Corporation	 	 	100.00	%	
Ingersoll-Rand Infrastructure Holding Corporation	 	 	100.00	%	
Ingersoll-Rand International Holding Corporation	 	 	100.00	%	
Ingersoll-Rand International Sales LLC	 	 	100.00	%	
Ingersoll-Rand International, Inc.	 	 	100.00	%	
Ingersoll-Rand Italian Holding LLC	 	 	100.00	%	
Ingersoll-Rand Liability Management Company	 	 	100.00	%	
Ingersoll-Rand Plus, LP	 	 	100.00	%	
Ingersoll-Rand Sales Company, LLC	 	 	100.00	%	
Ingersoll-Rand Security and Safety Holding Corporation	 	 	100.00	%	
Ingersoll-Rand Services Company	 	 	100.00	%	
Ingersoll-Rand Spanish Holding LP	 	 	100.00	%	
Ingersoll-Rand Transportation Services Company	 	 	100.00	%	
Ingersoll-Rand US United, LLC	 	 	100.00	%	
Ingersoll-Rand Western Hemisphere Trade Corporation	 	 	100.00	%	
Ingersoll-Rand Worldwide, Inc.	 	 	100.00	%	
Ingersoll-Rand, Inc.	 	 	100.00	%	
Integrated Access Systems, Inc.	 	 	100.00	%	
Interflex N.A., Inc.	 	 	100.00	%	
I-R E-Medical, Inc.	 	 	99.00	%	
IR Receivables Funding I Corporation	 	 	100.00	%	
IR Receivables Funding II Corporation	 	 	100.00	%	
IR of Reno, Inc.	 	 	100.00	%	
Krack Corporation	 	 	100.00	%	
Lockey Corp.	 	 	56.00	%	
Marlorch, Inc.	 	 	100.00	%	
MFP, LLC	 	 	100.00	%	
Monarch Hardware and Mfg. Company, LLC	 	 	100.00	%	
Nelson Refrigeration Inc.	 	 	100.00	%	
Newman Tonks, USA, LLC	 	 	100.00	%	
Newman-Tonks Holdings LLC	 	 	100.00	%	
Newman-Tonks Investments, LLC	 	 	100.00	%	
Niject Services Company	 	 	50.00	%	
Perimeter Bobcat, Inc.	 	 	100.00	%	
Recognition Systems, Inc.	 	 	100.00	%	
Refrigeration Engineering, Inc.	 	 	100.00	%	
Refrigeration Service & Design, Inc.	 	 	100.00	%	
Roconeco Corporation	 	 	100.00	%	
Rogers Refrigeration Co., Inc.	 	 	100.00	%	
SBG Holding Corp.	 	 	100.00	%	
Schlage Lock Company	 	 	100.00	%	
Schlage Lock Company LLC	 	 	100.00	%	
Security One Systems of Jacksonville	 	 	100.00	%	
Security One Systems, Inc.	 	 	100.00	%	
Silver Holding Corp.	 	 	100.00	%	
Tavant Technologies, Inc.	 	 	19.50	%	
Talor Industries, Inc.	 	 	100.00	%	
Terry D. Carter Service Co., Inc.	 	 	100.00	%	
Thermo King Corporation	 	 	100.00	%	
Thermo King de Puerto Rico, Inc.	 	 	100.00	%	
Thermo King Enterprises Company	 	 	100.00	%	
Thermo King SVC, Inc.	 	 	100.00	%	
Thermo King Trading Company	 	 	100.00	%	
Touch-Plate International, Inc.	 	 	100.00	%	
Von Duprin, Inc.	 	 	100.00	%	
WHS Refrigeration Services, Inc.	 	 	100.00	%	

 

 

VENEZUELA:	 	 	 	 	
Administradora Lockey CA	 	 	51.00	%	
Aro de Venezuela, C.A.	 	 	100.00	%	
Inversora Lockey de Venezuela CA	 	 	56.00	%	
Tratamaq CA	 	 	42.00	%	
 	 	 	 	 	
ZAMBIA:	 	 	 	 	
Ingersoll-Rand Limited (Zambia)	 	 	100.00	%	
 	 	 	 	 	
ZIMBABWE:	 	 	 	 	
Ingersoll-Rand Zimbabwe (Private) Ltd.	 	 	100.00	%	

 

 
 
EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-88580 and No. 333-88580-01) and S-8 (No. 333-67257, No. 333-35229, No. 333-00829, No. 333-19445, No. 333-42133, No. 333-128260 and No. 333-130047) of Ingersoll-Rand Company Limited of our report dated February 28, 2006 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP  

Florham Park, New Jersey
February 28, 2006

 

 
       Exhibit 31.1

CERTIFICATION

I, Herbert L. Henkel, certify that:

1.  	I have reviewed the annual report on Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2005;	

2.  	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.  	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.  	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a.  	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b.  	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c.  	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d.  	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.  	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

a.  	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	

b.  	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

 	 	 	

 	 

Date: March 1, 2006	By:  	/s/ Herbert L. Henkel	
 	Herbert L. Henkel	
 	Principal Executive Officer	

 
      Exhibit 31.2

CERTIFICATION

I, Timothy R. McLevish, certify that:

1.  	I have reviewed the annual report on Form 10-K of Ingersoll-Rand Company Limited for the year ended December 31, 2005;	

2.  	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.  	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.  	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a.  	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b.  	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c.  	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d.  	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.  	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

a.  	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	

b.  	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

 	 	

 	 
 	
Date: March 1, 2006  	By:  	/ s/ Timothy R. McLevish	
 	Timothy R. McLevish	
 	Principal Financial Officer	

 

 
 
Exhibit 32

Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Ingersoll-Rand Company Limited (the Company), does hereby certify that:

The Annual Report on Form 10-K for the year ended December 31, 2005 (the Form 10-K) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Herbert L. Henkel
Herbert L. Henkel
Chief Executive Officer
March 1, 2006

/s/ Timothy R. McLevish
Timothy R. McLevish
Chief Financial Officer
March 1, 2006